AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 1998
REGISTRATION NO. 333-57285-01
REGISTRATION NO. 333-57285
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
MEDIACOM LLC
MEDIACOM CAPITAL CORPORATION
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
NEW YORK 4841 06-1433421
NEW YORK 4841 06-1513997
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
100 CRYSTAL RUN ROAD
MIDDLETOWN, NEW YORK 10941
(914) 695-2600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
ROCCO B. COMMISSO
MANAGER
MEDIACOM LLC
100 CRYSTAL RUN ROAD
MIDDLETOWN, NEW YORK 10941
(914) 695-2600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ROBERT L. WINIKOFF, ESQ.
COOPERMAN LEVITT WINIKOFF
LESTER & NEWMAN, P.C.
800 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 688-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
----------------
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
----------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED AUGUST 10, 1998
PROSPECTUS
OFFER TO EXCHANGE
SERIES B 8 1/2% SENIOR NOTES DUE 2008
FOR ALL OUTSTANDING 8 1/2% SENIOR NOTES DUE 2008
OF
MEDIACOM LLC
MEDIACOM CAPITAL CORPORATION
----------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998
UNLESS EXTENDED.
Mediacom LLC, a New York limited liability company ("Mediacom" and, together
with its operating subsidiaries, the "Company"), and Mediacom Capital
Corporation, a New York corporation ("Mediacom Capital" and together with
Mediacom, the "Issuers"), hereby offer (the "Exchange Offer"), upon the terms
and subject to the conditions set forth in this Prospectus (the "Prospectus")
and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to
exchange $1,000 principal amount of their Series B 8 1/2% Senior Notes due 2008
(the "Series B Notes"), which have been registered under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Statement
of which this Prospectus is a part, for each $1,000 principal amount of their
outstanding 8 1/2% Senior Notes due 2008 (the "Series A Notes"), of which
$200,000,000 in aggregate principal amount are outstanding on the date hereof.
The form and terms of the Series B Notes are the same as the form and terms of
the Series A Notes (which they replace) except that the Series B Notes will
bear a "Series B" designation and will have been registered under the
Securities Act and, therefore, will not bear legends restricting their
transfer, and holders of the Series B Notes will not be entitled to certain
rights of holders of Series A Notes under the Exchange and Registration Rights
Agreement (the "Exchange and Registration Rights Agreement") dated April 1,
1998 by and between the Issuers and Chase Securities Inc. (the "Initial
Purchaser"), which rights will terminate upon the consummation of the Exchange
Offer. The Series B Notes will evidence the same debt as the Series A Notes
(which they replace) and will be entitled to the benefits of an Indenture dated
as of April 1, 1998 governing the Series A Notes and the Series B Notes (the
"Indenture"). The Series A Notes and the Series B Notes are sometimes referred
to herein collectively as the "Notes." See "Description of the Notes" and "The
Exchange Offer."
Interest on the Notes will be payable semi-annually on April 15 and October
15 of each year, commencing on October 15, 1998. The Notes will mature on April
15, 2008. Except as described below, the Issuers may not redeem the Series B
Notes prior to April 15, 2003. On and after such date, the Issuers may redeem
the Series B Notes, in whole or in part, at the redemption prices set forth
herein, together with accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time on or prior to April 15, 2001, the Issuers
may redeem up to 35% of the original principal amount of the Series B Notes
with the Net Cash Proceeds (as defined in "Description of the Notes--Certain
Definitions") of one or more Equity Offerings (as defined in "Description of
the Notes--Certain Definitions") by Mediacom, at a redemption price in cash
equal to 108.5% of the principal amount to be redeemed plus accrued and unpaid
interest, if any, to the date of redemption; provided that at least 65% of the
original aggregate principal amount of the Series B Notes remains outstanding
immediately after each such redemption. The Series B Notes will not be subject
to any sinking fund requirement. Upon the occurrence of a Change of Control (as
defined in "Description of the Notes--Repurchase of the Option of Holders--
Change of Control"), each holder of the Series B Notes will have the right to
require the Issuers to repurchase all or any part of such holder's Series B
Notes at a price equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase. See "Description of the
Notes--Optional Redemption" and "--Repurchase at the Option of Holders--Change
of Control." There can be no assurance that sufficient funds will be available
if necessary to make any required repurchases. See "Risk Factors--Ability to
Purchase Notes Upon a Change of Control."
The Series B Notes will be unsecured, senior obligations of the Issuers
ranking pari passu in right of payment with all other existing and future
unsecured Indebtedness of the Issuers, other than any Subordinated Obligations
(as defined in "Description of the Notes--Certain Definitions"). The Series B
Notes will be effectively subordinated in right of payment to any secured
Indebtedness of the Issuers. Mediacom is a holding company and conducts its
business through its operating subsidiaries (the "Subsidiaries"). Accordingly,
the Series B Notes will be effectively subordinated to all existing and future
Indebtedness and other liabilities (including trade payables) of the
Subsidiaries. As of March 31, 1998, after giving pro forma effect to the sale
of the Series A Notes by the Issuers to the Initial Purchaser and the use of
the net proceeds from such sale, the Company would have had approximately
$321.3 million of Indebtedness outstanding (including approximately $121.3
million of Indebtedness of the Subsidiaries). The Indenture permits the Company
to incur additional Indebtedness, including secured Indebtedness, subject to
certain restrictions. See "Capitalization" and "Description of the Notes--
Ranking."
Each Series B Note will bear interest from its issuance date. Holders of
Series A Notes that are accepted for exchange will receive, in cash, accrued
interest thereon to, but not including, the issuance date of the Series B
Notes. Such interest will be paid with the first interest payment on the Series
B Notes. Interest on the Series A Notes accepted for exchange will cease to
accrue upon issuance of the Series B Notes.
The Issuers will accept for exchange any and all validly tendered Series A
Notes not withdrawn prior to 5:00 p.m., New York City time, on , 1998,
unless extended by the Issuers in their sole discretion (the "Expiration
Date"). Tenders of Series A Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date. The Exchange Offer is subject
to certain customary conditions. See "The Exchange Offer--Conditions." Series A
Notes may be tendered only in integral multiples of $1,000. In the event the
Issuers terminate the Exchange Offer and do not accept for exchange any Series
A Notes, the Issuers will promptly return all previously tendered Series A
Notes to the holders thereof.
SEE "RISK FACTORS," WHICH BEGINS ON PAGE 13 OF THIS PROSPECTUS, FOR A
DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR
SERIES A NOTES IN THE EXCHANGE OFFER.
(Continued on following page)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------
THE DATE OF THIS PROSPECTUS IS , 1998
(Continued from previous page)
The Series A Notes were sold by the Issuers on April 1, 1998 to the Initial
Purchaser in a transaction not registered under the Securities Act in reliance
upon an exemption under the Securities Act (the "Series A Notes Offering").
The Initial Purchaser subsequently resold the Series A Notes within the United
States to qualified institutional buyers in reliance upon Rule 144A under the
Securities Act and outside the United States in accordance with Regulation S
under the Securities Act. Accordingly, the Series A Notes may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Series B
Notes are being offered hereunder in order to satisfy the obligations of the
Issuers under the Exchange and Registration Rights Agreement. See "The
Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Issuers believe
the Series B Notes issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Issuers within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Series B Notes are acquired in the ordinary course of such holder's business
and that such holder does not intend to participate and has no arrangement or
understanding with any person to participate in the distribution of such
Series B Notes. See "The Exchange Offer--Purpose and Effect of the Exchange
Offer" and "--Resale of the Series B Notes." Each holder of the Series A Notes
who wishes to exchange the Series A Notes for Series B Notes in the Exchange
Offer will be required to represent in the Letter of Transmittal that at the
time of the consummation of the Exchange Offer (i) it is not an affiliate of
the Issuers or, if it is such an affiliate, such holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable, (ii) the Series B Notes to be received by it are being
acquired in the ordinary course of its business and (iii) it has no
arrangements or understanding with any person to participate in the
distribution of the Series A or Series B Notes within the meaning of the
Securities Act. Each broker-dealer (a "Participating Broker-Dealer") that
receives Series B Notes for its own account pursuant to the Exchange Offer
must acknowledge that it will deliver a prospectus in connection with any
resale of such Series B Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used in connection with resales of Series B Notes
received in exchange for Series A Notes only by Participating Broker-Dealers
("Eligible Participating Broker-Dealers") who acquired such Series A Notes as
a result of market-making activities or other trading activities and not by
Participating Broker-Dealers who acquired such Series A Notes directly from
the Issuers. The Issuers have agreed that, for a period of 90 days after the
Expiration Date, they will make this Prospectus available to any Eligible
Participating Broker-Dealer for use in connection with any such resale. See
"Plan of Distribution."
Holders of Series A Notes not tendered and accepted in the Exchange Offer
will continue to hold such Series A Notes and will be entitled to all the
rights and benefits and will be subject to the limitations applicable thereto
under the Indenture and with respect to transfer under the Securities Act. The
Issuers will pay all the expenses incurred by them incident to the Exchange
Offer. See "The Exchange Offer."
There has not previously been any public market for the Series A Notes or
the Series B Notes. The Issuers do not intend to list the Series B Notes on
any securities exchange or to seek approval for quotation through any
automated quotation system. There can be no assurance that an active market
for the Series B Notes will develop. See "Risk Factors--Absence of Public
Market; Restrictions on Transfer." Moreover, to the extent that Series A Notes
are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Series A Notes could be adversely
affected.
The Series B Notes will be available initially only in book-entry form. The
Issuers expect that the Series B Notes issued pursuant to this Exchange Offer
will be issued in the form of a Global Note (as defined in "Book Entry--
Delivery and Form"), which will be deposited with, or on behalf of, The
Depository Trust Company (the "Depository") and registered in its name or in
the name of Cede & Co., its nominee. Beneficial interests in the Global Note
representing the Series B Notes will be shown on, and transfers thereof to
qualified institutional buyers or to foreign purchasers will be effected
through, records maintained by the Depository and its participants. After the
initial issuance of the Global Note, Series B Notes in certified form will be
issued in exchange for the Global Note only on the terms set forth in the
Indenture. See "Book Entry--Delivery and Form."
HISTORICAL AND PRO FORMA FINANCIAL STATEMENTS
THE FINANCIAL STATEMENTS AND DATA OF THE ENTITIES INDICATED HEREIN ARE OF
BUSINESSES ACQUIRED BY THE COMPANY SINCE ITS COMMENCEMENT OF OPERATIONS IN
1996. SUCH COMPANIES HAVE HAD DIFFERENT MANAGEMENT AND COST STRUCTURES. THE
FINANCIAL STATEMENTS AND DATA INCLUDED HEREIN ALSO INCLUDE HISTORICAL
CONSOLIDATED FINANCIAL STATEMENTS AND DATA OF THE COMPANY AND SUCH BUSINESSES.
THE FINANCIAL STATEMENTS AND DATA INCLUDED HEREIN, IN PARTICULAR THE UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL DATA, DO NOT NECESSARILY INDICATE THE RESULTS
OF OPERATIONS OR FINANCIAL CONDITION OF THE COMPANY THAT WOULD HAVE BEEN
REPORTED FOR THE PERIODS INDICATED FOR A VARIETY OF REASONS, INCLUDING
DIFFERENCES IN OPERATING AND OTHER COSTS, DIFFERENCES IN ACCOUNTING POLICIES
AND PROCEDURES AND DIFFERENCES IN COST OF CAPITAL. IN ADDITION, THE UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL DATA HAVE NOT BEEN PREPARED IN ACCORDANCE
WITH UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") BECAUSE
GAAP DOES NOT ALLOW FOR THE AGGREGATION OF FINANCIAL DATA FOR ENTITIES THAT
ARE NOT UNDER COMMON OWNERSHIP. SUCH PRO FORMA CONSOLIDATED FINANCIAL DATA ARE
INCLUDED HEREIN FOR INFORMATIONAL PURPOSES AND WHILE MANAGEMENT BELIEVES THAT
THEY MAY BE HELPFUL IN UNDERSTANDING THE PAST OPERATIONS OF THE ENTITIES, ON
SUCH A CONSOLIDATED BASIS, UNDUE RELIANCE SHOULD NOT BE PLACED THEREON.
i
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information, risk factors and historical
and pro forma financial statements, including the related notes, appearing
elsewhere in this Prospectus. As used in this Prospectus, unless the context
otherwise requires: (i) "Issuers" refers, collectively, to Mediacom LLC
("Mediacom") and Mediacom Capital Corporation ("Mediacom Capital"), a wholly-
owned subsidiary of Mediacom; (ii) "Company" refers to Mediacom and its
operating subsidiaries (the "Subsidiaries"), presently comprising Mediacom
Southeast LLC ("Mediacom Southeast"), Mediacom California LLC ("Mediacom
California"), Mediacom Arizona LLC ("Mediacom Arizona") and Mediacom Delaware
LLC ("Mediacom Delaware"); (iii) "1997 Systems" refers to the cable television
systems owned by the Company as of December 31, 1997; (iv) "1998 Systems"
refers to the cable television systems acquired by the Company in January 1998
from affiliates of Cablevision Systems Corporation (the "Cablevision Systems")
and from Jones Cable Income Fund 1-B/C Venture whose general partners are
affiliates of Jones Intercable, Inc. (the "Jones System"); (v) "Systems" refers
to the 1997 Systems and the 1998 Systems; and (vi) all references to the
Company's business and financial performance "on a pro forma basis" give effect
to the Systems as if owned by the Company at the beginning of the related
period or as of the applicable date. See "Glossary" and "Description of the
Notes--Certain Definitions" for the definition of certain terms appearing
herein.
THE COMPANY
Mediacom was founded in July 1995 principally to acquire, operate and develop
cable television systems through its Subsidiaries in selected non-metropolitan
markets of the United States. To date, the Company has completed eight
acquisitions of cable television systems that, as of March 31, 1998, passed
approximately 482,800 homes and served approximately 343,700 basic subscribers.
The Company is currently among the top 25 multiple system operators ("MSOs") in
the United States, operating in 14 states and serving 309 franchised
communities.
The Company's business strategy is to: (i) acquire underperforming and
undervalued cable television systems primarily in non-metropolitan markets, as
well as related telecommunications businesses; (ii) build subscriber clusters
through regionalized operations; (iii) implement operating plans and system
improvements designed to enhance the long-term operational and financial
performance of the Company; and (iv) deploy a flexible financing strategy to
complement the Company's growth objectives and operating plans. See "Business--
Business Strategy."
From March 1996 to December 1997, the Company completed six acquisitions of
cable television systems that, as of March 31, 1998, served approximately
64,300 basic subscribers in California, Arizona, Delaware and Maryland (the
"1997 Systems"). In January 1998, the Company acquired cable television systems
in two separate transactions that, as of March 31, 1998, served approximately
279,400 basic subscribers in eleven states, principally Alabama, California,
Florida, Kentucky, Missouri and North Carolina (the "1998 Systems"). The
aggregate purchase price for the 1997 Systems and the 1998 Systems
(collectively, the "Systems") was approximately $428.2 million (before closing
costs and adjustments), representing an acquisition price of approximately
$1,246 per basic subscriber.
1
To manage and operate the Systems, the Company has established four operating
regions: Southeast, Mid-Atlantic, Central and Western. Each region is
subdivided into groups of cable television systems ("Regional Clusters") which
are organized and operated geographically. The following table is a summary of
selected subscriber and operating data for the Systems as of March 31, 1998:
AVERAGE
BASIC SERVICE PREMIUM SERVICE MONTHLY
----------------------- ---------------------------- REVENUES
REGIONAL HOMES BASIC BASIC PREMIUM PREMIUM PER BASIC
OPERATING REGION CLUSTERS PASSED SUBSCRIBERS PENETRATION SERVICE UNITS PENETRATION(1) SUBSCRIBER(2)
- ---------------- -------- ------- ----------- ----------- ------------- -------------- -------------
Southeast(3)............ 4 178,580 130,750 73.2% 199,990 153.0% $31.21
Mid-Atlantic(4)......... 3 106,170 82,390 77.6 82,620 100.3 28.43
Central(5).............. 4 116,210 77,430 66.6 100,500 129.8 29.77
Western(6).............. 4 81,840 53,130 64.9 21,290 40.1 34.47
--- ------- ------- ----- ------- ------ ------
Total.................. 15 482,800 343,700 71.2% 404,400 117.7% $30.72
=== ======= ======= ===== ======= ====== ======
- --------
(1) The number of subscriptions to premium services which are paid for on an
individual basis as a percentage of the total number of basic service
subscribers. A customer may purchase more than one premium service, each of
which is counted as a separate premium service unit. This ratio may be
greater than 100% if the average customer subscribes to more than one
premium service unit.
(2) Represents average monthly revenues for the three months ended March 31,
1998, divided by the number of basic subscribers as of the end of such
period.
(3) Consists of cable television systems in Alabama, Florida, Mississippi and
Tennessee.
(4) Consists of cable television systems in Delaware, Maryland and North
Carolina.
(5) Consists of cable television systems in Illinois, Kansas, Kentucky,
Missouri and Oklahoma.
(6) Consists of cable television systems in Arizona and California.
The Systems, taken as a whole, serve communities with favorable demographic
characteristics. During the five year period ended December 31, 1997, basic
subscribers served by the Systems have grown at a compound annual rate of
approximately 4.2%. Furthermore, the Systems have experienced a strong demand
for premium service units, as reflected by the premium penetration of
approximately 117.7% as of March 31, 1998. Because the Systems serve
geographically and economically diverse communities in smaller markets across
fourteen states, the Company believes that it is more resistant to any
individual regional economic downturn and is less susceptible to any local
competitive threat.
RECENT DEVELOPMENTS
On January 9, 1998, Mediacom California completed the acquisition of the
Jones System, serving approximately 17,200 basic subscribers on such date, for
a purchase price of $21.4 million (before closing costs and adjustments). The
acquisition of the Jones System and related closing costs and adjustments was
financed with cash on hand and borrowings under a $100.0 million senior credit
facility (the "Western Credit Facility") which was entered into by Mediacom
California, Mediacom Arizona and Mediacom Delaware (collectively, the "Western
Group") in June 1997.
On January 23, 1998, Mediacom Southeast completed the acquisition of the
Cablevision Systems, serving approximately 260,100 basic subscribers on such
date, for an aggregate purchase price of approximately $308.7 million (before
closing costs and adjustments). The acquisition of the Cablevision Systems and
related closing costs and adjustments was financed with: (i) $211.0 million of
borrowings under a new $225.0 million senior credit facility (the "Southeast
Credit Facility" and, together with the Western Credit Facility, the
"Subsidiary Credit Facilities") made available to Mediacom Southeast; (ii) the
proceeds of $20.0 million aggregate principal amount of term notes (the
"Holding Company Notes") issued by Mediacom; and (iii) $94.0 million of equity
capital contributed to Mediacom by its members.
2
On April 1, 1998, the Company completed the Series A Notes Offering. The
Company used the net proceeds of the Series A Notes Offering (approximately
$193.5 million) to repay in full the Holding Company Notes and to make
contributions to Mediacom Southeast and the Western Group for purposes of
repaying certain indebtedness under the Subsidiary Credit Facilities. See "--
The Series A Notes Offering" and "Use of Proceeds."
ORGANIZATIONAL STRUCTURE AND MANAGEMENT
Mediacom was organized as a New York limited liability company to serve as
the holding company for its various Subsidiaries, each of which is a Delaware
limited liability company. The Subsidiaries are wholly-owned by Mediacom,
except for a 1.0% ownership interest in Mediacom California held by Mediacom
Management Corporation ("Mediacom Management"). Mediacom Capital, a New York
corporation wholly-owned by Mediacom, was formed specifically to effect the
Series A Notes Offering and does not conduct operations of its own. The Series
A Notes are, and the Series B Notes will be, joint and several obligations of
Mediacom and Mediacom Capital, although Mediacom received all the net proceeds
of the Series A Notes Offering.
Pursuant to separate management agreements with the Subsidiaries, Mediacom
Management, a Delaware corporation wholly-owned by Mr. Commisso, is paid
management fees for managing the day-to-day operations of the Subsidiaries. In
accordance with the Operating Agreement (as defined) of Mediacom, Mr. Commisso
is the sole manager (the "Manager") of Mediacom and has overall management and
effective control of the business and affairs of the Company. See "Certain
Relationships and Related Transactions" and "Description of the Operating
Agreement."
----------------
The Company's principal corporate offices are located at 100 Crystal Run
Road, Middletown, New York 10941, and its telephone number is (914) 695-2600.
RISK FACTORS
In connection with an investment in the Series B Notes, prospective investors
should consider, among other things, that: (i) the Company is, and will
continue to be, highly leveraged; (ii) the consolidated historical earnings of
the Company have been insufficient to cover its fixed charges; (iii) Mediacom
is a holding company which has no significant assets other than its investments
in and advances to the Subsidiaries; (iv) there are restrictions imposed by the
terms of the Company's indebtedness; (v) the Company's business is
substantially dependent upon the performance of certain key individuals;
(vi) the Company has a limited operating history; and (vii) the Company may be
unable to make expected capital expenditures to upgrade a significant portion
of its cable television distribution systems. See "Risk Factors."
3
THE SERIES A NOTES OFFERING
Series A Notes.............. The Series A Notes were sold by the Issuers on
April 1, 1998 to Chase Securities Inc. (the
"Initial Purchaser") pursuant to a Purchase
Agreement dated March 27, 1998 (the "Purchase
Agreement"). The Initial Purchaser subsequently
resold the Series A Notes (i) within the United
States only to qualified institutional buyers in
reliance upon Rule 144A under the Securities Act
and (ii) outside the United States in accordance
with Regulation S under the Securities Act.
Exchange and Registration
Rights Agreement............
Pursuant to the Purchase Agreement, the Issuers
and the Initial Purchaser entered into the
Exchange and Registration Rights Agreement, which
grants the holders of the Series A Notes certain
exchange and registration rights. The Exchange
Offer is intended to satisfy such exchange rights
which terminate upon the consummation of the
Exchange Offer.
THE EXCHANGE OFFER
Issuers..................... Mediacom LLC and Mediacom Capital Corporation.
Securities Offered.......... $200,000,000 aggregate principal amount of Series
B 8 1/2% Senior Notes due 2008.
The Exchange Offer.......... $1,000 principal amount of the Series B Notes in
exchange for each $1,000 principal amount of
Series A Notes. As of the date hereof,
$200,000,000 aggregate principal amount of Series
A Notes are outstanding. The Issuers will issue
the Series B Notes to holders on or promptly
after the Expiration Date.
Based on no-action letters issued by the staff of
the Commission to third parties, the Issuers
believe the Series B Notes issued pursuant to the
Exchange Offer may be offered for resale, resold
and otherwise transferred by any holder thereof
(other than any such holder that is an
"affiliate" of the Issuers within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such Series B Notes are acquired in
the ordinary course of such holder's business and
that such holder does not intend to participate
and has no arrangement or understanding with any
person to participate in the distribution of such
Series B Notes.
Each Participating Broker-Dealer that receives
Series B Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will
deliver a prospectus in connection
4
with any resale of such Series B Notes. The
Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to
time, may be used in connection with resales of
Series B Notes received in exchange for Series A
Notes only by Participating Broker-Dealers
("Eligible Participating Broker-Dealers") who
acquired such Series A Notes as a result of
market-making activities or other trading
activities and not by Participating Broker-
Dealers who acquired such Series A Notes directly
from the Issuers. The Issuers have agreed that,
for a period of 90 days after the Expiration
Date, they will make this Prospectus available to
any Eligible Participating Broker-Dealer for use
in connection with any such resale. See "Plan of
Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose
of participating, in a distribution of the Series
B Notes could not rely on the position of the
staff of the Commission communicated in no-action
letters and, in the absence of an exception
therefrom, must comply with the registration and
prospectus delivery requirements of the
Securities Act in connection with any resale
transaction. Failure to comply with such
requirements in such instance may result in such
holder incurring liability under the Securities
Act for which the holder is not indemnified by
the Company.
Expiration Date............. 5:00 p.m., New York City time, on , 1998,
unless the Exchange Offer is extended, in which
case the term "Expiration Date" means the latest
date and time to which the Exchange Offer is
extended.
Accrued Interest on the
Series B Notes and the
Series A Notes..............
Each Series B Note will bear interest from its
issuance date. Holders of Series A Notes that are
accepted for exchange will receive, in cash,
accrued interest thereon to, but not including,
the issuance date of the Series B Notes. Such
interest will be paid with the first interest
payment on the Series B Notes. Interest on the
Series A Notes accepted for exchange will cease
to accrue upon issuance of the Series B Notes.
Conditions to the Exchange The Exchange Offer is subject to certain
Offer....................... customary conditions, which may be waived by the
Issuers. See "The Exchange Offer--Conditions."
Procedures for Tendering
Series A Notes..............
Each holder of Series A Notes wishing to accept
the Exchange Offer must complete, sign and date
the accompanying Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
5
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the
Series A Notes and any other required
documentation to Bank of Montreal Trust Company
(the "Exchange Agent") at the address set forth
therein. By executing the Letter of Transmittal,
each holder will represent to the Issuers that,
among other things, the Series B Notes acquired
pursuant to the Exchange Offer are being obtained
in the ordinary course of business of the person
receiving such Series B Notes, whether or not
such person is the holder, that neither the
holder nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such Series B
Notes and that neither the holder nor any such
other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Issuers.
See "The Exchange Offer--Purpose and Effect of
the Exchange Offer" and "--Procedures for
Tendering."
Untendered Series A Notes... Following the consummation of the Exchange Offer,
holders of Series A Notes eligible to participate
but who do not tender their Series A Notes will
not have any further exchange rights and such
Series A Notes will continue to be subject to
certain restrictions on transfer. Accordingly,
the liquidity of the market for such Series A
Notes could be adversely affected.
Consequences of Failure to
Exchange....................
The Series A Notes that are not exchanged
pursuant to the Exchange Offer will remain
restricted securities. Accordingly, such Series A
Notes may be resold only: (i) to the Issuers;
(ii) pursuant to Rule 144A or Rule 144 under the
Securities Act or pursuant to another exemption
under the Securities Act; (iii) outside the
United States to a foreign person pursuant to the
requirements of Rule 904 under the Securities
Act; (iv) to certain institutional "accredited
investors" within the meaning of Rule 501(a)
under the Securities Act subject to a minimum
principal amount of $250,000; or (v) pursuant to
an effective registration statement under the
Securities Act. See "The Exchange Offer--
Consequences of Failure to Exchange."
Shelf Registration If: (i) because of any change in law or
Statement................... applicable interpretations thereof by the
Commission's staff the Issuers are not permitted
to effect the Exchange Offer as contemplated
hereby; (ii) any Series A Notes validly tendered
pursuant to the Exchange Offer are not exchanged
for Series B Notes within 180 days after April 1,
1998; (iii) the Initial Purchaser so requests
with respect to certain Notes; (iv) any
applicable law or interpretations do not permit
any holder to participate in the Exchange Offer;
(v) any holder that participates in the Exchange
Offer does not receive freely transferable Series
B Notes in exchange for tendered Series A Notes;
or (vi) the Issuers so elect, then the Issuers
have agreed to use their reasonable best efforts
to file as promptly
6
as practicable (but in no event more than 30 days
after so required or requested pursuant to
Section 2 of the Exchange and Registration Rights
Agreement) with the Commission a shelf
registration statement (the "Shelf Registration
Statement") and use their reasonable best efforts
to cause it to be declared effective. The Issuers
have agreed to use their reasonable best efforts
to maintain the effectiveness of the Shelf
Registration Statement for, under certain
circumstances, a maximum of two years, to cover
resales of the Series A Notes held by any such
holders.
Special Procedures for
Beneficial Owners...........
Any beneficial owner whose Series A Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such owner
must, prior to completing and executing the
Letter of Transmittal and delivering its Series A
Notes, either make appropriate arrangements to
register ownership of the Series A Notes in such
owner's name or obtain a properly completed bond
power from the registered holder. The transfer of
registered ownership may take considerable time.
The Company will keep the Exchange Offer open for
not less than thirty days in order to provide for
the transfer of registered ownership.
Guaranteed Delivery Holders of Series A Notes who wish to tender
Procedure................... their Series A Notes and whose Series A Notes are
not immediately available or who cannot deliver
their Series A Notes, the Letter of Transmittal
or any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply with
the procedures for book-entry transfer) prior to
the Expiration Date must tender their Series A
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
Withdrawal Rights........... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date.
Acceptance of Series A
Notes and Delivery of
Series B Notes.............. The Issuers will accept for exchange any and all
Series A Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date. The Series B Notes
issued pursuant to the Exchange Offer will be
delivered on or promptly after the Expiration
Date. See "The Exchange Offer--Terms of the
Exchange Offer."
Use of Proceeds............. There will be no cash proceeds to the Company
from the exchange pursuant to the Exchange Offer.
Exchange Agent..............
Bank of Montreal Trust Company.
7
THE SERIES B NOTES
General..................... The form and terms of the Series B Notes are the
same as the form and terms of the Series A Notes
except that (i) the Series B Notes will bear a
"Series B" designation, (ii) the Series B Notes
will have been registered under the Securities
Act and, therefore, will not bear legends
restricting their transfer, and (iii) the holders
of Series B Notes will not be entitled to certain
rights of holders of Series A Notes under the
Exchange and Registration Rights Agreement,
including the provisions providing for an
increase in the interest rate on the Series A
Notes in certain circumstances relating to the
timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is consummated.
See "The Exchange Offer--Purpose and Effect of
the Exchange Offer." The Series B Notes will
evidence the same debt as the Series A Notes
(which they replace) and will be entitled to the
benefits of the Indenture. See "Description of
the Notes."
Securities Offered.......... $200,000,000 aggregate principal amount of Series
B 8 1/2% Senior Subordinated Notes due 2008.
Maturity.................... April 15, 2008.
Interest Rate and Payment The Series B Notes will bear interest at a rate
Dates....................... of 8 1/2% per annum. Interest on the Series B
Notes will be payable semi-annually on each April
15 and October 15.
Sinking Fund................ None.
Mandatory Redemption........ None.
Optional Redemption......... Except as described below, the Issuers may not
redeem the Series B Notes prior to April 15,
2003. On and after such date, the Issuers may
redeem the Series B Notes, in whole or in part,
at the redemption prices set forth herein,
together with accrued and unpaid interest, if
any, to the date of redemption. In addition, at
any time on or prior to April 15, 2001, the
Issuers may redeem up to 35% of the original
principal amount of the Notes with the Net Cash
Proceeds of one or more Equity Offerings of
Mediacom, at a redemption price in cash equal to
108.5% of the principal amount to be redeemed
plus accrued and unpaid interest, if any, to the
date of redemption; provided that at least 65% of
the original aggregate principal amount of Notes
remains outstanding immediately after each such
redemption. See "Description of the Notes--
Optional Redemption."
Change of Control........... Upon the occurrence of a Change of Control, each
holder of the Series B Notes will have the right
to require the Issuers to repurchase all or any
part of such holder's Series B Notes at
8
a price equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any,
to the date of repurchase. See "Description of
the Notes--Optional Redemption" and "--Repurchase
at the Option of Holders--Change of Control."
There can be no assurance that sufficient funds
will be available if necessary to make any
required repurchases. See "Risk Factors--Ability
to Purchase Notes Upon a Change of Control."
Ranking.....................
The Series B Notes will be unsecured, senior
obligations of the Issuers ranking pari passu in
right of payment with all other existing and
future unsecured Indebtedness of the Issuers,
other than any Subordinated Obligations. The
Series B Notes will be effectively subordinated
in right of payment to any secured Indebtedness
of the Issuers. Since Mediacom is a holding
company and conducts its business through its
Subsidiaries, the Series B Notes will be
effectively subordinated to all existing and
future Indebtedness and other liabilities
(including trade payables) of the Subsidiaries.
As of March 31, 1998, on a pro forma basis, after
giving effect to the Series A Notes Offering and
the use of the net proceeds therefrom, the
Company would have had approximately $321.3
million of Indebtedness outstanding (including
approximately $121.3 million of Indebtedness of
the Subsidiaries), with the Subsidiaries having
the ability to borrow up to an additional $207.0
million in the aggregate under the Subsidiary
Credit Facilities. See "Capitalization" and
"Description of the Notes--Ranking."
Certain Covenants...........
The Indenture will limit, among other things: (i)
the incurrence of additional Indebtedness by
Mediacom and its Restricted Subsidiaries (as
defined in "Description of the Notes--Certain
Definitions"); (ii) the payment of dividends on,
and redemption of, Equity Interests (as defined
in "Description of the Notes--Certain
Definitions") of Mediacom and its Restricted
Subsidiaries; (iii) certain other restricted
payments, including certain investments; (iv)
sales of assets and Equity Interests of the
Restricted Subsidiaries; (v) certain transactions
with affiliates; (vi) the creation of liens; and
(vii) consolidations, mergers and transfers of
all or substantially all of the Issuers' assets.
The Indenture also will prohibit certain
restrictions on distributions from Restricted
Subsidiaries. However, all of those limitations
and prohibitions will be subject to a number of
important qualifications and exceptions. See
"Description of the Notes--Covenants."
For more information regarding the Series B Notes, including definitions of
certain capitalized terms used above, see "Description of the Notes." For a
discussion of the risk factors that should be considered by holders who tender
their Series A Notes in the Exchange Offer, see "Risk Factors."
9
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents: (i) summary historical financial data for the
period from January 1, 1996 through March 11, 1996 and as of and for the years
ended December 31, 1993, 1994 and 1995 derived from audited financial
statements of Benchmark Acquisition Fund II Limited Partnership (the
"Predecessor Company"); (ii) summary historical consolidated financial and
operating data as of and for the period from the commencement of operations
(March 12, 1996) to December 31, 1996 and for the year ended December 31, 1997
derived from the Company's audited consolidated financial statements and should
be read in conjunction with those statements, which are included in this
Prospectus; and (iii) unaudited summary historical consolidated financial data
for the three months ended March 31, 1997 and unaudited summary historical
consolidated financial data as of and for the three months ended March 31,
1998, all of which have been derived from the unaudited consolidated financial
statements of the Company, and summary historical consolidated operating data
for the three months ended March 31, 1997. In the opinion of management, such
unaudited interim financial statements have been prepared on the same basis as
the audited financial statements and include all adjustments, which consist
only of normal recurring adjustments, necessary to present fairly the financial
position and the results of operations for the interim periods. Financial and
operating results for the three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the full year.
In addition, the following table presents unaudited summary pro forma
consolidated financial and operating data for the Company for the year ended
December 31, 1997 and as of and for the three months ended March 31, 1998, as
adjusted to give pro forma effect to: (i) in the case of statement of
operations and other financial and operating data, the Series A Notes Offering
and the use of the net proceeds therefrom and the acquisitions of the Systems
and related equity contributions and borrowings under the Subsidiary Credit
Facilities and the Holding Company Notes, as if such transactions had been
consummated on January 1, 1997; and (ii) in the case of balance sheet data, the
Series A Notes Offering and the use of the net proceeds therefrom as if such
transactions had been consummated on March 31, 1998. See "--Recent
Developments" above. The unaudited pro forma consolidated financial and
operating data give effect to the acquisitions of the Systems under the
purchase method of accounting, certain other operating assumptions and the
impact of the Series A Notes Offering.
The unaudited summary pro forma consolidated financial data have been
prepared by the Company based upon the historical financial statements and do
not purport to represent what the Company's results of operations or financial
condition would have actually been or what operations of the Company in any
future period would be if the transactions that give rise to the pro forma
adjustments had occurred on the dates assumed. The following information is
qualified by reference to and should be read in conjunction with "Unaudited Pro
Forma Consolidated Financial Data," "Capitalization," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
financial statements and related notes thereto included elsewhere in this
Prospectus.
10
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA
PREDECESSOR COMPANY(1) THE COMPANY(2)
--------------------------------------- -------------------------------------
YEAR YEAR YEAR JANUARY 1 MARCH 12 YEAR THREE MONTHS
ENDED ENDED ENDED THROUGH THROUGH ENDED ENDED MARCH 31,
DEC. 31, DEC. 31, DEC. 31, MARCH 11, DEC. 31, DEC. 31, -----------------
1993 1994 1995 1996 1996 1997 1997 1998
-------- -------- -------- --------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
STATEMENT OF OPERATIONS
DATA:
Revenues............... $ 5,279 $ 5,075 $ 5,171 $1,038 $ 5,411 $ 17,634 $ 2,894 $ 25,943
Service costs.......... 1,254 1,322 1,536 297 1,511 5,547 890 9,822
Selling, general and
administrative
expenses............... 1,072 1,016 1,059 222 931 2,696 434 5,303
Management fee
expense................ 263 252 261 52 270 882 145 1,207
Depreciation and
amortization........... 4,337 4,092 3,945 527 2,157 7,636 1,607 11,229
------- ------- ------- ------ ------- -------- ------- --------
Operating income
(loss)................. (1,647) (1,607) (1,630) (60) 542 873 (182) (1,618)
Interest expense,
net(3)................. 903 878 935 201 1,528 4,829 889 5,017
Other expenses......... 26 -- -- -- 967 640 3 3,340
------- ------- ------- ------ ------- -------- ------- --------
Net loss............... $(2,576) $(2,485) $(2,565) $ (261) $(1,953) $ (4,596) $(1,074) $(9,975)
======= ======= ======= ====== ======= ======== ======= ========
OTHER DATA:
System Cash Flow(4).... $ 2,953 $ 2,737 $ 2,576 $ 519 $ 2,969 $ 9,391 $ 1,570 $ 10,818
System Cash Flow
margin(5).............. 55.9% 53.9% 49.8% 50.0% 54.9% 53.3% 54.3% 41.7%
Annualized System Cash
Flow(6)................
Adjusted EBITDA(7)..... $ 2,690 $ 2,485 $ 2,315 $ 467 $ 2,699 $ 8,509 $ 1,425 $ 9,611
Adjusted EBITDA
margin(8).............. 51.0% 49.0% 44.8% 45.0% 49.9% 48.3% 49.2% 37.0%
Annualized Adjusted
EBITDA(9)..............
Ratio of total
Indebtedness to
annualized Adjusted
EBITDA.................
Ratio of Adjusted
EBITDA to interest
expense, net...........
Net cash flows from
operating activities... $ 1,657 $ 1,395 $ 1,478 $ 226 $ 237 $ 7,007 $ 556 $ 8,615
Net cash flows from
investing activities... (462) (552) (261) (86) (45,257) (60,008) (413) (335,599)
Net cash flows from
financing activities... (1,024) (919) (1,077) -- 45,416 53,632 100 327,452
Deficiency of earnings
to fixed charges(10)... 2,576 2,485 2,565 261 1,953 4,596 1,074 9,975
OPERATING DATA (end of period, except
average):
Homes passed........... 38,749 87,750 38,749
Basic subscribers...... 27,153 64,350 26,561
Basic penetration...... 70.1% 73.3% 68.5%
Premium service units.. 11,691 39,288 13,126
Premium penetration.... 43.1% 61.1% 49.4%
Average monthly
revenues per basic
subscriber(11).........
Annual System Cash Flow
per basic
subscriber(12).........
Annual Adjusted EBITDA
per basic
subscriber(13).........
BALANCE SHEET DATA (end of period):
Total assets........... $15,296 $11,755 $ 8,149 $46,560 $102,791 $444,963
Total Indebtedness..... 14,213 13,294 12,217 40,529 72,768 314,760
Total members' equity.. 481 (2,003) (4,568) 4,537 24,441 108,466
PRO FORMA
--------------------
THREE
YEAR MONTHS
ENDED ENDED
DEC. 31, MARCH 31,
1997 1998
--------- ----------
STATEMENT OF OPERATIONS
DATA:
Revenues............... $119,091 $ 31,679
Service costs.......... 44,286 12,033
Selling, general and
administrative
expenses............... 23,191 5,988
Management fee
expense................ 5,389 1,465
Depreciation and
amortization........... 57,506 13,720
--------- ----------
Operating income
(loss)................. (11,281) (1,527)
Interest expense,
net(3)................. 26,154 6,557
Other expenses......... 1,379 3,340
--------- ----------
Net loss............... $(38,814) $(11,424)
========= ==========
OTHER DATA:
System Cash Flow(4).... $ 51,614 $ 13,658
System Cash Flow
margin(5).............. 43.3% 43.1%
Annualized System Cash
Flow(6)................ $ 54,632
Adjusted EBITDA(7)..... $ 46,225 $ 12,193
Adjusted EBITDA
margin(8).............. 38.8% 38.5%
Annualized Adjusted
EBITDA(9).............. $ 48,772
Ratio of total
Indebtedness to
annualized Adjusted
EBITDA................. 6.6x
Ratio of Adjusted
EBITDA to interest
expense, net........... 1.9x
Net cash flows from
operating activities...
Net cash flows from
investing activities...
Net cash flows from
financing activities...
Deficiency of earnings
to fixed charges(10)... 38,814 11,424
OPERATING DATA (end of period, except
average):
Homes passed........... 479,655 482,800
Basic subscribers...... 341,725 343,700
Basic penetration...... 71.2% 71.2%
Premium service units.. 403,281 404,400
Premium penetration.... 118.0% 117.7%
Average monthly
revenues per basic
subscriber(11)......... $ 30.72
Annual System Cash Flow
per basic
subscriber(12)......... $ 159
Annual Adjusted EBITDA
per basic
subscriber(13)......... $ 142
BALANCE SHEET DATA (end of period):
Total assets........... $451,463
Total Indebtedness..... 321,260
Total members' equity.. 108,466
(footnotes on following page)
11
NOTES TO SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING
DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
(1) The summary historical financial data for the period from January 1, 1996
through March 11, 1996 and for the years ended December 31, 1993, 1994 and
1995 have been derived from the audited financial statements of the
Predecessor Company.
(2) The Company commenced operations on March 12, 1996 with the acquisition of
the Ridgecrest System (as defined) and has since completed seven
additional acquisitions. See "Business--Acquisition History." The
historical amounts represent the results of operations of the Systems
acquired from the date of acquisition to the end of the period presented.
(3) Net of interest income. Interest income for the periods presented is not
material.
(4) Represents Adjusted EBITDA (as defined below in footnote 7) before
management fees. System Cash Flow (as defined in the Glossary) is not
intended to be a performance measure that should be regarded as an
alternative either to operating income or net income as an indicator of
operating performance or to the statement of cash flows as a measure of
liquidity, is not intended to represent funds available for debt service,
dividends, reinvestment or other discretionary uses, and should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
System Cash Flow is included herein because the Company believes that
System Cash Flow is a meaningful measure of performance as it is commonly
used in the cable television industry to analyze and compare cable
television companies on the basis of operating performance, leverage and
liquidity and a company's overall ability to service its debt. The
Company's definition of System Cash Flow may not be identical to similarly
titled measures reported by other companies.
(5) Represents System Cash Flow as a percentage of revenues. This measurement
is used by the Company, and is commonly used in the cable television
industry, to analyze and compare cable television companies on the basis
of operating performance.
(6) Represents System Cash Flow multiplied by four. The Company believes this
calculation provides a meaningful measure of performance, on a annualized
basis, for the reasons noted above in footnote 4.
(7) Represents operating income (loss) before depreciation and amortization.
Adjusted EBITDA is not intended to be a performance measure that should be
regarded as an alternative either to operating income or net income as an
indicator of operating performance or to the statement of cash flows as a
measure of liquidity, is not intended to represent funds available for
debt service, dividends, reinvestment or other discretionary uses, and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. Adjusted EBITDA is included herein because the Company
believes that Adjusted EBITDA is a meaningful measure of performance as it
is commonly used in the cable television industry to analyze and compare
cable television companies on the basis of operating performance, leverage
and liquidity and a company's overall ability to service its debt. In
addition, the primary debt instruments of the Company contain certain
covenants, compliance with which is measured by computations similar to
determining Adjusted EBITDA. The Company's definition of Adjusted EBITDA
may not be identical to similarly titled measures reported by other
companies.
(8) Represents Adjusted EBITDA as a percentage of revenues. This measurement
is used by the Company, and is commonly used in the cable television
industry, to analyze and compare cable television companies on the basis
of operating performance.
(9) Represents Adjusted EBITDA multiplied by four. This calculation provides
the measure by which the ratio of total indebtedness to annualized
Adjusted EBITDA is determined. This ratio is commonly used in the cable
television industry as a measure of leverage.
(10) For purposes of this computation, earnings are defined as income (loss)
before income taxes and fixed charges. Fixed charges are interest costs.
(11) Represents average monthly revenues for the period divided by the number
of basic subscribers as of the end of such period. This measurement is
commonly used in the cable television industry to analyze and compare
cable television companies on the basis of operating performance.
(12) Represents annualized System Cash Flow for the period divided by the
number of basic subscribers at the end of such period. This measurement is
commonly used in the cable television industry to analyze and compare
cable television companies on the basis of operating performance.
(13) Represents annualized Adjusted EBITDA for the period divided by the number
of basic subscribers at the end of such period. This measurement is used
in the cable television industry to analyze and compare cable television
companies on the basis of operating performance.
12
RISK FACTORS
The following risk factors, in addition to the other information contained
elsewhere in this Prospectus, should be carefully considered by prospective
investors in connection with an investment in the Series B Notes.
HIGHLY LEVERAGED CAPITAL STRUCTURE
The Company is, and will continue to be, highly leveraged as a result of the
substantial Indebtedness it has incurred, and intends to incur, to finance
acquisitions and expand its operations. As of March 31, 1998, the Company's
consolidated Indebtedness was approximately $314.8 million. As of March 31,
1998, on a pro forma basis after giving effect to the Series A Notes Offering
and the use of the net proceeds therefrom, the Company would have had
approximately $321.3 million of consolidated Indebtedness. See "Unaudited Pro
Forma Consolidated Financial Data." The Issuers do not have any Indebtedness
expressly subordinated by its terms in right and priority of payment to the
Series A Notes. In addition, subject to the restrictions in the Subsidiary
Credit Facilities and the Indenture, the Company plans to incur additional
Indebtedness from time to time, to finance acquisitions in the future, for
capital expenditures or for general business purposes. The Company's highly
leveraged capital structure could adversely affect the Issuers' ability to
service the Series B Notes and could have important consequences to holders of
the Series B Notes, including, but not limited to, the following: (i)
increasing the Company's vulnerability to adverse changes in general economic
conditions or increases in prevailing interest rates as compared to competing
companies that are not as highly leveraged; (ii) limiting the Company's
ability to obtain additional financing for working capital, capital
expenditures, acquisitions and general corporate purposes; (iii) a substantial
portion of the Company's cash flow from operations must be dedicated to debt
service requirements, thereby reducing the funds available for operations and
future business opportunities and expansion; and (iv) the Company will be
exposed to increases in interest rates given that a portion of the Company's
borrowings will be at variable rates of interest. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of Other Indebtedness."
INSUFFICIENCY OF EARNINGS TO COVER FIXED CHARGES
The consolidated historical earnings of the Company were insufficient to
cover its fixed charges for the three months ended March 31, 1998 and the year
ended December 31, 1997 by approximately $10.0 million and $4.6 million,
respectively. On a pro forma basis, after giving effect to the Series A Notes
Offering and the use of the net proceeds therefrom, the combined earnings of
the Company would have been insufficient to cover its fixed charges for the
three months ended March 31, 1998 and the year ended December 31, 1997 by
approximately $11.4 million and $41.4 million, respectively. See "Unaudited
Pro Forma Consolidated Financial Data." However, for both periods, earnings
are reduced by substantial non-cash charges, principally consisting of
depreciation and amortization.
Since the Company's commencement of operations in March 1996, the Company's
cash generated from operating activities has been sufficient to meet the
Company's debt service, working capital and capital expenditure requirements
and, together with cash from equity contributions and bank borrowings, also
has been sufficient to finance the Company's acquisitions. The ability of the
Company to meet its debt service and other obligations will depend upon the
future performance of the Company which, in turn, is subject to general
economic conditions and to financial, political, competitive, regulatory and
other factors, many of which are beyond the Company's control. The Company's
ability to meet its debt service and other obligations also may be affected by
changes in prevailing interest rates, as a portion of the borrowings under the
Subsidiary Credit Facilities will bear
13
interest at floating rates, subject to certain interest rate protection
agreements. The Company believes that it will continue to generate cash and
obtain financing sufficient to meet such requirements in the future; however,
there can be no assurance that the Company will be able to meet its debt
service and other obligations. If the Company were unable to do so, it would
have to refinance its Indebtedness or obtain new financing. Although in the
past the Company has been able to obtain financing principally through equity
contributions and bank borrowings, there can be no assurances that the Company
will be able to do so in the future or that, if the Company were able to do
so, the terms available will be favorable to the Company. See "Selected
Historical and Pro Forma Consolidated Financial and Operating Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Description of the Notes" and "Description of Other
Indebtedness."
HOLDING COMPANY STRUCTURE
Mediacom is a holding company which has no significant assets other than its
investments in and advances to the Subsidiaries. Mediacom Capital, a wholly-
owned subsidiary of Mediacom, was formed solely for the purpose of serving as
a co-issuer of the Notes and has no operations or assets from which it will be
able to repay the Series B Notes. The Issuers' ability to make interest and
principal payments when due to holders of the Series B Notes will be dependent
upon the receipt of sufficient funds from the Subsidiaries. Under the terms of
the Subsidiary Credit Facilities, upon the occurrence of an event of default
or if certain financial performance tests or other conditions are not met, the
Subsidiaries are restricted from making payments to Mediacom. There can be no
assurance that the Subsidiaries will be able to satisfy the financial tests
and the related conditions set forth in the Subsidiary Credit Facilities to
make such payments to Mediacom, or that the Subsidiaries will not be in
default of their respective financial covenants or otherwise under the
Subsidiary Credit Facilities which could prevent Mediacom from making any
payment in respect of the Series B Notes. In addition, because the
Subsidiaries will not guarantee the payment of principal of and interest on
the Series B Notes, the claims of holders of the Series B Notes effectively
will be subordinated to all existing and future claims of the creditors of
such entities including the lenders under the Subsidiary Credit Facilities and
the Subsidiaries' trade creditors. The ability of the holders of the Series B
Notes to realize upon any Subsidiary's assets upon its liquidation or
reorganization will be subject to the prior claims of such Subsidiary's
creditors including the lenders under the respective Subsidiary Credit
Facilities. As of March 31, 1998, on a pro forma basis after giving effect to
the Series A Notes Offering and the use of the net proceeds therefrom, the
Subsidiaries had approximately $142.9 million of total liabilities, including
approximately $121.3 million of Indebtedness. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of Other Indebtedness."
As a result of the restrictions referred to in the preceding paragraph,
there can be no assurance that the Issuers will be able to gain access to the
cash flow or assets of their Subsidiaries in a timely manner or in amounts
sufficient to pay interest on or principal of the Series B Notes or of
Mediacom's other Indebtedness when due, if any. The Company's ability to meet
debt service and repay its obligations (including the obligations under the
Series B Notes) will depend on the future operating performance and financial
results of the Subsidiaries, which will be subject, in part, to factors beyond
the control of the Subsidiaries, including prevailing economic conditions and
financial, business and other factors. See "Description of the Notes--
Ranking." The Indenture will permit the Subsidiaries to incur additional
Indebtedness under certain circumstances. See "Description of the Notes" and
"Description of Other Indebtedness."
All of Mediacom's membership interests in the Subsidiaries are pledged by
Mediacom as collateral under the respective Subsidiary Credit Facilities.
Therefore, if Mediacom were unable to pay the principal or interest on the
Series B Notes when due (whether at maturity, upon acceleration or otherwise),
the ability of the holders of the Series B Notes to proceed against the
membership interests of the Subsidiaries to satisfy such amounts would be
subject to the ability of such holders to obtain a
14
judgment against Mediacom and the prior satisfaction in full of all amounts
owing under the Subsidiary Credit Facilities. As secured creditors, the
lenders under the Subsidiary Credit Facilities would control the disposition
and sale of the membership interests of the Subsidiaries after an event of
default under the Subsidiary Credit Facilities, and would not be legally
required to take into account the interests of unsecured creditors of
Mediacom, such as the holders of the Series B Notes, with respect to any such
disposition or sale. There can be no assurance that the assets of Mediacom,
after the satisfaction of claims of its secured creditors, would be sufficient
to satisfy any amounts owing with respect to the Series B Notes.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
Each of the Subsidiary Credit Facilities and the Indenture impose
restrictions that, among other things, limit the amount of additional
Indebtedness that may be incurred by the Company and impose limitations on,
among other things, investments, loans and other payments, certain
transactions with affiliates and certain mergers and acquisitions. See
"Description of the Notes--Covenants" and "Description of Other Indebtedness."
The Subsidiary Credit Facilities also require the Subsidiaries to maintain
specified financial ratios and meet certain financial tests. The ability of
the Subsidiaries to comply with such covenants and restrictions can be
affected by events beyond their control, and there can be no assurance that
the Company will achieve operating results that would permit compliance with
such provisions. The breach of certain provisions of either of the Subsidiary
Credit Facilities would, under certain circumstances, result in defaults
thereunder, permitting the lenders thereunder to prevent distributions to
Mediacom and to accelerate the Indebtedness thereunder.
KEY PERSONNEL
The Company's business is substantially dependent upon the performance of
certain key individuals, including its Chairman and Chief Executive Officer,
Rocco B. Commisso. The Subsidiary Credit Facilities provide that a default
will result if Mr. Commisso ceases to be the Chairman and Chief Executive
Officer of Mediacom Management. See "Description of Other Indebtedness--
Subsidiary Credit Facilities." While Mr. Commisso has a significant ownership
position in the Company, events beyond the control of the Company could result
in the loss of his services and, although the Company maintains a strong
management team, the loss of the services of Mr. Commisso or other such
individuals could have a material adverse effect on the Company. The Company
has not entered into an employment agreement, nor does it carry key man life
insurance, for Mr. Commisso or any of its other key personnel.
LIMITED OPERATING HISTORY
The Company was founded in July 1995, commenced its operations in March 1996
and has grown principally through acquisitions. The Company has only recently
acquired the 1998 Systems which substantially increased the size of its
operations. Prospective investors, therefore, have limited historical
financial information about the Company and the results that can be achieved
by the Company in operating the cable television systems not previously owned
by the Company. The past performance of management with other companies does
not guarantee similar results for the Company. There can be no assurance that
the Company will be able to implement successfully its business strategy.
SIGNIFICANT CAPITAL EXPENDITURES
Consistent with its business strategy, the Company expects to make capital
expenditures to upgrade a significant portion of its cable television
distribution systems over the next several years (e.g., to increase bandwidth
and channel capacity and expand addressability). The Company's potential
inability to fund these capital expenditures could adversely affect its
ability to upgrade the
15
cable television distribution systems which could have a material adverse
effect on its operations and competitive position. See "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
SIGNIFICANT COMPETITION IN THE CABLE TELEVISION INDUSTRY
Cable television systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment, such as off-air television broadcast
programming, newspapers, movie theaters, live sporting events, online computer
services and home video products, including videotape cassette recorders.
Because the Company's franchises are generally non-exclusive, there is the
potential for competition with the Company's systems from other operators of
cable television systems, including systems operated by local governmental
authorities. Other distribution systems capable of delivering programming to
homes or businesses, including satellite master antenna television service
("SMATV"), direct broadcast satellite ("DBS") systems and multichannel,
multipoint distribution service ("MMDS") systems now compete with the Company.
In recent years, there has been significant national growth in the number of
subscribers to DBS services and such growth is expected to continue. See
"Business--Competition."
Additionally, recent changes in federal law and recent administrative and
judicial decisions have removed certain of the restrictions that have limited
entry into the cable television business by potential competitors such as
telephone companies, registered utility holding companies and their
subsidiaries. Such developments will enable local telephone companies to
provide a wide variety of video services in the telephone company's own
service area which will be directly competitive with services provided by
cable television systems. Other new technologies, including Internet-based
services, may also become competitive with services that cable television
operators can offer.
Many of the Company's potential competitors have substantially greater
resources than the Company, and the Company cannot predict the extent to which
competition will materialize in its franchise areas from other cable
television operators, other distribution systems for delivering video
programming and other broadband telecommunications services to the home, or
from other potential competitors, or, if such competition materializes, the
extent of its effect on the Company. See "Business--Competition" and
"Legislation and Regulation."
RISKS RELATING TO NEW LINES OF BUSINESS
The Company plans to upgrade selectively its cable television systems to
enhance the potential for increasing revenues through the introduction of new
technologies and services, such as cable Internet access and high-speed data
transmission. See "Business--Business Strategy." While the Company is
optimistic about the prospects for these new lines of business, there can be
no assurances that it will be able to enter them successfully or to generate
additional cash flow. Moreover, many of these new lines of business are likely
to have significant competition from businesses that may have substantial
financial resources and market presence such as local telephone companies,
long distance interexchange carriers and traditional online Internet service
providers.
NON-EXCLUSIVE FRANCHISES; NON-RENEWAL OR TERMINATION OF FRANCHISES
Cable television companies operate under franchises granted by local
authorities which are subject to renewal and renegotiation from time to time.
A franchise is generally granted for a fixed term ranging from five to fifteen
years, but in many cases is terminable if the franchisee fails to comply with
its material provisions. The Company's business is dependent upon the
retention and renewal of its local franchises. Franchises typically impose
conditions relating to the operation of cable television systems, including
requirements relating to the payment of fees, bandwidth capacity, customer
service requirements, franchise renewal and termination. The Cable Television
Consumer Protection and
16
Competition Act of 1992 (the "1992 Cable Act") prohibits franchising
authorities from granting exclusive cable television franchises and from
unreasonably refusing to award additional competitive franchises; it also
permits municipal authorities to operate cable television systems in their
communities without franchises. The Cable Communication Policy Act of 1984
(the "1984 Cable Act" and collectively with the 1992 Cable Act, the "Cable
Acts") provides, among other things, for an orderly franchise renewal process
in which franchise renewal will not be unreasonably withheld or, if renewal is
denied and the franchising authority acquires ownership of the system or
effects a transfer of the system to another person, the operator generally is
entitled to the "fair market value" for the system covered by such franchise.
Historically, franchises have been renewed for cable operators that have
provided satisfactory services and have complied with the terms of their
franchises. Although the Company believes that it generally has good
relationships with its franchise authorities, no assurance can be given that
the Company will be able to retain or renew such franchises or that the terms
of any such renewals will be on terms as favorable to the Company as the
Company's existing franchises. Furthermore, it is possible that a franchise
authority might grant a franchise to another cable company. The non-renewal or
termination of franchises relating to a significant portion of the Company's
subscribers could have a material adverse effect on the Company's results of
operations. See "Business--Franchises."
REGULATION IN THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation by federal,
local and, in some instances, state governmental agencies. The Cable Acts,
both of which amended the Communications Act of 1934 (as amended, the
"Communications Act"), established a national policy to guide the development
and regulation of cable television systems. The Communications Act was
recently substantially amended by the Telecommunications Act of 1996 (the
"1996 Telecom Act"). Principal responsibility for implementing the policies of
the Cable Acts and the 1996 Telecom Act has been allocated between the Federal
Communications Commission ("FCC") and state or local regulatory authorities.
It is not possible to predict the effect that ongoing or future developments
might have on the cable communications industry or on the operations of the
Company. See "Legislation and Regulation."
Federal Law and Regulation
The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established, among other things: (i) rate regulations; (ii)
mandatory carriage and retransmission consent requirements that require a
cable television system under certain circumstances to carry a local broadcast
station or to obtain consent to carry a local or distant broadcast station;
(iii) rules for franchise renewals and transfers; and (iv) other requirements
covering a variety of operational areas such as equal employment opportunity,
technical standards and customer service requirements.
The 1996 Telecom Act deregulates rates for cable programming services tiers
("CPST") commencing in March 1999 and, for certain small cable operators,
immediately eliminates rate regulation of CPST, and, in certain limited
circumstances, basic services. The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Company is currently unable to predict the ultimate effect of the
1992 Cable Act or the 1996 Telecom Act.
The FCC and Congress continue to be concerned that rates for regulated
programming services are rising at a rate exceeding inflation. It is therefore
possible that the FCC will further restrict the ability of cable television
operators to implement rate increases and/or Congress will enact legislation
which would, for example, delay or suspend the scheduled March 1999
termination of CPST rate regulation.
17
State and Local Regulation
Cable television systems generally operate pursuant to non-exclusive
franchises, permits or licenses granted by a municipality or other state or
local governmental entity. The terms and conditions of franchises vary
materially from jurisdiction to jurisdiction. A number of states subject cable
television systems to the jurisdiction of centralized state governmental
agencies. To date, other than Delaware, no state in which the Company
currently operates has enacted state level regulation. The Company cannot
predict whether any of the states in which it currently operates will engage
in such regulation in the future. See "Legislation and Regulation."
RISKS RELATING TO ACQUISITION STRATEGY
The Company expects that a portion of its future growth may be achieved
through the acquisition of additional cable television systems. There can be
no assurance that the Company in the future will be able to successfully
complete acquisitions or exchanges of additional cable television systems
consistent with its business strategy. Furthermore, there can be no assurance
that the Company will successfully obtain financing to complete such
acquisitions, if needed, or that the terms thereof will be favorable to the
Company.
In carrying out its acquisition strategy, the Company attempts to minimize
the risk of unexpected liabilities and contingencies associated with acquired
businesses through planning, investigation and negotiation, but such
liabilities and contingencies may nevertheless accompany acquisitions. There
can be no assurance that the Company will be able to integrate successfully
any acquired businesses into its operations or realize any efficiencies
through the implementation of its operating strategies.
ABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Issuers could be required to
make an offer to purchase all outstanding Series B Notes at a purchase price
equal to 101% of the principal amount thereof, together with accrued and
unpaid interest, if any, to the date of repurchase. If a Change of Control
were to occur, there can be no assurance that the Company would have
sufficient financial resources, or would be able to arrange financing or be
permitted under the terms of other outstanding or future Indebtedness
arrangements, to pay the purchase price for all Series B Notes tendered by
holders thereof. In addition, the Subsidiary Credit Facilities include "change
of control" provisions that permit the lenders thereunder to accelerate the
repayment of Indebtedness thereunder. The Subsidiary Credit Facilities will
not permit the Subsidiaries to make distributions to the Issuers so as to
permit the Issuers to effect a purchase of the Series B Notes upon a Change of
Control without the prior satisfaction of certain financial tests and other
conditions. See "--Holding Company Structure" above and "Description of Other
Indebtedness." Any future credit agreements or other agreements relating to
other Indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when the Company is prohibited from repurchasing Series B Notes, the Company
could seek the consent of its lenders to repurchase Series B Notes or could
attempt to refinance the borrowings that contain such prohibition. If the
Company does not obtain such consent or repay such borrowing, the Company
would remain prohibited from repurchasing Series B Notes. In such case, the
Company's failure to repurchase tendered Series B Notes would constitute an
Event of Default under the Indenture. See "Description of the Notes--
Repurchase at the Option of Holders--Change of Control."
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
Prior to the Exchange Offer, there has not been any public market for the
Series A Notes. The Series A Notes have not been registered under the
Securities Act and will be subject to restrictions on transferability to the
extent that they are not exchanged for Series B Notes by holders who are
entitled to participate in this Exchange Offer. The holders of Series A Notes
(other than any such holder that
18
is an "affiliate" of the Issuers within the meaning of Rule 405 under the
Securities Act) who are not eligible to participate in the Exchange Offer are
entitled to certain registration rights, and the Issuers are required to file
a Shelf Registration Statement with respect to such Series A Notes. The Series
B Notes will constitute a new issue of securities with no established trading
market. Although the Initial Purchaser has informed the Issuers that it
currently intends to make a market in the Series B Notes, it is not obligated
to do so and any such market making may be discontinued at any time without
notice in the sole discretion of the Initial Purchaser. In addition, such
market making activity will be subject to the limits imposed by the Securities
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and may be limited during the pendency of the Exchange Offer or the
effectiveness of a shelf registration statement in lieu thereof. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Series B Notes. The Series B Notes are expected to be eligible for trading
by qualified buyers in the PORTAL market. If an active public market does not
develop, the market price and liquidity of the Series B Notes may be adversely
affected. If a trading market develops for the Series B Notes, the future
trading prices thereof will depend on many factors including, among other
things, the Company's results of operations, prevailing interest rates, the
market for securities with similar terms and the market for securities of
other companies in similar businesses. The Issuers do not intend to apply for
listing of the Series B Notes on any securities exchange or for their
quotation through an automated dealer quotation system.
The Series A Notes were offered in reliance upon an exemption from
registration under the Securities Act and applicable state securities laws.
Therefore, the Series A Notes may be transferred or resold only in a
transaction registered under, or exempt from, the Securities Act and
applicable state securities laws. Pursuant to the Exchange and Registration
Rights Agreement, the Company has agreed to file the Exchange Offer
Registration Statement with the Commission and to use its reasonable best
efforts to cause such registration statement to become effective with respect
to the Series B Notes. After the registration statement becomes effective, the
Series B Notes generally will be permitted to be resold or otherwise
transferred (subject to the restrictions described under "Exchange and
Registration Rights Agreement" and "Transfer Restrictions") by each holder
without the requirement of further registration. The Series B Notes, however,
also will constitute a new issue of securities with no established trading
market and will be issued only in the amount of Series A Notes being tendered
for exchange. No assurance can be given as to the liquidity of the trading
market for the Series B Notes, or, in the case of non-tendering holders of
Series A Notes, the trading market for the Series A Notes following the
Exchange Offer.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Series B Notes in exchange for the Series A Notes pursuant
to the Exchange Offer will be made only after a timely receipt by the Company
of such Series A Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. Therefore, holders of the Series
A Notes desiring to tender such Series A Notes in exchange for Series B Notes
should allow sufficient time to ensure timely delivery. The Company is under
no duty to give notification of defects or irregularities with respect to the
tenders of Series A Notes for exchange. Series A Notes that are not tendered
or are tendered but not accepted will, following the consummation of the
Exchange Offer, continue to be subject to the existing restrictions upon
transfer thereof and, upon consummation of the Exchange Offer, certain
registration rights under the Exchange and Registration Rights Agreement will
terminate. In addition, any holder of Series A Notes who tenders in the
Exchange Offer for the purpose of participating in a distribution of the
Series B Notes may be deemed to have received restricted securities and, if
so, will be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transactions.
Each holder of the Series A Notes who wishes to exchange the Series A Notes
for Series B Notes in the Exchange Offer will be required to represent in the
Letter of Transmittal that at the time of the
19
consummation of the Exchange Offer: (i) it is not an affiliate of the Issuers
or, if it is such an affiliate, such holder will comply with the registration
and prospectus delivery requirements of the Securities Act to the extent
applicable; (ii) the Series B Notes to be received by it are being acquired in
the ordinary course of its business; and (iii) it has no arrangement or
understanding with any person to participate in the distribution of the Series
A or Series B Notes within the meaning of the Securities Act. Each
Participating Broker-Dealer that receives Series B Notes for its own account
in exchange for Series A Notes, where such Series A Notes were acquired by
such Participating Broker-Dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of such Series B Notes. See "Plan of
Distribution." To the extent that Series A Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Series A Notes could be adversely affected. See "The Exchange
Offer."
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition, including,
in particular, the likelihood of the Company's success in developing and
expanding its business following the consummation of the Exchange Offer. The
statements are based upon a number of assumptions and estimates which are
inherently subject to significant uncertainties and contingencies, many of
which are beyond the control of the Company, and reflect future business
decisions which are subject to change. The foregoing description of risk
factors specifies the principal contingencies and uncertainties to which the
Company believes it is subject. Some of these assumptions inevitably will not
materialize, and unanticipated events will occur which will affect the
Company's results.
20
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Issuers'
obligations under the Exchange and Registration Rights Agreement. The Issuers
will not receive any cash proceeds from the issuance of the Series B Notes in
the Exchange Offer. The net proceeds received by Mediacom from the Series A
Notes Offering were approximately $193.5 million. Of such net proceeds,
Mediacom: (i) used $20.0 million to repay in full the principal of and accrued
interest on the Holding Company Notes; (ii) contributed $120.0 million to
Mediacom Southeast as a preferred equity capital contribution; and (iii)
contributed $53.5 million to the Western Group in the form of subordinated
loans. Mediacom Southeast and the Western Group used such amounts to repay a
portion of the outstanding principal Indebtedness and related accrued interest
under the revolving credit lines of the respective Subsidiary Credit
Facilities. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and "Description
of Other Indebtedness."
CAPITALIZATION
The following table sets forth the Company's capitalization as of March 31,
1998: (i) on an actual basis; and (ii) on a pro forma basis after giving
effect to the Series A Notes Offering and the use of the net proceeds
therefrom. This table should be read in conjunction with the Consolidated
Financial Statements and related notes thereto, "Unaudited Pro Forma
Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Description of Other
Indebtedness" included elsewhere in this Prospectus.
AS OF MARCH 31, 1998
--------------------
ACTUAL PRO FORMA
------ ---------
(IN THOUSANDS)
Long-term debt (including current maturities):
Mediacom:
Holding Company Notes.................................. $ 20.0 $ --
Senior Notes due 2008.................................. -- 200.0
Subsidiaries:
Southeast Credit Facility(1)........................... 201.0 81.0
Western Credit Facility(2)............................. 90.5 37.0
Seller Note............................................ 3.3 3.3
------ ------
Total long-term debt................................. 314.8 321.3
Total members' equity(3)................................... 108.5 108.5
------ ------
Total capitalization................................. $423.3 $429.8
====== ======
- --------
(1) Pro forma for the Series A Notes Offering, Mediacom Southeast had
approximately $144.0 million of unused credit commitments, of which
approximately $130.0 million could have been borrowed by Mediacom
Southeast and distributed to Mediacom under the most restrictive covenants
of the Southeast Credit Facility.
(2) Pro forma for the Series A Notes Offering, the Western Group had
approximately $63.0 million of unused credit commitments, of which
approximately $54.0 million could have been borrowed by the Western Group
and distributed to Mediacom under the most restrictive covenants of the
Western Credit Facility.
(3) Actual and pro forma represent $125.0 million of invested equity capital
less accumulated losses since the commencement of operations.
21
SELECTED HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents: (i) selected historical financial data for the
period from January 1, 1996 through March 11, 1996 and as of and for the years
ended December 31, 1993, 1994 and 1995 derived from the audited financial
statements of Benchmark Acquisition Fund II Limited Partnership (the
"Predecessor Company"); (ii) selected historical consolidated financial and
operating data as of and for the period from the commencement of operations
(March 12, 1996) to December 31, 1996 and for the year ended December 31, 1997
derived from the Company's audited consolidated financial statements and
should be read in conjunction with those statements, which are included in
this Prospectus; and (iii) unaudited selected historical consolidated
financial data for the three months ended March 31, 1997 and unaudited
selected historical consolidated financial data as of and for the three months
ended March 31, 1998, all of which have been derived from the unaudited
consolidated financial statements of the Company, and selected historical
consolidated operating data for the three months ended March 31, 1997. In the
opinion of management, such unaudited interim financial statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, which consist only of normal recurring adjustments, necessary to
present fairly the financial position and the results of operations for the
interim periods. Financial and operating results for the three months ended
March 31,1998 are not necessarily indicative of the results that may be
expected for the full year.
In addition, the following table presents unaudited selected pro forma
consolidated financial and operating data for the Company for the year ended
December 31, 1997 and as of and for the three months ended March 31, 1998, as
adjusted to give pro forma effect to: (i) in the case of statement of
operations and other financial and operating data, the Series A Notes Offering
and the use of the net proceeds therefrom and the acquisitions of the Systems
and related equity contributions and borrowings under the Subsidiary Credit
Facilities and the Holding Company Notes, as if such transactions had been
consummated on January 1, 1997; and (ii) in the case of balance sheet data,
the Series A Notes Offering and the use of the net proceeds therefrom as if
such transactions had been consummated on March 31, 1998. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Recent Developments." The unaudited pro forma consolidated financial and
operating data give effect to the acquisitions of the Systems under the
purchase method of accounting, certain other operating assumptions and the
impact of the Series A Notes Offering.
The unaudited selected pro forma consolidated financial data have been
prepared by the Company based upon the historical financial statements and do
not purport to represent what the Company's results of operations or financial
condition would have actually been or what operations of the Company in any
future period would be if the transactions that give rise to the pro forma
adjustments had occurred on the dates assumed. The following information is
qualified by reference to and should be read in conjunction with "Unaudited
Pro Forma Consolidated Financial Data," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes thereto included elsewhere in this
Prospectus.
22
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA
PREDECESSOR COMPANY(1) THE COMPANY(2)
-------------------------------------- -------------------------------------
YEAR YEAR YEAR JANUARY 1 MARCH 12 YEAR THREE MONTHS
ENDED ENDED ENDED THROUGH THROUGH ENDED ENDED MARCH 31,
DEC.31, DEC. 31, DEC. 31, MARCH 11, DEC. 31, DEC. 31, -----------------
1993 1994 1995 1996 1996 1997 1997 1998
------- -------- -------- --------- -------- -------- ------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
STATEMENT OF OPERATIONS
DATA:
Revenues............... $ 5,279 $ 5,075 $ 5,171 $1,038 $ 5,411 $ 17,634 $ 2,894 $ 25,943
Service costs.......... 1,254 1,322 1,536 297 1,511 5,547 890 9,822
Selling, general and
administrative
expenses............... 1,072 1,016 1,059 222 931 2,696 434 5,303
Management fee
expense................ 263 252 261 52 270 882 145 1,207
Depreciation and
amortization........... 4,337 4,092 3,945 527 2,157 7,636 1,607 11,229
------- ------- ------- ------ ------- -------- ------- --------
Operating income
(loss)................. (1,647) (1,607) (1,630) (60) 542 873 (182) (1,618)
Interest expense,
net(3)................. 903 878 935 201 1,528 4,829 889 5,017
Other expenses......... 26 -- -- -- 967 640 3 3,340
------- ------- ------- ------ ------- -------- ------- --------
Net loss............... $(2,576) $(2,485) $(2,565) $ (261) $(1,953) $ (4,596) $(1,074) $ (9,975)
======= ======= ======= ====== ======= ======== ======= ========
OTHER DATA:
System Cash Flow(4).... $ 2,953 $ 2,737 $ 2,576 $ 519 $ 2,969 $ 9,391 $ 1,570 $ 10,818
System Cash Flow
margin(5).............. 55.9% 53.9% 49.8% 50.0% 54.9% 53.3% 54.3% 41.7%
Annualized System Cash
Flow(6)................
Adjusted EBITDA(7)..... $ 2,690 $ 2,485 $ 2,315 $ 467 $ 2,699 $ 8,509 $ 1,425 $ 9,611
Adjusted EBITDA
margin(8).............. 51.0% 49.0% 44.8% 45.0% 49.9% 48.3% 49.2% 37.0%
Annualized Adjusted
EBITDA(9)..............
Ratio of total
indebtedness to
annualized Adjusted
EBITDA.................
Ratio of Adjusted
EBITDA to interest
expense, net...........
Net cash flows from
operating activities... $ 1,657 $ 1,395 $ 1,478 $ 226 $ 237 $ 7,007 $ 556 $ 8,615
Net cash flows from
investing activities... (462) (552) (261) (86) (45,257) (60,008) (413) (335,599)
Net cash flows from
financing activities... (1,024) (919) (1,077) -- 45,416 53,632 100 327,452
Deficiency of earnings
to fixed charges(10)... 2,576 2,485 2,565 261 1,953 4,596 1,074 9,975
OPERATING DATA (end of period,
except average):
Homes passed........... 38,749 87,750 38,749
Basic subscribers...... 27,153 64,350 26,561
Basic penetration...... 70.1% 73.3% 68.5%
Premium service units.. 11,691 39,288 13,126
Premium penetration.... 43.1% 61.1% 49.4%
Average monthly
revenues per basic
subscriber(11).........
Annual System Cash Flow
per basic
subscriber(12).........
Annual Adjusted EBITDA
per basic
subscriber(13).........
BALANCE SHEET DATA (end of period):
Total assets........... $15,296 $11,755 $ 8,149 $46,560 $102,791 $444,963
Total Indebtedness..... 14,213 13,294 12,217 40,529 72,768 314,760
Total members' equity.. 481 (2,003) (4,568) 4,537 24,441 108,466
PRO FORMA
--------------------
THREE
YEAR MONTHS
ENDED ENDED
DEC. 31, MARCH 31,
1997 1998
--------- ----------
STATEMENT OF OPERATIONS
DATA:
Revenues............... $119,091 $ 31,679
Service costs.......... 44,286 $ 12,033
Selling, general and
administrative
expenses............... 23,191 $ 5,988
Management fee
expense................ 5,389 $ 1,465
Depreciation and
amortization........... 57,506 $ 13,720
--------- ----------
Operating income
(loss)................. (11,281) (1,527)
Interest expense,
net(3)................. 26,154 $ 6,557
Other expenses......... 1,379 $ 3,340
--------- ----------
Net loss............... $(38,814) $(11,424)
========= ==========
OTHER DATA:
System Cash Flow(4).... $ 51,614 $ 13,658
System Cash Flow
margin(5).............. 43.3% 43.1%
Annualized System Cash
Flow(6)................ $ 54,632
Adjusted EBITDA(7)..... $ 46,225 $ 12,193
Adjusted EBITDA
margin(8).............. 38.8% 38.5%
Annualized Adjusted
EBITDA(9).............. $ 48,772
Ratio of total
indebtedness to
annualized Adjusted
EBITDA................. 6.6x
Ratio of Adjusted
EBITDA to interest
expense, net........... 1.9x
Net cash flows from
operating activities...
Net cash flows from
investing activities...
Net cash flows from
financing activities...
Deficiency of earnings
to fixed charges(10)... 38,814 11,424
OPERATING DATA (end of period,
except average):
Homes passed........... 479,655 482,800
Basic subscribers...... 341,725 343,700
Basic penetration...... 71.2% 71.2%
Premium service units.. 403,281 404,400
Premium penetration.... 118.0% 117.7%
Average monthly
revenues per basic
subscriber(11)......... $ 30.72
Annual System Cash Flow
per basic
subscriber(12)......... $ 159
Annual Adjusted EBITDA
per basic
subscriber(13)......... $ 142
BALANCE SHEET DATA (end of period):
Total assets........... $451,463
Total Indebtedness..... 321,260
Total members' equity.. 108,466
(footnotes on following page)
23
NOTES TO SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND
OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
(1) The selected historical financial data for the period from January 1,
1996 through March 11, 1996 and for the years ended December 31, 1993,
1994 and 1995 have been derived from the audited financial statements of
the Predecessor Company.
(2) The Company commenced operations on March 12, 1996 with the acquisition
of the Ridgecrest System (as defined) and has since completed seven
additional acquisitions. See "Business--Acquisition History." The
historical amounts represent the results of operations of the Systems
acquired from the date of acquisition to the end of the period presented.
(3) Net of interest income. Interest income for the periods presented is not
material.
(4) Represents Adjusted EBITDA (as defined below in footnote 7) before
management fees. System Cash Flow is not intended to be a performance
measure that should be regarded as an alternative either to operating
income or net income as an indicator of operating performance or to the
statement of cash flows as a measure of liquidity, is not intended to
represent funds available for debt service, dividends, reinvestment or
other discretionary uses, and should not be considered in isolation or as
a substitute for measures of performance prepared in accordance with
generally accepted accounting principles. System Cash Flow is included
herein because the Company believes that System Cash Flow is a meaningful
measure of performance as it is commonly used in the cable television
industry to analyze and compare cable television companies on the basis
of operating performance, leverage and liquidity and a company's overall
ability to service its debt. The Company's definition of System Cash Flow
may not be identical to similarly titled measures reported by other
companies.
(5) Represents System Cash Flow as a percentage of revenues. This measurement
is used by the Company, and is commonly used in the cable television
industry, to analyze and compare cable television companies on the basis
of operating performance.
(6) Represents System Cash Flow multiplied by four. The Company believes this
calculation provides a meaningful measure of performance, on an
annualized basis, for the reasons noted above in footnote 4.
(7) Represents operating income (loss) before depreciation and amortization.
Adjusted EBITDA is not intended to be a performance measure that should
be regarded as an alternative either to operating income or net income as
an indicator of operating performance or to the statement of cash flows
as a measure of liquidity, is not intended to represent funds available
for debt service, dividends, reinvestment or other discretionary uses,
and should not be considered in isolation or as a substitute for measures
of performance prepared in accordance with generally accepted accounting
principles. Adjusted EBITDA is included herein because the Company
believes that Adjusted EBITDA is a meaningful measure of performance as
it is commonly used in the cable television industry to analyze and
compare cable television companies on the basis of operating performance,
leverage and liquidity and a company's overall ability to service its
debt. In addition, the primary debt instruments of the Company contain
certain covenants, compliance with which is measured by computations
similar to determining Adjusted EBITDA. The Company's definition of
Adjusted EBITDA may not be identical to similarly titled measures
reported by other companies.
(8) Represents Adjusted EBITDA as a percentage of revenues. This measurement
is used by the Company, and is commonly used in the cable television
industry, to analyze and compare cable television companies on the basis
of operating performance.
(9) Represents Adjusted EBITDA multiplied by four. This calculation provides
the measure by which the ratio of total indebtedness to annualized
Adjusted EBITDA is determined. This ratio is commonly used in the cable
television industry as a measure of leverage.
(10) For purposes of this computation, earnings are defined as income (loss)
before income taxes and fixed charges. Fixed charges are interest costs.
(11) Represents average monthly revenues for the period divided by the number
of basic subscribers as of the end of such period. This measurement is
commonly used in the cable television industry to analyze and compare
cable television companies on the basis of operating performance.
(12) Represents annualized System Cash Flow for the period divided by the
number of basic subscribers at the end of such period. This measurement
is commonly used in the cable television industry to analyze and compare
cable television companies on the basis of operating performance.
(13) Represents annualized Adjusted EBITDA for the period divided by the
number of basic subscribers at the end of such period. This measurement
is used in the cable television industry to analyze and compare cable
television companies on the basis of operating performance.
24
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The unaudited pro forma consolidated financial data presented below is
derived from the historical consolidated financial statements of the Company
and the Systems. The unaudited pro forma consolidated balance sheet data as of
March 31, 1998 give pro forma effect to the Series A Notes Offering and the
use of the net proceeds therefrom as if such transactions had been consummated
on March 31, 1998. The unaudited pro forma consolidated statements of
operations for the year ended December 31, 1997, and for the three months
ended March 31, 1998, give pro forma effect to the Series A Notes Offering and
the purchase of the Systems and related equity contributions and borrowings
under the Subsidiary Credit Facilities and the Holding Company Notes as if
such transactions had been consummated on January 1, 1997.
The unaudited pro forma consolidated financial data give effect to the
acquisition of the 1998 Systems under the purchase method of accounting and
are based upon the assumptions and adjustments described in the accompanying
notes to the unaudited pro forma consolidated financial statements represented
on the following pages. The adjustments included in the unaudited pro forma
consolidated financial data represent the Company's preliminary determination
of those adjustments based on available information, although no appraisal or
other valuation has yet been completed and such adjustments do not include
many of the effects of purchase accounting. Although there can be no assurance
that the actual adjustments will not differ significantly from the pro forma
adjustments reflected in the pro forma consolidated financial data, the
Company does not believe the difference between actual and pro forma
adjustments will be material to the financial statements at this time. The
purchase price allocations are expected to be finalized by December 31, 1998.
The unaudited pro forma consolidated financial data does not purport to
represent what the Company's results of operations or financial condition
would have actually been or what operations would be if the transactions that
give rise to the pro forma adjustments had occurred on the dates assumed. The
unaudited pro forma consolidated financial data presented below should be read
in conjunction with the audited and unaudited historical financial statements
and related notes thereto of the Company and certain of the Systems and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
25
MEDIACOM LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
HISTORICAL OFFERING PRO
COMPANY ADJUSTMENTS FORMA
---------- ----------- --------
ASSETS:
Cash and equivalents......................... $ 1,495 $ -- $ 1,495
Subscriber accounts receivable, net.......... 4,074 -- 4,074
Prepaid expenses and other current assets.... 2,639 -- 2,639
Inventory.................................... 1,293 -- 1,293
Property, plant and equipment, net........... 179,122 -- 179,122
Intangible assets, net....................... 242,482 -- 242,482
Other assets, net............................ 13,858 6,500(a) 20,358
-------- ------ --------
Total assets................................ $444,963 $6,500 $451,463
======== ====== ========
LIABILITIES AND MEMBERS' EQUITY:
Debt......................................... $314,760 $6,500(b) $321,260
Accounts payable and accrued expenses........ 20,598 -- 20,598
Subscriber advance payments and deposits..... 614 -- 614
Management fees payable...................... 525 -- 525
-------- ------ --------
Total liabilities........................... $336,497 $6,500 $342,997
-------- ------ --------
Capital contributions........................ $124,990 $ -- $124,990
Accumulated deficit.......................... (16,524) -- (16,524)
-------- ------ --------
Total members' equity....................... $108,466 $ -- $108,466
-------- ------ --------
Total liabilities and members' equity....... $444,963 $6,500 $451,463
======== ====== ========
See Accompanying Notes To Unaudited Pro Forma Consolidated Balance Sheet.
26
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(DOLLARS IN THOUSANDS)
For purposes of determining the pro forma effect of the transactions
described above on the Company's consolidated balance sheet as of March 31,
1998, the following adjustments have been made:
(a) Represents the adjustments to other assets, net resulting from the payment
of estimated fees and expenses of the Series A Notes Offering.
(b) Represents the following adjustments to debt related to the Series A Notes
Offering and the use of proceeds therefrom:
Gross proceeds from Series A Notes Offering.................... $ 200,000
Repayment of Holding Company Notes............................. (20,000)
Repayment of Southeast Credit Facility......................... (120,000)
Repayment of Western Credit Facility........................... (53,500)
---------
Net increase in debt......................................... $ 6,500
=========
27
MEDIACOM LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
1997 SYSTEMS 1998 SYSTEMS
--------------------------------- ------------------------------
SYSTEMS
HISTORICAL AS JONES CABLEVISION PRIOR TO OFFERING PRO
COMPANY ADJUSTMENTS ADJUSTED SYSTEM SYSTEMS ADJUSTMENTS OFFERING ADJUSTMENTS FORMA
---------- ----------- -------- ------ ----------- ----------- -------- ----------- --------
Revenues............... $17,634 $ 6,485 (a) $ 24,119 $5,956 $ 89,016 $ -- $119,091 -- $119,091
Service costs.......... 5,547 2,237 (a) 7,784 1,973 38,513 (3,984)(e) 44,286 -- 44,286
Selling, general and
administrative
expenses.............. 2,696 1,470 (a) 4,166 1,236 22,099 (4,310)(f) 23,191 -- 23,191
Management fee
expense............... 882 324 (b) 1,206 298 -- 3,885 (g) 5,389 -- 5,389
Depreciation and
amortization.......... 7,636 6,925 (c) 14,561 1,204 46,116 (5,025)(h) 56,856 650 (j) 57,506
------- ------- -------- ------ -------- ------ -------- ----- --------
Operating income
(loss)............... 873 (4,471) (3,598) 1,245 (17,712) 9,434 (10,631) (650) (11,281)
Interest expense, net.. 4,829 1,230 (d) 6,059 12 12,702 7,120 (i) 25,893 261(k) 26,154
Other expenses......... 640 -- 640 339 400 -- 1,379 -- 1,379
------- ------- -------- ------ -------- ------ -------- ----- --------
Net income (loss)..... $(4,596) $(5,701) $(10,297) $ 894 $(30,814) $2,314 $(37,903) $(911) $(38,814)
======= ======= ======== ====== ======== ====== ======== ===== ========
Deficiency of earnings
to fixed charges..... $4,596 $ 38,814
======= ========
See Accompanying Notes To Unaudited Pro Forma Consolidated Statement of
Operations.
28
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
For purposes of determining the pro forma effects of the transactions
described above on the Company's consolidated statement of operations for the
twelve months ended December 31, 1997, the following adjustments have been
made:
(a) The table below represents actual revenues, service costs, and selling,
general and administrative expenses of the Lower Delaware System and the
Sun City System, recognized prior to the dates of their respective
acquisition by the Company. See "Business--Acquisition History."
LOWER DELAWARE SUN CITY
SYSTEM SYSTEM TOTAL
-------------- -------- ------
Revenues.................................... $4,303 $2,182 $6,485
Service costs............................... 1,425 812 2,237
Selling, general and administrative
expenses................................... 1,090 380 1,470
(b) Represents the net adjustment to record pro forma effect of management
fees payable to Mediacom Management resulting from the additional revenues
of the 1997 Systems. Management fees are calculated as follows: (i) 5.0%
of the first $50,000 in annual gross operating revenues of the Company;
(ii) 4.5% of such revenues in excess thereof up to $75,000; and (iii) 4.0%
of such revenues in excess of $75,000. See "Certain Relationships and
Related Transactions--Management Agreements."
(c) Pro forma depreciation and amortization is calculated based on preliminary
asset appraisals as follows:
PRELIMINARY ASSET PRO FORMA
LOWER DELAWARE SYSTEM ALLOCATION LIFE EXPENSE
--------------------- ----------- ----- ---------
Property, plant and equipment.................... $21,450 7 $3,064
Franchise costs.................................. 14,200 15 947
Subscriber lists................................. 7,250 5 1,450
Other............................................ 7
------- ------
Total............................................ $42,900 $5,468
======= ======
PRELIMINARY ASSET PRO FORMA
SUN CITY SYSTEM ALLOCATION LIFE EXPENSE
--------------- ----------- ----- ---------
Property, plant and equipment.................... $ 4,600 7 $ 657
Franchise costs.................................. 4,500 15 300
Subscriber lists................................. 2,400 5 480
Other............................................ 20
------- ------
Total............................................ $11,500 $1,457
======= ======
PRELIMINARY ASSET PRO FORMA
TOTAL LOWER DELAWARE & SUN CITY SYSTEMS ALLOCATION LIFE EXPENSE
--------------------------------------- ----------- ----- ---------
Property, plant and equipment.................... $26,050 7 $3,721
Franchise costs.................................. 18,700 15 1,247
Subscriber lists................................. 9,650 5 1,930
Other............................................ 27
------- ------
Total............................................ $54,400 $6,925
======= ======
29
(d) Represents adjustments to interest due to incremental indebtedness arising
from the purchase of the 1997 Systems as if such purchase occurred on
January 1, 1997. An 1/8% change in the interest rates will increase or
decrease the interest expense per annum on the bank debt by $45 after
adjusting for interest rate swap
agreements. Historical interest expense has been eliminated as the Company
has not assumed the debt obligations of the acquiree. Outstanding principal
under the Subsidiary Credit Facilities represents average borrowings during
the period.
INTEREST PRO FORMA
PRINCIPAL RATE EXPENSE
--------- -------- ---------
Subsidiary Credit Facilities.................. $68,100 8.51% $ 5,795
Seller Note................................... 2,929 9.00% 264
-------
Pro forma interest expense.................... $ 6,059
Total actual interest expense--historical
Company...................................... (4,829)
-------
Pro forma interest expense adjustment......... $ 1,230
=======
(e) Represents the net adjustment to: (i) reflect the addition of increased
programming fees in service costs of approximately $1,978 incurred by the
Company had the Systems been subject to the Company's current programming
fee structure for the period; (ii) reclassify certain fees, taxes and
expenses of the previous owners of the 1998 Systems totaling $5,007 from
service costs to selling, general and administrative expenses; and (iii)
reduce certain expenses due to the Company's current contractual
agreements for a combined adjustment of $955. See "Certain Relationships
and Related Transactions--Management Agreements."
(f) Represents the net adjustment to: (i) eliminate corporate overhead in
selling, general, and administrative expenses of $4,564 billed by the
previous owners of the 1998 Systems under contractual arrangements that
have been replaced by a management agreement with Mediacom Management
under which management fees are paid by the Company; (ii) eliminate stock
expense of $3,348 incurred by the previous owners of the 1998 Systems,
which will not be incurred by the Company and have not been replaced by
other forms of compensation; (iii) reclassify certain fees, taxes and
expenses of the previous owners of $5,007 from service costs to selling,
general and administrative expenses; and (iv) reduce certain expenses due
to the Company's current contractual agreements for a combined adjustment
of $1,405. See "Certain Relationships and Related Transactions--Management
Agreements."
(g) Represents the net adjustment to record pro forma effect of management
fees payable to Mediacom Management resulting from the additional revenues
of the 1998 Systems. Management fees are calculated as follows: (i) 5.0%
of the first $50,000 in annual gross operating revenues of the Company;
(ii) 4.5% of such revenues in excess thereof up to $75,000; and (iii) 4.0%
of such revenues in excess of $75,000. See "Certain Relationships and
Related Transactions--Management Agreements."
(h) Pro forma depreciation and amortization is calculated based on preliminary
asset appraisals as follows:
PRELIMINARY ASSET PRO FORMA
JONES SYSTEM ALLOCATION LIFE EXPENSE
------------ ----------- ----- ---------
Property, plant and equipment.................... $ 8,560 7 $1,223
Franchise costs.................................. 8,515 15 568
Subscriber lists................................. 4,325 5 865
Other............................................ 13
------- ------
Total............................................ $21,400 $2,669
======= ======
30
PRELIMINARY ASSET PRO FORMA
CABLEVISION SYSTEMS ALLOCATION LIFE EXPENSE
------------------- ----------- ----- ---------
Property, plant and equipment.................... $123,474 7 $17,639
Franchise costs.................................. 120,211 15 8,014
Subscriber lists................................. 65,000 5 13,000
Other............................................ 973
-------- -------
Total............................................ $308,685 $39,626
======== =======
PRELIMINARY ASSET PRO FORMA
TOTAL 1998 SYSTEMS ALLOCATION LIFE EXPENSE
------------------ ----------- ----- ---------
Property, plant and equipment................... $132,034 7 $ 18,862
Franchise costs................................. 128,726 15 8,582
Subscriber lists................................ 69,325 5 13,865
Other........................................... 986
-------- --------
Total........................................... $330,085 42,295
========
Total historical--1998 Systems.................. (47,320)
--------
Total 1998 System adjustments................... $ (5,025)
========
(i) Represents adjustments to interest due to incremental indebtedness arising
from the purchase of the 1998 Systems as if such purchase occurred on
January 1, 1997. An 1/8% change in the interest rates will increase or
decrease the interest expense per annum on the bank debt by $294 after
adjusting for interest rate swap agreements. Historical interest expense
has been eliminated as the Company has not assumed the debt obligations of
the acquiree. Outstanding principal under the Subsidiary Credit Facilities
represents average borrowings during the period.
INTEREST PRO FORMA
PRINCIPAL RATE EXPENSE
--------- -------- ---------
Subsidiary Credit Facilities.................. $296,900 8.08% $ 23,993
Holding Company Notes......................... 20,000 8.18% 1,636
Seller Note................................... 2,929 9.00% 264
--------
Pro forma interest expense.................... 25,893
Total actual interest expense--1997 and 1998
Systems...................................... (18,773)
--------
Pro forma interest expense adjustment......... $ 7,120
========
(j) Represents adjustment to record amortization of $6,500 in fees and
expenses relating to the Series A Notes Offering as if such offering had
occurred on January 1, 1997.
(k) Represents adjustments to record interest expense on total indebtedness
after giving pro forma effect to the Series A Notes Offering and the
applications of the net proceeds therefrom as if such Series A Notes
occurred on January 1, 1997. An 1/8% change in the interest rates will
increase or decrease the interest expense per annum on the bank debt by
$77 after adjusting for interest rate swap agreements. Historical interest
expense has been eliminated as the Company has not assumed the debt
obligations of the acquiree. Outstanding principal under the Subsidiary
Credit Facilities represents average borrowings during the period.
INTEREST PRO FORMA
PRINCIPAL RATE EXPENSE
--------- -------- ---------
Subsidiary Credit Facilities.................. $123,400 7.21% $ 8,890
Seller Note................................... 2,929 9.00% 264
Senior Notes.................................. 200,000 8.50% 17,000
--------
Pro forma interest expense after Offering..... 26,154
Pro forma interest expense prior to Offering.. (25,893)
--------
Pro forma interest expense adjustment......... $ 261
========
31
MEDIACOM LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,1998
(DOLLARS IN THOUSANDS)
1998 SYSTEMS
-------------------------------
SYSTEMS
HISTORICAL JONES CABLEVISION PRIOR TO OFFERING PRO
COMPANY SYSTEM SYSTEMS ADJUSTMENTS OFFERING ADJUSTMENTS FORMA
---------- ------ ----------- ----------- -------- ----------- --------
Revenues................ $25,943 $ 133 $ 5,603 $ -- $ 31,679 $ -- $ 31,679
Service costs........... 9,822 152 2,272 (213)(a) 12,033 -- 12,033
Selling, general and
administrative
expenses............... 5,303 139 1,839 (1,293)(b) 5,988 -- 5,988
Management fee expense.. 1,207 7 -- 251 (c) 1,465 -- 1,465
Depreciation and
amortization........... 11,229 30 2,780 (482)(d) 13,557 163 (g) 13,720
------- ------ ------- ------ -------- ----- --------
Operating income
(loss)................ (1,618) (195) (1,288) 1,737 (1,364) (163) (1,527)
Interest expense, net... 5,017 -- 742 750 (e) 6,509 48 (h) 6,557
Other expenses.......... 3,340 -- 71 (71)(f) 3,340 -- 3,340
------- ------ ------- ------ -------- ----- --------
Net income (loss)...... $(9,975) $(195) $(2,101) $1,058 $(11,213) $(211) $(11,424)
======= ====== ======= ====== ======== ===== ========
Deficiency of earnings
to fixed charges....... $ 9,975 $ 11,424
======= ========
See Accompanying Notes To Unaudited Pro Forma Consolidated Statement of
Operations.
32
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
For purposes of determining the pro forma effects of the transactions
described above on the Company's consolidated statement of operations for the
three months ended March 31, 1998, the following adjustments have been made:
(a) Represents the net adjustment to: (i) reflect the addition of increased
programming fees in service costs of approximately $185 incurred by the
Company had the Systems been subject to the Company's current programming
fee structure for the period; and (ii) reclassify certain fees, taxes and
expenses of the previous owners of the 1998 Systems of $398 from service
costs to selling, general and administrative expenses. See "Certain
Relationships and Related Transactions--Management Agreements".
(b) Represents the net adjustment to: (i) eliminate corporate overhead in
selling, general, and administrative expenses of $443 billed by the
previous owners of the 1998 Systems under contractual arrangements that
have been replaced by a management agreement with Mediacom Management
under which management fees are paid by the Company; (ii) reclassify
certain fees, taxes and expenses of the previous owners of $398 from
service costs to selling, general and administrative expenses; (iii)
eliminate costs of duplicative functions and personnel attributable to the
acquisitions of the 1998 Systems and reduce certain expenses due to the
Company's contractual agreements for a combined adjustment of $84; and
(iv) eliminate non-recurring expenses of $1,164 recorded by the previous
owners of the 1998 Systems in connection with the divestiture of these
systems. See "Certain Relationships and Related Transactions--Management
Agreements."
(c) Represents the net adjustment to record pro forma effect of management
fees payable to Mediacom Management resulting from the additional revenues
of the 1998 Systems. Management fees are calculated as follows: (i) 5.0%
of the first $50,000 in annual gross operating revenues of the company;
(ii) 4.5% of such revenues in excess thereof up to $75,000; and (iii) 4.0%
of such revenues in excess of $75,000. See "Certain Relationships and
Related Transactions--Management Agreements."
(d) Represents the reduction of historical depreciation and amortization
expense of the 1998 Systems by $482 to reflect the excess over the
Company's actual depreciation and amortization for the period based on
preliminary allocations previously disclosed in Note (h) to the Unaudited
Pro Forma Consolidated Statement of Operations for the Year Ended December
31, 1997.
(e) Represents adjustments to interest due to incremental indebtedness arising
from the purchase of the 1998 Systems as if such purchase occurred on
January 1, 1998. An 1/8% change in the interest rates will increase or
decrease the interest expense per annum on the bank debt by $294 after
adjusting for interest rate swap agreements. Historical interest expense
has been eliminated as the Company has not assumed the debt obligations of
the acquiree. Outstanding principal under the Subsidiary Credit Facilities
represents average borrowings during the period.
INTEREST PRO FORMA
PRINCIPAL RATE EXPENSE
--------- -------- ---------
Subsidiary Credit Facilities.................. $296,900 8.12% $24,104
Holding Company Notes......................... 20,000 8.23% 1,646
Seller Note................................... 3,193 9.00% 287
-------
Pro forma interest expense--annualized (A).... 26,037
-------
Pro forma interest expense--three months ended
March 31, 1998 (A divided by 4).............. 6,509
Total actual interest expense--historical
Company...................................... (5,017)
Total actual interest expense--1998 Systems... (742)
-------
Pro forma interest expense adjustment......... $ 750
=======
(f) Represents the elimination of historical Other expenses of the 1998
Systems.
(g) Represents adjustment to record amortization of $6,500 in fees and
expenses relating to the Series A Notes Offering as if such offering had
occurred on January 1, 1998.
33
(h) Represents adjustments to record interest expense on total indebtedness
after giving pro forma effect to the Series A Notes Offering and the
applications of the net proceeds therefrom as if such Series A Notes
occurred on January 1, 1998. An 1/8% change in the interest rates will
increase or decrease the interest expense per annum on the bank debt by
$77 after adjusting for interest rate swap agreements. Historical interest
expense has been eliminated as the Company has not assumed the debt
obligations of the acquiree. Outstanding principal under the Subsidiary
Credit Facilities represents average borrowings during the period.
INTEREST PRO FORMA
PRINCIPAL RATE EXPENSE
--------- -------- ---------
Subsidiary Credit Facilities.................. $123,400 7.25% $ 8,942
Seller Note................................... 3,193 9.00% 287
Senior Notes.................................. 200,000 8.50% 17,000
-------
Pro forma interest expense--annualized (A).... 26,229
-------
Pro forma interest expense--three months ended
March 31, 1998 (A divided by 4).............. 6,557
Total actual interest expense--Systems prior
to Offering.................................. (6,509)
-------
Pro forma interest expense adjustment......... $ 48
=======
34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The Company was formed in July 1995 and commenced operations in March 1996
with the acquisition of its first cable television system, and has since
completed seven additional acquisitions of cable television systems. A
significant portion of the Company's basic subscribers were acquired in
January 1998 with the purchase of the 1998 Systems for an aggregate purchase
price of $330.1 million (before closing costs and adjustments). The 1998
Systems passed approximately 392,430 homes and served approximately 279,400
basic subscribers as of March 31, 1998. In addition, as of such date, the
Company owned the 1997 Systems which passed approximately 90,370 homes and
served approximately 64,300 basic subscribers. See "Business--Acquisition
History." Accordingly, the purchase of the 1998 Systems resulted in a
substantial increase in the number of basic subscribers and the revenues and
expenses of the Company. As a result of the Company's limited operating
history and the effect of the purchase of the 1998 Systems, the Company
believes that its actual results of operations for the period ended December
31, 1996, the year ended December 31, 1997, and the three months ended March
31, 1998 are not indicative of the Company's results of operations in the
future. All acquisitions have been accounted for under the purchase method of
accounting and, therefore, the Company's historical results of operations
include the results of operations for each acquired system subsequent to its
respective acquisition date.
GENERAL
The Company's revenues are primarily attributable to monthly subscription
fees charged to basic subscribers for the Company's basic and premium cable
television programming services. Basic revenues consist of monthly
subscription fees for all services (other than premium programming) as well as
monthly charges for customer equipment rental. Premium revenues consist of
monthly subscription fees for programming provided on a per channel basis. In
addition, other revenues are derived from installation and reconnection fees
charged to basic subscribers to commence or discontinue service, pay-per-view
charges, late payment fees, franchise fees, advertising revenues and
commissions related to the sale of goods by home shopping services.
The Company's operating expenses consist of service costs and selling,
general and administrative expenses directly attributable to the Systems.
Service costs include fees paid to programming suppliers, expenses related to
copyright fees, wages and salaries of technical personnel and plant operating
costs. Programming fees have historically increased at rates in excess of
inflation due to increases in the number of programming services offered by
the Company and improvements in the quality of programming. The Company
believes that under the FCC's existing cable rate regulations, it will be able
to increase its rates for cable television services enough to more than cover
any increases in the costs of programming. See "Legislation and Regulation."
Moreover, the Company benefits from its membership in a cooperative with over
eight million basic subscribers which provides its members with significant
volume discounts from programming suppliers and cable equipment vendors.
Selling, general and administrative expenses directly attributable to the
Systems include wages and salaries for customer service and administrative
personnel, franchise fees and expenses related to billing, marketing,
advertising sales and office administration.
The Company relies on Mediacom Management for all of its strategic,
managerial, financial and operational oversight and advice. Mediacom
Management also coordinates and provides advice with respect to programming
arrangements, engineering in the areas of routine maintenance, system
improvements and new technologies, and the financing of acquisitions and the
operations of the Company's cable television systems. In exchange for all such
services to the Company, Mediacom Management is entitled to receive annual
management fees of 5.0% of the first $50.0 million of annual gross operating
revenues of the Company, 4.5% of such revenues in excess thereof up to $75.0
35
million, and 4.0% of such revenues in excess of $75.0 million. Pursuant to the
Operating Agreement (as defined), Mediacom Management is entitled to receive a
fee of 1.0% of the purchase price of acquisitions made by the Company until
the Company's pro forma consolidated annual gross operating revenues equal
$75.0 million, and 0.5% of such purchase price thereafter. See "Certain
Relationships and Related Transactions."
The high level of depreciation and amortization associated with the
Company's acquisition activities as well as the interest expense related to
its financing activities have caused the Company to report net losses in its
limited operating history. The Company believes that such net losses are
common for cable television companies and anticipates that it will continue to
incur net losses for the foreseeable future.
RESULTS OF OPERATIONS
ACTUAL
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31,
1997
The following historical information includes the results of operations of
the Lower Delaware System (acquired on June 24, 1997), the Sun City System
(acquired on September 19, 1997), the Jones System (acquired on January 9,
1998) and the Cablevision Systems (acquired on January 23, 1998) only for that
portion of the respective period that such cable television systems were owned
by the Company. See "Business--Acquisition History."
A significant portion of the Company's basic subscribers were acquired after
March 31, 1997, with the purchase of the Lower Delaware System, the Sun City
System, the Jones System and the Cablevision Systems. See "Business--
Acquisition History." At March 31, 1998, these systems served approximately
317,800 basic subscribers, representing 92.5% of the approximately 343,700
basic subscribers served by the Systems at the end of the first quarter of
1998. As such, the Company's acquisition activities subsequent to March 31,
1997 have resulted in substantial increases in the revenues, operating
expenses, operating loss and net loss of the Company for the three month
period ended March 31, 1998, compared to the corresponding period of 1997.
Consequently, the Company believes that any comparisons of the Company's
results of operations between the two periods are not indicative of the
Company's results of operations in the future.
Revenues increased to approximately $25.9 million for the three months ended
March 31, 1998, from approximately $2.9 million for the three months ended
March 31, 1997, principally due to the inclusion of the results of operations
of: (i) the Lower Delaware System and the Sun City System for the full quarter
ended March 31, 1998; and (ii) the Jones System and Cablevision Systems from
their respective acquisition dates. The results of operations of the Company
for the three month period ended March 31, 1998 also reflected the
implementation of basic service rate increases in March 1998, affecting
approximately 237,000 basic subscribers. The average monthly basic service
rate increase was approximately $3.30 per affected basic subscriber.
Approximately 79.0%, 16.0% and 5.0% of the revenues for the three months
ended March 31, 1998, were attributable to basic revenues, premium revenues,
and other revenues, respectively. Approximately 80.0%, 8.0% and 12.0% of the
revenues for the corresponding period of 1997 were attributable to basic
revenues, premium revenues and other revenues, respectively.
Service costs increased to approximately $9.8 million for the three months
ended March 31, 1998, from approximately $900,000 for the corresponding period
of 1997. Substantially all of this increase was due to the inclusion of the
aforementioned acquisitions by the Company. Approximately 73.0%, 15.0% and
12.0% of the service costs for the three months ended March 31, 1998 were
attributable to programming and copyright costs, technical personnel costs,
and plant operating costs, respectively.
36
Approximately 66.0%, 15.0% and 19.0% of the service costs for the
corresponding period of 1997 were attributable to programming and copyright
costs, technical personnel costs, and plant operating costs, respectively.
Selling, general and administrative expenses increased to approximately $5.3
million for the three months ended March 31, 1998, from approximately $400,000
for the corresponding period of 1997. Substantially all of this increase was
due to the inclusion of the aforementioned acquisitions by the Company.
Approximately 28.0%, 23.0%, 12.0%, and 37.0% of the selling, general and
administrative expenses for the three months ended March 31, 1998, were
attributable to customer service and administrative personnel costs, franchise
fees and property taxes, customer billing expenses, and expenses related to
marketing, advertising sales and office administration, respectively.
Approximately 36.0%, 10.0%, 12.0% and 42.0% of the selling, general and
administrative expenses for the corresponding period of 1997 were attributable
to customer service and administrative personnel costs, franchise fees and
property taxes, customer billing expenses, and expenses related to marketing,
advertising sales and office administration, respectively.
Management fee expense increased to approximately $1.2 million for the three
months ended March 31, 1998, from approximately $100,000 for the corresponding
period of 1997. Such increase was due to the higher revenues generated in the
1998 period. Depreciation and amortization expense increased to approximately
$11.2 million for the three months ended March 31, 1998, from approximately
$1.6 million for the corresponding period of 1997. This increase was
substantially due to the aforementioned acquisition activity of the Company
subsequent to March 31, 1997.
Operating loss increased to approximately $1.6 million for the three months
ended March 31, 1998, from approximately $200,000 for the corresponding period
of 1997 principally due to the increase in depreciation and amortization
expense as discussed above.
Interest expense, net, increased to approximately $5.0 million for the three
months ended March 31, 1998, from approximately $900,000 for the corresponding
period of 1997. This increase was substantially due to the additional debt
incurred in connection with the acquisitions by the Company as discussed
above. Other expenses increased to approximately $3.3 million for the three
months ended March 31, 1998, from approximately $3,000 for the corresponding
period of 1997. This increase was substantially due to acquisition fees paid
to Mediacom Management in connection with the acquisitions of the Jones System
and the Cablevision Systems. Due to the factors described above, the net loss
increased to approximately $10.0 million for the three months ended March 31,
1998, from approximately $1.1 million for the corresponding period of 1997.
Adjusted EBITDA is calculated as operating income (loss) before depreciation
and amortization. See Note 7 to the "Selected Historical and Pro Forma
Consolidated Financial and Operating Data." Adjusted EBITDA increased to
approximately $9.6 million for the three months ended March 31, 1998, from
approximately $1.4 million for the corresponding period of 1997. Adjusted
EBITDA as a percentage of revenues decreased to 37.0% for the three months
ended March 31, 1998, from 49.2% for the corresponding period in 1997. This
decrease was principally due to the higher programming costs of the acquired
Cablevision Systems in relation to the revenues generated by these cable
television systems.
In April 1998, the Company increased basic service rates affecting
approximately 22,000 basic subscribers with an average monthly basic service
rate increase of approximately $2.15 per affected basic subscriber. Following
the implementation of the basic service rate increases in March and April
1998, the Company has experienced growth in the number of basic subscribers it
serves and modest reductions of services by basic subscribers receiving the
expanded basic service. However, there can be no assurance that because of
these rate increases or otherwise, the Company's basic subscribers affected by
such rate increases will not reduce their level of service or cancel their
cable television service altogether sometime in the future. The Company's
actual results for future periods may be materially different as a result.
37
Three Months Ended March 31, 1997 Compared to the Period from January 1, 1996
to March 11, 1996
The following historical information for the three months ended March 31,
1997 includes the results of operations of the Ridgecrest System, the Kern
Valley System and the Valley Center and Nogales Systems for the full period.
The following historical information for the period from January 1, 1996 to
March 11, 1996 includes the results of operations of the Predecessor Company
(see below). The Company acquired substantially all of the assets of the
Benchmark Acquisition Fund II Limited Partnership (the "Predecessor Company")
on March 12, 1996 in its purchase of the Ridgecrest System. See "Business--
Acquisition History".
Revenues increased to approximately $2.9 million for the period ended March
31, 1997 from approximately $1.0 million for the period from January 1, 1996
to March 11, 1996. This increase was principally due to the inclusion of the
results of operations of the Kern Valley System and the Valley Center and
Nogales Systems. Approximately 80.0%, 8.0% and 12.0% of the revenues for the
1997 period were attributable to basic revenues, premium revenues and other
revenues, respectively. Approximately 78.0%, 9.0% and 13.0% for the 1996
period were attributable to basic revenues, premium revenues and other
revenues, respectively.
Service costs increased to approximately $900,000 for the 1997 period from
approximately $300,000 for the 1996 period. Approximately 66.0%, 15.0% and
19.0% of the service costs for the 1997 period were attributable to
programming and copyright costs, technical personnel costs, and plant
operating costs, respectively. Approximately 80.0%, 10.0% and 10.0% of the
service costs for the 1996 period were attributable to programming and
copyright costs, technical personnel costs, and plant operating costs,
respectively.
Selling, general and administrative expenses increased to approximately
$400,000 for the 1997 period from approximately $200,000 for the 1996 period.
Approximately 36.0%, 10.0%, 12.0% and 42.0% of the selling, general and
administrative expenses for the 1997 period were attributable to customer
service and administrative personnel costs, franchise fees and property taxes,
customer billing expenses, and expenses related to marketing, advertising
sales and office administration, respectively. Approximately 27.0%, 8.0%, 10.0
and 55.0% of the selling, general and administrative expense for the 1996
period were attributable to customer service and administrative personnel
costs, franchise fees and property taxes, customer billing expenses, and
expenses related to marketing, advertising sales and office administration,
respectively. Management fee expense as a percentage of revenues was unchanged
at 5.0%.
Year Ended December 31, 1997 Compared to the Period from March 12, 1996
(commencement of operations) to December 31, 1996
The following historical information includes the results of operations of
the Ridgecrest System (acquired on March 12, 1996 which is the date of
commencement of operations of the Company), the Kern Valley System (acquired
on June 28, 1996), the Valley Center and Nogales Systems (acquired on December
27, 1996), the Lower Delaware System (acquired on June 24, 1997) and the Sun
City System (acquired on September 19, 1997) only for that portion of the
respective period that such Systems were owned by the Company. See "Business--
Acquisition History."
The growth over the period ended December 31, 1996 in revenues, operating
expenses, operating income and net loss was principally attributable to the
inclusion of: (i) the full year of results of operations of the Ridgecrest
System, the Kern Valley System, the Nogales System and the Valley Center
System; (ii) the results of operations of the Lower Delaware System from the
date of its acquisition on June 24, 1997; and (iii) the results of operations
of the Sun City System from the date of its acquisition on September 19, 1997.
Revenues increased to approximately $17.6 million for the year ended December
31, 1997, from approximately $5.4 million for the period ended December 31,
38
1996. Approximately 81.0%, 9.0% and 10.0%, of the revenues for the year ended
December 31, 1997, were attributable to basic revenues, premium revenues and
other revenues, respectively. Approximately 80.0%, 8.0% and 12.0% of the
revenues for the period ended December 31, 1996, were attributable to basic
revenues, premium revenues and other revenues, respectively.
Service costs increased to approximately $5.5 million for the year ended
December 31, 1997, from approximately $1.5 million for the period ended
December 31, 1996. Substantially all of this increase was due to the inclusion
of the aforementioned acquisitions by the Company in 1997 and the full year of
results for the acquisitions completed by the Company in 1996. Approximately
70.0%, 15.0% and 15.0% of the service costs for the year ended December 31,
1997, were attributable to programming and copyright costs, technical
personnel costs, and plant operating costs, respectively. Approximately 72.0%,
13.0% and 15.0% of the service costs for the period ended December 31, 1996,
were attributable to programming and copyright costs, technical personnel
costs, and plant operating costs, respectively.
Selling, general and administrative expenses increased to approximately $2.7
million for the year ended December 31, 1997, from approximately $900,000 for
the period ended December 31, 1996. Substantially all of this increase was due
to the inclusion of the aforementioned acquisitions by the Company in 1997 and
the full year of results for the acquisitions completed by the Company in
1996. Approximately 36.0%, 9.0%, 13.0% and 42.0% of the selling, general and
administrative expenses for the year ended December 31, 1997, were
attributable to customer service and administrative personnel costs, franchise
fees and property taxes, customer billing expenses, and expenses related to
marketing, advertising sales and office administration, respectively.
Approximately 28.0%, 8.0%, 10.0% and 54.0% of the selling, general and
administrative expenses for the period ended December 31, 1996, were
attributable to customer service and administrative personnel costs, franchise
fees and property taxes, customer billing expenses, and expenses related to
marketing, advertising sales and office administration, respectively.
Management fee expense increased to approximately $900,000 for the year
ended December 31, 1997, from approximately $300,000 for the period ended
December 31, 1996. Such increase was due to the Company's higher revenues
generated during the year ended December 31, 1997. Depreciation and
amortization expense increased to approximately $7.6 million for the year
ended December 31, 1997, from approximately $2.2 million for the period ended
December 31, 1996. This increase was substantially due to the acquisitions of
the Lower Delaware System and the Sun City System in 1997 and the full year of
depreciation and amortization expense with respect to the Ridgecrest System,
the Kern Valley System, and the Valley Center and Nogales Systems.
Interest expense increased to approximately $4.8 million for the year ended
December 31, 1997, from approximately $1.5 million for the period ended
December 31, 1996. This increase was principally due to the increased levels
of debt incurred in connection with the acquisitions discussed above as well
as a full year of interest expense reported in the 1997 period. Other expenses
decreased to approximately $600,000 for the year ended December 31, 1997, from
approximately $1.0 million for the period ended December 31, 1996. This
decrease is principally due to pre-acquisition expenses recorded in 1996. Due
to the factors described above, the net loss increased to approximately $4.6
million for the year ended December 31, 1997, from approximately $2.0 million
for the period ended December 31, 1996.
Adjusted EBITDA is calculated as operating income (loss) before depreciation
and amortization. See Note 7 to the "Selected Historical and Pro Forma
Consolidated Financial and Operating Data". Adjusted EBITDA increased to
approximately $8.5 million for the year ended December 31, 1997, from
approximately $2.7 million for the 1996 period. Adjusted EBITDA as a
percentage of revenues
39
decreased to 48.3% for the year ended December 31, 1997, from 49.9% for the
1996 period. This decrease was principally due to the higher programming costs
of the Systems acquired by the Company during 1997 in relation to the revenues
generated by these Systems.
Period from March 12, 1996 to December 31, 1996 Compared to Year Ended
December 31, 1995
The following historical information for the period ended December 31, 1996
includes the results of operations of the Ridgecrest System (acquired on March
12, 1996), the Kern Valley System (acquired on June 28, 1996) and the Valley
Center and Nogales Systems (acquired on December 27, 1996) only for that
portion of the respective period that such Systems were owned by the Company.
The following historical information for the year ended December 31, 1995
includes the results of operations of the Predecessor Company. The Company
acquired substantially all of the assets of the Predecessor Company on March
12, 1996 in its purchase of the Ridgecrest System. See "Business--Acquisition
History."
The growth over the year ended December 31, 1995, in revenues and operating
income was principally attributable to: (i) the inclusion of results of
operations of the Kern Valley System from its date of acquisition on June 28,
1996; and (ii) operating efficiencies realized by the Company in the
Ridgecrest and Kern Valley Systems during the period ended December 31, 1996.
Revenues increased to approximately $5.4 million for the period ended
December 31, 1996, from approximately $5.2 million for the year ended December
31, 1995. Approximately 80.0%, 8.0% and 12.0% of the revenues for the period
ended December 31, 1996, were attributable to basic revenues, premium revenues
and other revenues, respectively. Approximately 79.0%, 9.0% and 12.0% of the
revenues for the year ended December 31, 1995, were attributable to basic
revenues, premium revenues and other revenues, respectively.
Service costs decreased slightly to approximately $1.5 million for the
period ended December 31, 1996, from the amount recorded for the year ended
December 31, 1995. Approximately 72.0%, 13.0% and 15.0% of the service costs
for the period ended December 31, 1996, were attributable to programming and
copyright costs, technical personnel costs, and plant operating costs,
respectively. Approximately 75.0%, 16.0% and 9.0% of the service costs for the
year ended December 31, 1995, were attributable to programming and copyright
costs, technical personnel costs, and plant operating costs, respectively.
Selling, general and administrative expenses decreased slightly to
approximately $900,000 for the period ended December 31, 1996, from the amount
recorded for the year ended December 31, 1995. Approximately 28.0%, 8.0%,
10.0% and 54.0% of the selling, general and administrative expenses for the
period ended December 31, 1996, were attributable to customer service and
administrative personnel costs, franchise fees and property taxes, customer
billing expenses, and expenses related to marketing, advertising sales and
office administration, respectively. Approximately 33.0%, 10.0%, 9.0% and
48.0% of the selling, general and administrative expense for year ended
December 31, 1995, were attributable to customer service and administrative
personnel costs, franchise fees and property taxes, customer billing expenses,
and expenses related to marketing, advertising sales and office
administration, respectively. Management fee expense as a percentage of
revenues was unchanged at 5.0%.
Pro Forma Results for Three Months Ended March 31, 1998 Compared to Pro Forma
Results for Three Months Ended March 31, 1997
The Company has reported the results of operations of the Systems from the
date of their respective acquisition. The following financial information for
the three months ended March 31, 1998 and 1997, includes unaudited pro forma
operating results of the Company assuming the acquisitions of the Systems had
been consummated on January 1, 1997. See "Business--Acquisition History."
40
Revenues increased to approximately $31.7 million for the three months ended
March 31, 1998, from approximately $29.2 million for the three months ended
March 31, 1997. The growth in revenues was attributable principally to
internal subscriber growth and an increase in average monthly revenue per
subscriber. Operating expenses in the aggregate increased to approximately
$18.0 million in the 1998 period from approximately $16.4 million in the 1997
period, principally due to the addition of service costs and selling, general
and administrative expenses associated with the increase in the subscriber
base.
Management fee expense increased to approximately $1.5 million in the 1998
period from approximately $1.4 million in the 1997 period. Such increase was
due to higher revenues recorded during the 1998 period. Depreciation and
amortization expense increased to approximately $13.6 million in the 1998
period from approximately $12.8 million in the 1997 period principally due to
capital expenditures in the 1998 period.
Adjusted EBITDA is calculated as operating income (loss) before depreciation
and amortization. See Note 7 to the "Selected Historical and Pro Forma
Consolidated Financial and Operating Data". Adjusted EBITDA increased to
approximately $12.2 million for the 1998 period, from approximately $11.5
million for the 1997 period. Adjusted EBITDA as a percentage of revenues
decreased to 38.5% for the 1998 period, from 39.3% for the 1997 period. The
decrease was principally due to the higher selling, general and administration
expenses in the 1998 period.
The pro forma financial information presented above has been prepared for
comparative purposes only and does not purport to be indicative of the
operating results which actually would have resulted had the acquisitions of
the Lower Delaware System, the Sun City System, the Jones System and the
Cablevision Systems been consummated on January 1, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The cable television business is a capital intensive business that generally
requires financing for the upgrade, expansion and maintenance of the technical
infrastructure. In addition, the Company has pursued, and continues to pursue,
a business strategy that includes selective acquisitions. The Company has
funded its working capital requirements, capital expenditures and acquisitions
through a combination of internally generated funds, long-term borrowings and
equity contributions. The Company intends to continue to finance such
expenditures through these same sources.
From March 12, 1996 to December 31, 1997, the Company's capital expenditures
(other than those related to acquisitions) were approximately $5.4 million,
and for the three months ended March 31, 1998, the Company's capital
expenditures were approximately $4.5 million. During 1997 and the first
quarter of 1998, the Company upgraded certain 1997 Systems which served
approximately 31,300 basic subscribers as of March 31, 1998. As a result, over
74.0% of the 1997 Systems' basic subscribers are currently served by cable
television systems with at least 62 channel capacity. As part of this upgrade
program, the Company in the fourth quarter of 1997 began the 550MHz (78 analog
channels) upgrade of its largest cable television system which is located in
lower Delaware, serving approximately 28,720 basic subscribers as of March 31,
1998, and expects completion of this project by mid-1999 at an estimated total
cost of $6.4 million. Since the acquisition of the 1998 Systems, the Company
has initiated several 550MHz (78 analog channels) upgrade projects in the 1998
Systems affecting over 100,000 basic subscribers, with expected completion by
year-end 1999 at an estimated total cost of $30.4 million.
The Company has budgeted approximately $140.0 million for capital
expenditures over the five-year period ending December 31, 2002, inclusive of
the aforementioned capital expenditures for the Lower Delaware System and 1998
Systems. Over this period, the Company intends to spend approximately: (i)
$70.0 million to establish a technical standard of 550MHz bandwidth capacity
in cable television systems serving over 80.0% of its basic subscribers; (ii)
$64.0 million for ongoing maintenance and replacement and for installations
and extensions to the cable plant related to
41
customer growth; and (iii) $6.0 million for the purchase of additional
addressable converters. The Company is evaluating the economic viability of
upgrading its larger systems to 750MHz bandwidth capacity, which would require
additional capital investment. Overall, based on its capital expenditures
budget, the Company plans to invest approximately $79 per basic subscriber in
each year during such five-year period. The Company intends to utilize its
internally generated funds and its available unused credit commitments under
the Subsidiary Credit Facilities, as described below, to fund the foregoing
expenditures. See "Business--Business Strategy" for a discussion of the
Company's strategic capital investment strategy.
From the Company's commencement through December 31, 1997, the Company
invested approximately $98.1 million (before closing costs and adjustments) to
acquire the 1997 Systems which served approximately 64,300 basic subscribers
as of March 31, 1998. In January 1998, the Company invested approximately
$330.1 million (before closing costs and adjustments) to acquire the 1998
Systems which served approximately 279,400 basic subscribers as of March 31,
1998. In the aggregate, the Company has invested approximately $428.2 million
(before closing costs and adjustments) to acquire the Systems, which served
approximately 343,700 basic subscribers as of March 31, 1998, representing an
acquisition price of approximately $1,246 per basic subscriber.
Mediacom is a limited liability company which serves as the holding company
for its various Subsidiaries, each of which is also a limited liability
company. The Company's financing strategy is to raise equity from its members
and issue public long-term debt (including the Notes) at the holding company
level, while utilizing the Subsidiaries to access debt capital in the bank and
private placement markets through multiple stand-alone borrowing groups. The
Company believes that this financing strategy is beneficial because it
broadens the Company's access to various debt markets, enhances its
flexibility in managing the Company's capital structure, reduces the overall
cost of debt capital and permits the Company to maintain a substantial
liquidity position in the form of unused and available bank credit
commitments.
Financings of the Subsidiaries are currently effected through two stand-
alone borrowing groups, each with separate lending groups. The credit
arrangements in these borrowing groups are non-recourse to Mediacom, have no
cross-default provisions relating directly to each other, have different
revolving credit and term periods and contain separately negotiated covenants
tailored for each borrowing group. These credit arrangements permit the
relevant Subsidiaries, subject to covenant restrictions, to make distributions
to Mediacom. A description of the principal provisions of each of the credit
arrangements of the Subsidiaries is set forth in "Description of Other
Indebtedness--Subsidiary Credit Facilities."
Prior to the date of the Series A Notes Offering, in order to finance its
working capital requirements, capital expenditures and acquisitions, and to
provide liquidity for future capital requirements, the Company completed the
following financing arrangements: (i) a $100.0 million senior credit facility
for the Western Group expiring in September 2005; (ii) a $225.0 million senior
credit facility for Mediacom Southeast expiring in June 2006; (iii) a seller
note (the "Seller Note") in the original principal amount of $2.8 million
issued by the Western Group; (iv) the Holding Company Notes in the aggregate
principal amount of $20.0 million, which were issued by Mediacom in connection
with the acquisition of the Cablevision Systems; and (v) $135.5 million of
equity capital, of which $125.0 million has been invested to date in Mediacom.
See "Description of Other Indebtedness."
The $100.0 million Western Credit Facility requires the Western Borrowing
Group to satisfy certain financial ratios such as: (i) a Senior Leverage Ratio
(as defined therein) not to exceed, currently 5.90:1 and gradually decreasing
to 3.00:1 on June 30, 2002 and at all times thereafter; (ii) a Total Leverage
Ratio (as defined therein) not to exceed, currently 6.40:1 and gradually
decreasing to 4.00:1 on June 30, 2002 and at all times thereafter; (iii) an
Interest Coverage Ratio (as defined therein) not to be less than, currently
1.50:1 and gradually increasing to 2:00 on March 31, 2000 and at all times
thereafter; and (iv) a Fixed Charge Coverage Ratio (as defined therein) not to
be less than 1.05:1 at any time. The Western Borrowing Group is currently in
compliance with each of these ratios. See "Description of Other Indebtedness."
42
The $225.0 million Southeast Credit Facility requires Mediacom Southeast to
satisfy certain financial ratios such as: (i) a Total Leverage Ratio (as
defined therein) not to exceed, currently 6.00:1 and gradually decreasing to
3.00:1 on December 31, 2003 and at all times thereafter; (ii) an Interest
Coverage Ratio (as defined therein) not to be less than, currently 1.50:1 and
gradually increasing to 2.00:1 on December 31, 1999 and at all times
thereafter; and (iii) a Pro Forma Debt Service Coverage Ratio (as defined
therein) not to be less than 1.15:1 at any time. Mediacom Southeast is
currently in compliance with each of these ratios. See "Description of Other
Indebtedness."
On April 1, 1998, Mediacom and Mediacom Capital jointly issued $200 million
aggregate principal amount of 8.5% Series A Notes due on April 15, 2008.
Mediacom used approximately $20.0 million of the net proceeds of the Series A
Notes Offering to repay in full the principal amount of the Holding Company
Notes. Mediacom contributed the remaining net proceeds of approximately $173.5
million in the form of preferred equity capital contributions to Mediacom
Southeast and subordinated loans to the Western Group. Such Subsidiaries used
the full amount of such capital contributions and loans to repay portions of
the outstanding principal Indebtedness and related accrued interest under the
revolving credit facilities of the respective Subsidiary Credit Facilities.
See "Use of Proceeds."
The Indenture imposes certain limitations on the ability of the Company to,
among other things, pay dividends or make other restricted payments,
consummate certain asset sales, enter into certain transactions with
affiliates, incur liens, merge or consolidate with any other person or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of the assets of the Company. See "Description of the Notes." As described
under "Description of the Notes--Covenants--Limitation on Indebtedness," the
Company will be limited in the amount of debt it may incur based upon a debt
to "operating cash flow" ratio which must be less than or equal to 7:1 or, as
applicable specifically to incurrence of debt by the Subsidiaries, 6:1, in
each case after giving effect to such incurrence. Operating cash flow, as used
in such ratio, is essentially the same as Adjusted EBITDA, as applicable to
the Company and as used in this Prospectus. However, the Company uses the term
Adjusted EBITDA in this Prospectus as EBITDA is a term more commonly used by
investors in analyzing and comparing cable television companies.
As of March 31, 1998, the Company had entered into interest rate swap
agreements to hedge a notional amount of $62.0 million of borrowings under the
Subsidiary Credit Facilities with expiration dates of September 1998 through
October 2002. As a result of the Company's interest rate swap agreements, and
after giving pro forma effect to the issuance of the Series A Notes,
approximately 84.0% of the Company's Indebtedness was at fixed interest rates
or subject to interest rate protection as of March 31, 1998.
As a result of the financing transactions described above, including the
effect of the Series A Notes Offering and the use of the net proceeds
therefrom, as of March 31, 1998, the Company would have had the ability to
borrow up to approximately $207.0 million under the Subsidiary Credit
Facilities. Of such amount, approximately $184.0 million could have been
borrowed and distributed to Mediacom under the most restrictive covenants in
the Subsidiary Credit Facilities. Determined as of March 31, 1998, and after
giving effect to the aforementioned interest rate swap agreements, the
weighted average interest rate on all Indebtedness outstanding under the
Subsidiary Credit Facilities was approximately 8.1%. After giving effect to
the Series A Notes Offering, the use of the net proceeds therefrom and said
interest rate swap agreements, such rate would have been approximately 7.3%.
See "Description of Other Indebtedness."
In certain limited circumstances, Mediacom's members have the right to
require Mediacom to redeem their membership interests if necessary to satisfy
legal restrictions relating to such ownership, as described under "Description
of the Operating Agreement--Put Rights."
Although the Company has not generated earnings sufficient to cover fixed
charges, the Company has generated cash and obtained financing sufficient to
meet its debt service, working capital, capital expenditure and acquisition
requirements. The Company expects that it will continue to be able to generate
funds and obtain financing sufficient to service its obligations under the
Notes. There can be no assurance that the Company will be able to refinance
its Indebtedness or obtain new financing in the future or, if the Company were
able to do so, that the terms would be favorable to the Company.
43
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information," and in 1998, issued SFAS No. 132 "Employer's Disclosure
about Pension and Other Post Retirement Benefits" and SFAS No. 133 "Accounting
for Derivative Instruments and Hedging Activities." The adoption of these
standards is not expected to significantly impact the Company's results of
operations, financial position or cash flows or the Company's Consolidated
Financial Statements and the related footnotes.
INFLATION AND CHANGING PRICES
The Company's costs and expenses are subject to inflation and price
fluctuations. However, because changes in costs are generally passed through
to subscribers, such changes are not expected to have a material effect on the
Company's results of operations.
RECENT DEVELOPMENTS
Acquisitions and Related Financings. On January 9, 1998, Mediacom California
completed the acquisition of the Jones System, serving approximately 17,200
basic subscribers on such date, for a purchase price of $21.4 million (before
closing costs and adjustments). The acquisition of the Jones System and
related closing costs and adjustments was financed with cash on hand and
borrowings under a $100.0 million senior credit facility (the "Western Credit
Facility") which was entered into by Mediacom California, Mediacom Arizona and
Mediacom Delaware (collectively, the "Western Group") in June 1997.
On January 23, 1998, Mediacom Southeast completed the acquisition of the
Cablevision Systems, serving approximately 260,100 basic subscribers on such
date, for an aggregate purchase price of approximately $308.7 million (before
closing costs and adjustments). The acquisition of the Cablevision Systems and
related closing costs and adjustments was financed with: (i) $211.0 million of
borrowings under a new $225.0 million senior credit facility (the "Southeast
Credit Facility" and, together with the Western Credit Facility, the
"Subsidiary Credit Facilities") made available to Mediacom Southeast; (ii) the
proceeds of $20.0 million aggregate principal amount of term notes (the
"Holding Company Notes") issued by Mediacom; and (iii) $94.0 million of equity
capital contributed to Mediacom by its members.
On April 1, 1998, the Company completed the Series A Notes Offering. The
Company used the net proceeds of the Series A Notes Offering (approximately
$193.5 million) to repay in full the Holding Company Notes and to make
contributions to Mediacom Southeast and the Western Group for purposes of
repaying certain indebtedness under the Subsidiary Credit Facilities. See "Use
of Proceeds."
Service Rate Increases. In January and February 1998, the Company gave
notice of basic service rate increases to approximately 237,000 basic
subscribers, effective in March 1998. For the month of March 1998, partly as a
result of these basic service rate increases, the Company's annualized
revenues were approximately $131.5 million. The Company also gave notice of
basic service rate increases to approximately 22,000 basic subscribers,
effective in April 1998. In most cases, such rate increases were implemented
in connection with the introduction of new programming services, resulting
from the activation of unused channels in the 1998 Systems. There can be no
assurance that because of these basic service rate increases or otherwise, the
Company's basic subscribers affected by such rate increases will not reduce
their level of service or cancel their cable television service altogether.
The Company's actual results for future periods may be materially different as
a result.
YEAR 2000
The Company has performed a review of its Year 2000 preparedness relative to
the Systems, its accounting software and its computer hardware. The Company
believes that it will not incur material costs in connection with becoming
Year 2000 compliant. In addition, the Company has received communications from
its significant third party vendors and service providers stating that they
are generally on target to become Year 2000 compliant in 1999 if they have not
already done so. There can be no assurance that these third party vendors and
service providers will complete their own Year 2000 compliant projects in a
timely manner and that failure to do so would not have an adverse impact on
the Company's business.
44
BUSINESS
OVERVIEW
Mediacom was founded in July 1995 by Rocco B. Commisso principally to
acquire, operate and develop cable television systems through its Subsidiaries
in selected non-metropolitan markets of the United States. Mr. Commisso is the
Chairman and Chief Executive Officer of Mediacom and has over 20 years of
experience with the cable television industry. To date, the Company has
completed eight acquisitions of cable television systems that, as of March 31,
1998, passed approximately 482,800 homes and served approximately 343,700
basic subscribers. The Company is currently among the top 25 MSOs in the
United States, operating in 14 states and serving 309 franchised communities.
In pursuing its business strategy, the Company has sought to take advantage
of market opportunities to acquire underperforming and undervalued cable
television systems principally in non-metropolitan markets and to build
subscriber clusters through regionalized operations. From March 1996 to
December 1997, the Company completed six acquisitions of cable television
systems that, as of March 31, 1998, served approximately 64,300 basic
subscribers in California, Arizona, Delaware and Maryland. In January 1998,
the Company acquired cable television systems in two separate transactions
that, as of March 31, 1998, served approximately 279,400 basic subscribers in
eleven states principally Alabama, California, Florida, Kentucky, Missouri and
North Carolina.
The Systems, taken as a whole, serve communities with favorable demographic
characteristics. During the five year period ended December 31, 1997, basic
subscribers served by the Systems have grown at a compound annual rate of
approximately 4.2%. Furthermore, the Systems have experienced a strong demand
for premium service units, as reflected by the premium penetration of
approximately 117.7% as of March 31, 1998. Because the Systems serve
geographically and economically diverse communities in smaller markets across
fourteen states, the Company believes that it is more resistant to any
individual regional economic downturn and is less susceptible to any local
competitive threat.
BUSINESS STRATEGY
The Company's business strategy is to: (i) acquire underperforming and
undervalued cable television systems primarily in non-metropolitan markets, as
well as related telecommunications businesses; (ii) implement operating plans
and system improvements designed to enhance the long-term operational and
financial performance of the Company; and (iii) deploy a flexible financing
strategy to complement the Company's growth objectives and operating plans.
The key elements of the Company's business strategy are:
Selectively Pursue Strategic Acquisitions. The Company actively seeks to
acquire undervalued and underperforming cable television systems, principally
in non-metropolitan markets, that it believes can benefit from its operating
strategy. The Company generally targets systems in close proximity to its
existing operations since it is more cost effective to provide cable
television and advanced telecommunications services over an expanded
subscriber base within a concentrated geographic area. The Company believes
that it may be able to purchase "fill-in" acquisitions at favorable prices in
geographic areas where it is the dominant provider of cable television
services. The Company may also expand its base of operations into other
markets or pursue related telecommunications businesses if such acquisitions
are consistent with its overall business strategy. The Company generally
considers the following factors in analyzing potential acquisitions: (i) the
demographics of the market, including income levels, housing densities and
prospects for subscriber growth; (ii) the potential for clustering or
regionalization; (iii) the competitive environment; (iv) the quality of the
system's technical infrastructure, including the cost of upgrading; (v) the
system's operating expense structure; (vi) existing subscriber rates; (vii)
the cost to deploy new services such as pay-per-view, Internet access and
high-speed data transmission; (viii) the potential for developing local
advertising
45
business; and (ix) franchise expiration, terms and conditions. The Company
believes that acquisition opportunities continue to exist in non-metropolitan
markets. Currently, the Company does not have any agreements to acquire any
significant cable television systems nor are there any such acquisitions that
are probable of occurring.
Target Non-Metropolitan Markets. The Company believes that there are
operating, regulatory, competitive and economic advantages in acquiring and
operating cable television systems in non-metropolitan markets. Typically, in
smaller communities, cable television is necessary in order to receive a full
complement of off-air broadcast stations, and there are fewer competitive
entertainment alternatives available to the customer. Consequently, non-
metropolitan cable television systems are generally characterized by higher
basic penetration rates, lower subscriber turnover and lower operating costs,
thus providing for more predictable revenue streams and higher cash flow
margins than cable television systems serving urban and suburban markets. The
Systems, taken as a whole, serve communities that generally have experienced
higher than average growth rates in population and households. The Company
believes that such favorable demographic profiles of the markets in which it
operates will enable the Company to increase its basic subscriber base. The
Company believes that it will continue to benefit from favorable rate
regulation under the "small system rules" adopted by the FCC in 1995, and that
operating in smaller markets generally poses fewer regulatory burdens. See
"Legislation and Regulation." The Company also believes that non-metropolitan
markets have less appeal to other local hardwire and wireless video service
providers due to the lower housing densities which result in higher capital
expenditures per household to construct competing video delivery systems.
Lastly, as a result of the recent trend by larger MSOs in the cable television
industry toward redirecting their resources to urban and suburban markets,
evidenced by their ongoing divestiture of smaller market cable television
systems, the Company believes that there will be continuing opportunities to
acquire its targeted cable television systems at favorable prices.
Promote and Expand Service Offerings. To date, the Company generally has
sought to acquire cable television systems that have underserved their
customers. As a result, the Company believes that significant opportunities
exist to increase the revenues of the Systems by promoting and expanding the
programming services available to its customers. On a pro forma basis, for the
three months ended March 31, 1998, the average monthly revenues per basic
subscriber for the Systems was approximately $30.72, providing the Company
with pricing flexibility as it introduces new programming services. The
weighted average channel capacity for the Systems is 51 channels, of which
five channels on average are unused and available for additional programming.
The Company introduces new programming services aggressively by activating
current unused channel capacity and by increasing channel availability through
planned system improvements in the longer term. In an effort to increase
revenues from pay-per-view movies and events, and to increase the penetration
of premium programming services (such as Home Box Office ("HBO") and
Showtime), the Company plans to deploy additional addressable converters in
the customers' homes. Currently, approximately 63.0% of the Company's basic
subscribers are served by systems that offer addressable technology, and
approximately 23.0% of the Company's basic subscribers have addressable
converters installed in their homes. The Company plans to market its services
aggressively utilizing a full range of marketing techniques including direct
door-to-door sales, telemarketing, direct mail, print and broadcast
advertising, billing inserts and cross-channel promotion. In addition, the
Company believes that there are significant opportunities to increase local
advertising revenues, particularly in the Company's larger cable television
systems. On a pro forma basis, for the three months ended March 31, 1998, the
Systems generated local advertising revenues of only $0.21 per basic
subscriber per month.
Invest in System Improvements. As part of its commitment to customer
service, the Company endeavors to maintain high technical performance
standards in all of its cable television systems. To accomplish this, the
Company has embarked on a capital investment program to upgrade the Systems
46
selectively. This program, which involves the use of fiber optic technology,
will expand channel capacities, enhance signal quality, improve technical
reliability, augment addressability and provide a platform to develop high-
speed data services and Internet access. The Company believes that such
technical upgrades create additional revenue opportunities, enhance operating
efficiencies, increase customer satisfaction, improve franchising relations
and solidify the Company's position as the dominant provider of video services
in the markets in which it operates. Over the next five years, the Company
intends to spend approximately: (i) $70.0 million to establish a technical
standard of 550MHz bandwidth capacity (78 analog channels) in cable television
systems serving over 80.0% of its basic subscribers; (ii) $64.0 million for
ongoing maintenance and replacement and for installations and extensions to
the cable plant related to customer growth; and (iii) $6.0 million for the
purchase of additional addressable converters. The Company is currently
evaluating the economic viability of upgrading its larger systems to 750MHz
bandwidth capacity (112 analog channels), which would require additional
capital investment. During 1997 and the first quarter of 1998, the Company
completed upgrade projects affecting approximately 31,300 basic subscribers
served by the 1997 Systems as of March 31, 1998, and as a result, over 74.0%
of the 1997 Systems' basic subscribers are currently served by cable
television systems with at least 62 channel capacity. As part of this upgrade
program, the Company in the fourth quarter of 1997 began the 550MHz upgrade of
its largest cable television system which is located in lower Delaware,
serving approximately 28,720 basic subscribers as of March 31, 1998, and
expects completion of this project by mid-1999. In addition, the Company has
already begun 550MHz upgrade projects in the 1998 Systems affecting over
100,000 basic subscribers, with expected completion by year-end 1999. The
Company is continually evaluating new technical developments and the economic
feasibility of introducing new services and programming delivery capabilities,
such as video-on-demand, digital compression and other interactive and high-
speed data application.
Realize Operating Efficiencies. After consummating an acquisition, the
Company implements managerial, operational, purchasing and technical changes
designed to improve operating efficiencies. By regionalizing certain
managerial, sales and administrative functions and imposing additional cost
controls at its 1997 Systems, the Company reduced operating costs, while
increasing the emphasis on customer service. With respect to the 1998 Systems,
the Company is currently evaluating the consolidation of certain regional,
administrative and customer service operations. In addition, the Company plans
to consolidate headend facilities, thereby reducing technical operating costs
and capital expenditures associated with the introduction of new video
services, while also facilitating the Company's ability to pursue local
advertising, Internet access and high-speed data applications. The Company
plans to eliminate at least 24 of the 157 headend facilities in the Systems.
Deliver Advanced Telecommunications Services. The Company believes that
additional revenue opportunities exist in non-metropolitan markets by
providing advanced telecommunication services, such as Internet access and the
delivery of high-speed data services, including local area network
applications for residential and commercial customers. The Company believes
these smaller markets have limited appeal to the larger telecommunications
companies and that its technical platform will provide such services at higher
speeds and lower cost, giving the Company a competitive advantage over other
telecommunication providers in the markets in which it operates. In
Ridgecrest, California, where its cable television system passed approximately
17,700 homes and served approximately 9,900 basic subscribers as of March 31,
1998, the Company provides Internet access to over 3,500 customers through
both the telephone modem and the cable modem. The cable modem provides
Internet access at download speeds of up to 100 times faster than telephone
modem connections. The Company plans to introduce Internet access via the
cable modem in its larger systems and will seek to complement this service
with the telephone modem connection through acquisitions and initial start-ups
of local Internet access businesses.
47
Focus on Customer Satisfaction. The Company believes that providing superior
customer service is a key element for its long-term success. The Company seeks
to achieve a high level of customer satisfaction by employing a well-trained
staff of customer service representatives and experienced field technicians.
Over 75% of the Company's basic subscribers are provided toll-free access to
the Company's regional calling centers on a 24-hour, 7-day per week basis. The
Company believes customer service is also enhanced by the regional calling
centers' ability to coordinate effectively technical service and installation
appointments and to speed response to customer inquiries. The Company also
believes that the regional calling center structure increases the
effectiveness of its marketing campaigns. The Company is presently evaluating
the possibility of extending the same 24-hour service to its other customers.
Additionally, as part of its plans to introduce new programming services, the
Company regularly evaluates the programming packages and pricing options
available, and surveys its customers for their preferences for new programming
services.
Deploy Flexible Financing Strategy. The Company has deployed a financing
strategy which utilizes a prudent blend of equity and debt capital to
complement the Company's acquisition and operating activities. Through its
holding company structure, the Company has raised equity from its members and
intends to issue public long-term debt (including the Notes) at the holding
company level, while utilizing the Subsidiaries to access debt capital in the
bank and private placement markets through multiple stand-alone borrowing
groups. The Company believes that this financing strategy is beneficial
because it broadens the Company's access to various debt markets, enhances its
flexibility in managing the Company's capital structure, reduces the overall
cost of debt capital and permits the Company to maintain a substantial
liquidity position in the form of unused and available bank credit
commitments. To date, the Company has raised $135.5 million of equity capital,
of which $125.0 million has been invested in Mediacom. In addition, the
Company has established two subsidiary borrowing groups which have obtained in
the aggregate $325.0 million of committed bank credit facilities. Such credit
facilities are non-recourse to Mediacom, have no cross-default provisions
relating directly to each other and permit the relevant Subsidiaries, subject
to covenant and other restrictions, to make distributions to Mediacom. As of
March 31 1998, on a pro forma basis after giving effect to the Series A Notes
Offering and the use of the net proceeds therefrom, the Company would have had
approximately $207.0 million of unused credit commitments, of which
approximately $184.0 million could have been borrowed and distributed to
Mediacom under the most restrictive covenants in the Subsidiaries' credit
agreements. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and "Description
of Other Indebtedness."
THE CABLE TELEVISION INDUSTRY
A cable television system receives television, radio and data signals that
are transmitted to the system's headend site by means of off-air antennas,
microwave relay systems and satellite earth stations. These signals are then
modulated, amplified and distributed, primarily through coaxial, and in some
instances, fiber optic cable, to customers who pay a fee for this service.
Cable television systems may also originate their own television programming
and other information services for distribution through the system. Cable
television systems generally are constructed and operated pursuant to non-
exclusive franchises or similar licenses granted by local governmental
authorities for a specified term of years, generally for extended periods of
up to 15 years.
The cable television industry developed in the United States in the late
1940's and early 1950's in response to the needs of residents in predominantly
rural and mountainous areas of the country where the quality of off-air
television reception was inadequate due to factors such as topography and
remoteness from television broadcast towers. In the late 1960's, cable
television systems also developed in small and medium-sized cities and
suburban areas that had a limited availability of clear off-air television
station signals. All of these markets are regarded within the cable industry
as "classic" cable television station markets. In more recent years, cable
television systems have been constructed
48
in large urban cities and nearby suburban areas, where good off-air reception
from multiple television stations usually is already available, in order to
receive the numerous, satellite-delivered channels carried by cable television
systems which are not otherwise available via broadcast television reception.
Cable television systems offer customers various levels (or "tiers") of
cable television services consisting of: (i) off-air television signals of
local network, independent and educational stations; (ii) a limited number of
television signals from so-called "superstations" originating from distant
cities (such as WGN); (iii) various satellite-delivered, non-broadcast
channels (such as Cable News Network ("CNN"), MTV: Music Television, the USA
Network ("USA"), Entertainment and Sports Programming Network ("ESPN") and
Turner Network Television ("TNT")); (iv) certain programming originated
locally by the cable television system (such as public, governmental and
educational access programs); and (v) informational displays featuring news,
weather, stock market and financial reports and public service announcements.
For an extra monthly charge, cable television systems also offer premium
television services to their customers. These services (such as HBO, Showtime
and regional sports networks) are satellite-delivered channels consisting
principally of feature films, live sports events, concerts and other special
entertainment features, usually presented without commercial interruption.
A customer generally pays an initial installation charge and fixed monthly
fees for basic and premium television services and for other services (such as
the rental of converters and remote control devices). Such monthly service
fees constitute the primary source of revenue for cable television operators.
In addition to customer revenue from these services, cable television
operators generate revenue from additional fees paid by customers for pay-per-
view programming of movies and special events and from the sale of available
advertising spots on advertiser-supported programming. Cable television
operators frequently also offer to their customers home shopping services,
which pay the systems a share of revenue from sales of products in the
systems' service areas. See "--Marketing, Programming and Rates."
49
ACQUISITION HISTORY
Founded in July 1995, the Company commenced operations in March 1996 with
the acquisition of its first cable television system serving certain
communities in and around Ridgecrest, California. Since then, the Company has
completed seven additional acquisitions of cable television systems. The
following table summarizes certain information relating to the acquisitions of
the Systems in chronological order:
PURCHASE
LOCATION OF PURCHASE PRICE BASIC PRICE PER
SYSTEMS PREDECESSOR OWNER (SYSTEM)(1) DATE ACQUIRED (IN MILLIONS)(2) SUBSCRIBERS(3) SUBSCRIBER
- ----------------- ----------------------------------- ------------------ ---------------- -------------- ----------
Ridgecrest, CA Benchmark Communications March 12, 1996 $ 18.8 9,870 $1,905
(the "Ridgecrest System")
Kern Valley, CA Booth American Company June 28, 1996 11.0 6,240 1,763
(the "Kern Valley System")
Nogales, AZ Saguaro Cable TV Investors, L.P. December 27, 1996 11.4 7,780 1,465
(the "Nogales System")
Valley Center, CA Valley Center Cablesystems, L.P. December 27, 1996 2.5 2,020 1,238
(the "Valley Center System")
Lower Delaware American Cable TV Investors 5, Ltd. June 24, 1997 42.9 28,720 1,494
(the "Lower Delaware System")
Sun City, CA CoxCom, Inc. September 19, 1997 11.5 9,670 1,189
(the "Sun City System")
Clearlake, CA Jones Intercable, Inc. January 9, 1998 21.4 17,550 1,219
(the "Jones System")
Various States Cablevision Systems Corporation January 23, 1998 308.7 261,850 1,179
(the "Cablevision Systems") ------ ------- ------
Total $428.2 343,700 $1,246
====== ======= ======
- --------
(1) Purchased from either the named party, one or more of its affiliates or
the controlling or managing operator.
(2) Represents the final purchase price before closing costs and adjustments.
(3) As of March 31,1998.
50
DESCRIPTION OF THE OPERATING REGIONS
To manage and operate the Systems, the Company has established four
operating regions: Southeast, Mid-Atlantic, Central and Western. In turn, each
region is subdivided into groups of cable television systems ("Regional
Clusters") which are organized and operated geographically. On a pro forma
basis, the table below and the discussion that follows provide an overview of
selected financial, operating and technical statistics for each of the
Company's four operating regions as of and for the three months ended March
31, 1998 (unless otherwise indicated).
SOUTHEAST MID-ATLANTIC CENTRAL WESTERN TOTAL
--------- ------------ ------- ------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER
DATA)
FINANCIAL DATA:
Annualized revenues........ $48,975 $28,105 $27,660 $21,975 $126,715
Annualized operating
expenses.................. 30,410 15,975 14,925 10,775 72,085
------- ------- ------- ------- --------
Annualized System Cash
Flow...................... $18,565 $12,130 $12,735 $11,200 $ 54,630
System Cash Flow margin.... 37.9% 43.2% 46.0% 51.0% 43.1%
Annual System Cash Flow per
basic subscriber(1)....... $ 142 $ 147 $ 165 $ 211 $ 159
Average monthly basic
revenues per basic
subscriber(2)............. $ 21.68 $ 21.79 $ 22.17 $ 27.15 $ 22.66
Average monthly revenues
per basic subscriber(3)... $ 31.21 $ 28.43 $ 29.77 $ 34.47 $ 30.72
OPERATING AND TECHNICAL
DATA (end of period,
except average):
Homes passed............... 178,580 106,170 116,210 81,840 482,800
Miles of plant............. 4,690 2,860 2,870 1,260 11,680
Density(4)................. 38 37 41 65 41
Basic subscribers.......... 130,750 82,390 77,430 53,130 343,700
Basic penetration.......... 73.2% 77.6% 66.6% 64.9% 71.2%
Premium service units...... 199,990 82,620 100,500 21,290 404,400
Premium penetration........ 153.0% 100.3% 129.8% 40.1% 117.7%
Regional Clusters.......... 4 3 4 4 15
Weighted average channel
capacity(5)............... 57 47 42 58 51
- --------
(1) Represents annualized System Cash Flow for the period divided by basic
subscribers at the end of the period.
(2) Represents revenues from basic programming services for the last three
months of the period divided by basic subscribers at the end of the
period.
(3) Represents average monthly revenues for the three months ended March 31,
1998 divided by the number of basic subscribers as of the end of such
period.
(4) Homes passed divided by miles of plant.
(5) Determined on a per subscriber basis.
SOUTHEAST REGION. The cable television systems in the Southeast Region, the
Company's largest region, were purchased in January 1998 as part of the
acquisition of the Cablevision Systems. Over 81.0% of the region's basic
subscribers are located in the suburbs and outlying areas of Pensacola, Fort
Walton Beach and Panama City, Florida, Mobile and Huntsville, Alabama and
Biloxi, Mississippi. On a pro forma basis, for the three months ended March
31, 1998, the region's annualized revenues were approximately $49.0 million,
and annualized System Cash Flow was approximately $18.6 million, resulting in
a System Cash Flow margin of 37.9% and annual System Cash Flow per basic
subscriber of $142. The region's systems passed approximately 178,580 homes
and served approximately 130,750 basic subscribers in 90 franchised
communities. All of the region's basic subscribers are serviced from a
regional customer service center in Gulf Breeze, Florida, which provides 24-
hour, 7-day per week service. According to National Decision Systems, 1997
("NDS"), projected median household growth in the counties served by the
region's systems for the five-year period ending 2002 is 5.5%, exceeding the
projected U.S. median household growth for the same period of 3.4%.
51
At March 31, 1998, the region generated monthly revenues per basic
subscriber of $31.21 and had an average monthly rate for basic programming
services of $21.68. The weighted average channel capacity of the region's
systems was 57 channels, with over 44.0% of the region's basic subscribers
being served by systems with at least five unused channels, providing the
Company with flexibility in the near term as it introduces new basic and other
programming services. The region's video services are delivered through 57
headend facilities. Over the next two years, the Company plans to upgrade
certain systems to 78 channel capacity, affecting approximately 26,800 of the
region's basic subscribers and expects to eliminate 12 headend facilities in
the Systems. After completion of these projects, approximately 54.0% of the
region's basic subscribers will be served by systems with 78 channel capacity.
As part of its technical improvement program, the Company also plans to
accelerate the deployment of addressable converters in the region. Currently,
over 69.0% of the region's basic subscribers are served by systems that offer
addressable technology and over 32.0% of the region's basic subscribers have
addressable converters in their homes. In addition, the Company intends to
promote more aggressively the region's local advertising sales, which
generated monthly revenues of only $0.08 per basic subscriber during the first
quarter of 1998. The Southeast Region is organized in four Regional Clusters:
the Panhandle Cluster, the Mobile Cluster, the Huntsville Cluster and the
Central Alabama/Mississippi Cluster.
The Panhandle Cluster. The cable television systems in the Panhandle Cluster
serve approximately 56,950 basic subscribers in the suburbs and outlying areas
of Pensacola, Fort Walton Beach and Panama City, Florida. The largest system
in the cluster is located in the suburbs of Pensacola, Florida, serving
approximately 28,600 basic subscribers from two headend facilities. This
system has 78 channel capacity, of which 8 are unused, and 42.6 miles of fiber
backbone. This system's basic subscribers have increased at a 6.6% compound
annual growth rate ("CAGR") over the 1992-1997 period, reflecting the
favorable population and housing growth trends in these markets. The cluster
also serves the high-growth resort area of Gulf Shores, Alabama. The basic
subscribers served by the Gulf Shores system have increased at a CAGR of 10.0%
over the same five-year period. The Gulf Shores system serves approximately
6,900 basic subscribers from one headend facility and has 27.5 miles of fiber
backbone. This system was upgraded in late 1997 to 78 channel capacity,
resulting in 34 unused channels.
The Mobile Cluster. The cable television systems in the Mobile Cluster serve
approximately 34,800 basic subscribers in the suburbs and outlying areas of
Mobile, Alabama and Biloxi, Mississippi. The largest system serves
approximately 17,000 basic subscribers from three headend facilities. Over the
next two years, the Company plans to upgrade this system to 78 channel
capacity, which will also result in the elimination of two headend facilities.
This cluster's basic subscribers increased at a CAGR of 4.7% over the 1992-
1997 period.
The Huntsville Cluster. The cable television systems in the Huntsville
Cluster serve approximately 16,200 basic subscribers, principally in the high-
growth suburbs of Huntsville, Alabama. The largest cable television system
serves approximately 90.0% of this cluster's basic subscribers from two
headend facilities, has 25 miles of fiber backbone, and is capable of
delivering 54 channels, of which 3 channels are unused. The Huntsville
Cluster's basic subscribers have increased at a CAGR of 5.9% over the 1992-
1997 period.
The Central Alabama/Mississippi Cluster. The cable television systems in the
Central Alabama/Mississippi Cluster serve approximately 22,800 basic
subscribers principally in the outlying areas of Jackson, Meridian, and
Tupelo, Mississippi and Montgomery and Tuscaloosa, Alabama. Approximately
45.0% of this cluster's basic subscribers are served by systems capable of
delivering 54 channels, with at least 7 unused channels. This cluster's basic
subscribers have increased at a CAGR of 1.6% over the 1992-1997 period.
52
MID-ATLANTIC REGION. The cable television systems in the Mid-Atlantic Region
serve communities in lower Delaware and southeastern Maryland and northeastern
and western areas of North Carolina. The Lower Delaware System was acquired in
June 1997 from an affiliate of Tele-Communications, Inc., and the region's
remaining systems were purchased in January 1998 as part of the acquisition of
the Cablevision Systems. On a pro forma basis, for the three months ended
March 31, 1998, the region's annualized revenues were approximately $28.1
million, and annualized System Cash Flow was approximately $12.1 million,
resulting in a System Cash Flow margin of 43.2% and annual System Cash Flow
per basic subscriber of $147. The region's systems passed approximately
106,170 homes and served approximately 82,390 basic subscribers in 59
franchised communities. According to NDS, projected median household growth in
the counties served by the Mid-Atlantic Region for the five-year period ending
2002 is 5.3%, exceeding the projected U.S. median household growth rate for
the same period of 3.4%.
At March 31, 1998, the region generated monthly revenues per basic
subscriber of $28.43 and had an average monthly rate for basic programming
services of $21.79. The weighted average channel capacity of the region's
systems was 47 channels, with approximately 22.0% of the basic subscribers
served by systems with excess channel capacity. The region's video services
are delivered through 17 headend facilities. Over the next two years, the
Company expects to upgrade to 78 channel capacity systems serving
approximately 76.0% of the region's basic subscribers and expects to eliminate
four headend facilities in the region. After these system improvements, over
84.0% of the region's basic subscribers will be served by systems with at
least 54 channel capacity. These planned improvements will also include the
elimination of up to four headend facilities. In addition, the Company plans
to accelerate the deployment of addressable converters in the region.
Currently, over 84.0% of the region's basic subscribers are served by systems
that offer addressable technology and over 23.0% of the region's basic
subscribers have addressable converters in their homes. The Company intends to
promote more aggressively the region's local advertising sales, which
generated monthly revenue of only $0.35 per basic subscriber during the first
quarter of 1998. The Mid-Atlantic Region is organized in three Regional
Clusters: the Lower Delaware Cluster, the Western Carolina Cluster and the
Eastern Carolina Cluster.
The Lower Delaware Cluster. The cable television system in the Lower
Delaware Cluster serves approximately 28,720 basic subscribers in lower
Delaware and southeastern Maryland, adjacent to Ocean City, Maryland. This
system is served from a single headend facility and has over 65 miles of fiber
backbone. An upgrade to 78 channel capacity was initiated in the fourth
quarter of 1997, utilizing both fiber-to-the-feeder and fiber backbone
architecture, with an expected completion date of mid-1999. The Company is
currently evaluating the coordination of this system's customer service
functions with the regional calling center in Hendersonville, North Carolina
in order to provide to the customers of this cluster 24-hour, 7-day per week
service. This cluster's basic subscribers have increased at a CAGR of 4.4%
over the 1992-1997 period.
The Western Carolina Cluster. The cable television systems in the Western
Carolina Cluster serve approximately 36,490 basic subscribers principally
located in Hendersonville, North Carolina and the suburbs and outlying areas
of Asheville, North Carolina, and Greenville and Spartanburg, South Carolina.
The largest system serves approximately 22,250 basic subscribers in Henderson
County, North Carolina, from a single headend facility and has 29.5 miles of
fiber backbone. Over the next two years, the Company intends to upgrade
systems serving approximately 84.0% of the cluster's basic subscribers to 78
channel capacity, utilizing both fiber-to-the-feeder and fiber backbone
architecture. This cluster's basic subscribers increased at a CAGR of 6.8%
over the 1992-1997 period. Both the Western and Eastern Carolina Clusters are
serviced from a regional customer service center located in Hendersonville,
North Carolina, which provides 24-hour, 7-day per week service.
The Eastern Carolina Cluster. The cable television systems in the Eastern
Carolina Cluster serve approximately 17,180 basic subscribers principally
located in the northeastern coastal area of North
53
Carolina. Within the next two years, the Company intends to upgrade two
systems serving approximately 6,700 basic subscribers to 78 channel capacity
from their current channel capacity of 36 channels. This cluster's basic
subscribers increased at a CAGR of 3.8% over the 1992-1997 period.
CENTRAL REGION. The cable television systems in the Central Region were
acquired in January 1998 as part of the acquisition of the Cablevision
Systems. This region's systems serve the suburbs and outlying areas of Kansas
City and Springfield, Missouri and Topeka, Kansas, and the western portion of
Kentucky. On a pro forma basis, for the three months ended March 31, 1998, the
region's annualized revenues were approximately $27.7 million, and annualized
System Cash Flow was approximately $12.7 million, resulting in a System Cash
Flow margin of 46.0% and annual System Cash Flow per basic subscriber of $165.
The systems passed 116,210 homes and served 77,430 basic subscribers in 144
franchised communities. According to NDS, projected median household growth in
the counties served by the Central Region for the five-year period ending 2002
is 3.8%, exceeding the projected U.S. median household growth rate for the
same period of 3.4%.
At March 31, 1998, the region generated monthly revenue per basic subscriber
of $29.77 and had an average monthly rate for basic programming services of
$22.17. The weighted average channel capacity of the region's cable television
systems was 42 channels, with approximately 22.0% of the region's basic
subscribers being served by systems with at least five unused channels. The
region's video services are delivered through 74 headend facilities. In the
near term, the Company plans to utilize excess channel capacity to introduce
new basic programming services. Over the next two years, the Company expects
to upgrade several of the region's systems to 78 channel capacity and to
eliminate eight headend facilities in the region. After completion of these
projects, approximately 47.0% of the region's basic subscribers will be served
by systems with at least 54 channel capacity. As part of its technical
improvement program, the Company also plans to increase the deployment of
addressable converters in the region, which are currently installed in the
homes of only 3.1% of the region's basic subscribers. In addition, the Company
plans to improve the region's local advertising sales which generated monthly
revenues of only $0.04 per basic subscriber during the first quarter of 1998.
The Central Region is organized in four Regional Clusters: the Western
Kentucky Cluster, the Springfield Cluster, the Kansas City Cluster and the
Topeka Cluster.
The Western Kentucky Cluster. The cable television systems in the Western
Kentucky Cluster serve approximately 34,800 basic subscribers principally
located in the communities surrounding the Land Between Lakes recreational
area of Western Kentucky and outlying areas of Bowling Green, Kentucky. This
cluster also serves communities in southern Illinois, primarily within 40
miles of St. Louis, Missouri. Within the next two years, the Company intends
to upgrade certain systems in this cluster to 78 channel capacity, affecting
approximately 13,400 basic subscribers. This cluster's basic subscribers
increased at a CAGR of 4.8% over the 1992-1997 period.
The Springfield Cluster. The cable television systems in the Springfield
Cluster serve approximately 19,450 basic subscribers located in suburbs and
outlying areas of Springfield, Missouri. Within the next two years, the
Company intends to upgrade certain systems in this cluster affecting
approximately 6,500 basic subscribers to 78 channel capacity from their
current channel capacity of 36 channels. This cluster's basic subscribers
increased at a CAGR of 4.0% over the 1992-1997 period.
The Kansas City Cluster. The cable television systems in the Kansas City
Cluster serve approximately 13,470 basic subscribers located in suburbs and
outlying areas of Kansas City, Missouri. Within the next two years, the
Company intends to upgrade certain systems in this cluster affecting
approximately 5,600 basic subscribers to 78 channel capacity from their
current channel capacity of 36 channels. This cluster's basic subscribers
increased at a CAGR of 3.2% over the 1992-1997 period.
54
The Topeka Cluster. The cable television systems in the Topeka Cluster serve
approximately 9,710 basic subscribers located in suburbs and outlying areas of
Topeka, Kansas. Within the next two years, the Company intends to upgrade a
certain system in this cluster affecting approximately 1,600 basic subscribers
to 78 channel capacity from its current channel capacity of 36 channels. This
cluster's basic subscribers increased at a CAGR of 1.6% over the 1992-1997
period.
WESTERN REGION. The cable television systems in the Western Region were
acquired in separate asset purchase transactions, beginning on March 12, 1996
with the purchase of the Ridgecrest System and concluding with the purchase of
the Jones System on January 9, 1998. The region's systems serve communities
in: (i) areas north of Napa Valley, California; (ii) the Indian Wells Valley
in central California; (iii) portions of Riverside County and San Diego
County, California; and (iv) Nogales, Arizona and outlying areas. On a pro
forma basis, for the three months ended March 31, 1998, the region's
annualized revenues were approximately $22.0 million, and annualized System
Cash Flow was approximately $11.2 million, resulting in a System Cash Flow
margin of 51.0% and annual System Cash Flow per basic subscriber of $211. The
region's systems passed 81,840 homes and served 53,130 basic subscribers in 16
franchised communities. According to NDS, projected median household growth in
the counties served by the Western Region for the five-year period ending 2002
is 9.5%, exceeding the projected U.S. median household growth rate for the
same period of 3.4%.
At March 31, 1998, the region generated monthly revenues per basic
subscriber of $34.47 and had an average monthly rate for basic programming
services of $27.15. The weighted average channel capacity of the region's
cable television systems was 58 channels, with approximately 32.0% of the
region's basic subscribers being served by systems having at least five unused
channels. The region's video services are delivered through nine headend
facilities. Over the next two years, the Company expects to upgrade the
region's largest system from 36 to 78 channel capacity. After completion of
this project, approximately 98.0% of the region's basic subscribers will be
served by systems with at least 62 channel capacity. As part of its technical
improvement program, the Company also plans to accelerate the deployment of
addressable converters in the region. The region's systems are 100%
addressable and approximately 28.0% of the region's basic subscribers have
addressable converters in their homes. In addition, the Company plans to
promote more aggressively the region's local advertising sales, which
generated monthly revenues of only $0.63 per basic subscriber during the first
quarter of 1998. The Western Region is organized in four Regional Clusters:
the Clearlake Cluster, the Ridgecrest Cluster, the Sun City Cluster and the
Nogales Cluster.
The Clearlake Cluster. The cable television system in the Clearlake Cluster,
acquired on January 9, 1998 from affiliates of Jones Intercable, Inc., serves
approximately 17,550 basic subscribers in certain communities of Lake County,
California. This system is served by a single headend facility. The Company
has already initiated an upgrade of this system to 78 channel capacity from
its current channel capacity of 36 channels and plans to utilize both fiber-
to-the-feeder and fiber backbone architecture. Completion of this upgrade
project is expected in late 1999. This cluster's basic subscribers increased
at a CAGR of 4.0% over the 1992-1997 period.
The Ridgecrest Cluster. The cable television systems in the Ridgecrest
Cluster serve approximately 16,110 basic subscribers located in Ridgecrest,
Kernville, Lake Isabella and Trona, California and their surrounding areas.
All of the systems in this cluster have the capability of delivering 62
channels. The Company currently offers Internet access via both the telephone
modem and cable modem to over 3,500 customers in the Ridgecrest community at
monthly rates of between $17.95 and $19.95 for the telephone modem customers
and between $29.95 and $34.95 for the cable modem customers. The Company
intends to introduce this same combination of Internet access services in its
larger systems. Also, the Ridgecrest Cluster's local advertising business
generated monthly revenues
55
per basic subscriber of approximately $1.10 during the first quarter of 1998.
This cluster's basic subscribers decreased by approximately 1,600 over the
1992-1997 period.
The Sun City Cluster. The cable television systems in the Sun City Cluster
serve approximately 11,690 basic subscribers in Sun City and Valley Center,
California from two headend facilities. As a result of completing technical
upgrades since their acquisition, these systems now have the capability to
deliver between 62 channels and 78 channels of programming. This cluster's
basic subscribers increased at a CAGR of 1.8% over the 1992-1997 period.
The Nogales Cluster. The cable television systems in the Nogales Cluster
serve approximately 7,780 basic subscribers in Nogales, and its surrounding
communities, and Ajo, Arizona, from three headend facilities. As a result of
completing technical upgrades since their acquisition, over 85.0% of the
cluster's basic subscribers are now served by systems with the capability to
deliver between 62 channels and 78 channels. This cluster's basic subscribers
increased at a CAGR of 1.0% over the 1992-1997 period.
TECHNOLOGICAL DEVELOPMENTS
As part of its commitment to customer service, the Company endeavors to
maintain high technical performance standards in all of its cable television
systems. To accomplish this, the Company has embarked on a capital investment
program to upgrade the Systems selectively. This program, which involves the
use of fiber optic technology, will expand channel capacities, enhance signal
quality, improve technical reliability, augment addressability and provide a
platform to develop high-speed data services and Internet access. The Company
believes that such technical upgrades create additional revenue opportunities,
enhance operating efficiencies, increase customer satisfaction, improve
franchising relations and solidify the Company's position as the dominant
provider of video services in the markets in which it operates. Before
committing the capital to upgrade or rebuild a system, the Company carefully
assesses: (i) the existing technical reliability and picture quality of the
system; (ii) basic subscribers' demand for more channels; (iii) requirements
in connection with franchise renewals; (iv) programming alternatives offered
by competitors; (v) customers' demand for other cable television and broadband
telecommunications services; and (vi) the return on investment of any such
capital outlay.
The table below summarizes the Company's existing technical profile as of
March 31, 1998. On such date, the Systems had a weighted average channel
capacity of 51 channels and delivered, on average, 46 channels of programming
to its basic subscribers.
BASIC PERCENTAGE OF BASIC SUBSCRIBERS BY CHANNEL CAPACITY WEIGHTED
SUBSCRIBERS ----------------------------------------------------------------------- AVERAGE
AS OF MARCH 30 CHANNELS 36 CHANNELS 42 CHANNELS 54 CHANNELS 62 CHANNELS 78 CHANNELS CHANNEL
OPERATING REGIONS 31, 1998 (270 MHZ) (300 MHZ) (330 MHZ) (400 MHZ) (450 MHZ) (550 MHZ) CAPACITY
----------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- --------
Southeast............... 130,750 1.0% 22.8% 16.7% 4.6% 21.9% 33.0% 57
Mid-Atlantic............ 82,390 0.0 25.6 53.2 0.7 6.0 14.5 47
Central................. 77,430 1.9 40.4 43.4 4.7 9.6 0.0 42
Western................. 53,130 0.0 32.4 2.0 0.0 34.4 31.2 58
------- ---- ----- ----- ---- ----- ----- ---
Total................. 343,700 0.8% 29.0% 29.2% 3.0% 17.2% 20.8% 51
======= ==== ===== ===== ==== ===== ===== ===
56
Over the next five years, the Company intends to spend approximately: (i)
$70.0 million to establish a technical standard of 550MHz bandwidth capacity
(78 analog channels) in cable television systems serving over 80% of its basic
subscribers (the "System Improvement Program"); (ii) $64.0 million for ongoing
maintenance and replacement and for installations and extensions to the cable
plant related to customer growth; and (iii) $6.0 million for the purchase of
additional addressable converters. The table below summarizes the Company's
expected technical profile upon completion of the System Improvement Program.
BASIC PERCENTAGE OF BASIC SUBSCRIBERS BY CHANNEL CAPACITY WEIGHTED
SUBSCRIBERS ----------------------------------------------------------------------- AVERAGE
AS OF MARCH 30 CHANNELS 36 CHANNELS 42 CHANNELS 54 CHANNELS 62 CHANNELS 78 CHANNELS CHANNEL
OPERATING REGIONS 31, 1998 (270 MHZ) (300 MHZ) (330 MHZ) (400 MHZ) (450 MHZ) (550 MHZ) CAPACITY
----------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- --------
Southeast............... 130,750 0.0% 1.0% 0.8% 3.0% 16.6% 78.6% 74
Mid-Atlantic............ 82,390 0.0 0.0 0.0 0.0 6.0 94.0 77
Central................. 77,430 0.0 4.0 4.0 3.6 9.7 78.7 72
Western................. 53,130 0.0 0.0 0.0 0.0 34.6 65.4 72
------- ---- ---- ---- ---- ----- ----- ---
Total................. 343,700 0.0% 1.3% 1.2% 1.9% 15.3% 80.3% 74
======= ==== ==== ==== ==== ===== ===== ===
Over 63.0% of the Company's basic subscribers currently have access to
addressable technology and over 23.0% have addressable converters in their
homes. During the next five years, the Company expects that the number of its
basic subscribers with addressable converters deployed in their homes will
double. Addressable technology enables the Company to electronically control
the cable television services being delivered to the customer's home. As a
result, the Company can electronically upgrade or downgrade services to a
customer immediately, from its regional calling centers and local customer
service centers, without the delay or expense associated with dispatching a
technician to the customer's home. Addressable technology also reduces premium
service theft, is an effective enforcement tool in the collection of
delinquent payments and enables the Company to offer pay-per-view services,
including movies and events.
The Company's active use of fiber optic technology as an alternative to
coaxial cable is playing a major role in expanding channel capacity and
improving the performance of its cable television systems. Fiber optic strands
are capable of carrying hundreds of video, data and voice channels over
extended distances without the extensive signal amplification typically
required for coaxial cable. The Company will use fiber backbone architecture
to eliminate headend facilities and to reduce amplifier cascades, thereby
improving picture quality, system reliability and headend and maintenance
expenditures. The Company plans to utilize fiber backbone architecture to
eliminate at least 24 of the 157 headend facilities in the Systems. To date,
the Company has utilized fiber optic technology in all of its 550MHz upgrade
projects, using a combination of fiber-to-feeder and fiber backbone
architecture. In addition, a number of fiber upgrade projects are underway
affecting 125,000 basic subscribers. Upon completion of the System Improvement
Program, the Company expects that fiber optic technology will be utilized in
systems serving over 90% of its basic subscribers.
Recently, high-speed cable modems and set-top boxes using digital
compression technology have become commercially viable. These developments
allow for the introduction of high-speed data services and Internet access and
will increase programming services available to customers. The Company now
offers Internet access both through the telephone modem and cable modem in one
of the Western Region's systems and intends to introduce a combination of
these services in its larger systems. Digital compression technology provides
for a significant expansion of channel capacity with up to 16 digital channels
to be carried in the bandwidth of one analog channel. The Company is currently
evaluating the economic feasibility of deploying digital compression
technology in one or more of its larger systems.
57
MARKETING, PROGRAMMING AND RATES
The Company's marketing programs and campaigns are based upon offering a
variety of cable services creatively packaged and tailored to appeal to its
different markets and to segments within each market. The Company routinely
surveys its customer base to ensure that it is meeting the demands of its
customers and stays abreast of its competition in order to effectively counter
competitors' promotional campaigns. The Company uses a coordinated array of
marketing techniques to attract and retain customers and to increase premium
service penetration, including door-to-door and direct mail solicitation,
telemarketing, media advertising, local promotional events typically sponsored
by programming services and cross-channel promotion of new services and pay-
per-view. Over 75.0% of the Systems' basic subscribers are serviced by
regional calling centers where the Company concentrates its telemarketing
efforts with a well-trained staff of telemarketers.
The Company has various contracts to obtain basic and premium programming
for the Systems from program suppliers whose compensation is typically based
on a fixed fee per customer. The Company's programming contracts are generally
for a fixed period of time and are subject to negotiated renewal. Some program
suppliers provide volume discount pricing structures or offer marketing
support to the Company. The Company's successful marketing of multiple premium
service packages emphasizing customer value enables the Company to take
advantage of such cost incentives. In addition, the Company is a member of the
National Cable Television Cooperative, Inc., a programming consortium
consisting of small to medium-sized MSOs serving, in the aggregate, over eight
million cable subscribers. The consortium was formed to help create
efficiencies in the areas of securing and administering programming contracts,
as well as to establish more favorable programming rates and contract terms
for small to medium-sized operators. The Company intends to negotiate
programming contract renewals both directly and through the consortium to
obtain the best available contract terms. The Company's programming costs are
expected to increase in the future due to additional programming being
provided to its customers, increased costs to purchase programming,
inflationary increases and other factors affecting the cable television
industry. The Company believes that it will be able to pass through expected
increases in its programming costs to customers, although there can be no
assurance that it will be able to do so. The Company also has various
retransmission consent arrangements with commercial broadcast stations which
generally expire in December 1999 and beyond. None of these consents require
payment of fees for carriage, however, the Company has entered into agreements
with certain stations to carry satellite-delivered cable programming which is
affiliated with the network carried by such stations. See "Legislation and
Regulation."
Although services vary from system to system due to differences in channel
capacity, viewer interests and community demographics, the majority of the
Systems offer a "basic service tier," consisting of local television channels
(network and independent stations) available over-the-air, satellite-delivered
"superstations" originating from distant cities (such as WGN), and local
public, governmental, home-shopping and leased access channels. The majority
of the Systems offer, for a monthly fee, an expanded basic tier of various
satellite-delivered, non-broadcast channels (such as CNN, MTV, USA, ESPN and
TNT). In addition to these services, the Systems typically provide one or more
premium services such as HBO, Cinemax, Showtime, The Movie Channel, Starz! and
The Disney Channel, which are combined in different formats to appeal to the
various segments of the viewing audience. These services are satellite-
delivered channels consisting principally of feature films, original
programming, live sports events, concerts and other special entertainment
features, usually presented without commercial interruption. Such premium
programming services are offered by the Systems both on a per-channel basis
and as part of premium service packages designed to enhance customer value and
to enable the Company to take advantage of programming agreements offering
cost incentives based on premium service unit growth. Basic subscribers may
subscribe for one or more premium service units. A "premium service unit" is a
single premium service for which a subscriber must pay an additional monthly
fee in order to receive the service. The Company plans to
58
upgrade certain of the Systems using fiber optic technology, which will allow
the Company to expand its ability to use "tiered" packaging strategies for
marketing premium services and promoting niche programming services. The
Company believes that this ability will increase basic and premium penetration
as well as revenue per basic subscriber. The Systems also typically provide
one or more pay-per-view services purchased from independent suppliers such as
Request, Viewer's Choice, Showtime Event Television, etc. These services are
satellite-delivered channels, consisting principally of feature films, live
sporting events, concerts and other special "events," usually presented
without commercial interruption. Such pay-per-view services are offered by the
Company on a "per viewing" basis, with subscribers only paying for programs
which they select for viewing.
Monthly customer rates for services vary from market to market, primarily
according to the amount of programming provided. At March 31, 1998, the
Company's monthly basic service rates for residential customers ranged from
$3.89 to $16.00, the Company's monthly expanded basic service rates for
residential customers ranged from $13.87 to $22.55 and per-channel premium
service rates (not including special promotions) ranged from $1.75 to $12.50
per service. For the three months ended March 31, 1998, on a pro forma basis,
the weighted average price for the Company's monthly combined basic and
expanded basic service was approximately $22.66.
A one-time installation fee, which the Company may wholly or partially waive
during a promotional period, is usually charged to new customers. The Company
charges monthly fees for converters and remote control tuning devices. The
Company also charges administrative fees for delinquent payments for service.
Customers are free to discontinue service at any time without additional
charge in the majority of the systems and may be charged a reconnection fee to
resume service. Commercial customers, such as hotels, motels and hospitals,
are charged negotiated monthly fees and a non-recurring fee for the
installation of service. Multiple dwelling unit accounts may be offered a bulk
rate in exchange for single-point billing and basic service to all units.
In addition to customer fees, the Company derives a modest amount of revenue
from the sale of local spot advertising time on locally originated and
satellite-delivered programming. The Company also derives modest amounts of
revenues from affiliations with home shopping services (which offer
merchandise for sale to customers and compensate system operators with a
percentage of their sales receipts).
The Company is an eligible "small cable company" under certain FCC rules,
which enables it to utilize a simplified rate setting methodology for most of
the Systems in establishing maximum rates for basic and expanded basic
services. This methodology almost always results in rates which exceed those
produced by the cost-of-service rules applicable to larger cable television
operators. Approximately 82% of the basic subscribers served by the Systems
are covered by such FCC rules. The Company believes that its rate practices
are generally consistent with the current practices in the industry. See
"Legislation and Regulation--Federal Regulation--Rate Regulation."
CUSTOMER SERVICE AND COMMUNITY RELATIONS
The Company is dedicated to providing superior customer service. The
Company's plans to make significant system improvements are designed in part
to strengthen customer service through greater system reliability and the
introduction of new services. The Company seeks a high level of customer
satisfaction by also employing a well-trained staff of customer service
representatives and experienced field technicians. The Company's three
regional calling centers offer 24-hour, 7-day per week coverage to over 75% of
the Systems' customers on a toll-free basis. The Company believes customer
service is also enhanced by the regional calling centers' ability to
coordinate effectively technical service and installation appointments and to
speed response to customer inquiries. The Company also believes that the
regional calling center structure increases the effectiveness of its marketing
campaigns.
59
In addition, the Company is dedicated to fostering strong community
relations in the communities served by the Systems. The Company supports local
charities and community causes through staged events and promotional
campaigns. The Company also installs and provides free cable television
service and Internet access to public schools, government buildings and not-
for-profit hospitals in its franchise areas. The Company believes that its
relations with the communities in which the Systems operate are generally
good.
FRANCHISES
Cable television systems are generally operated under non-exclusive
franchises granted by local governmental authorities. These 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 the provision of free service to schools
and certain other public institutions; and the maintenance of insurance and
indemnity bonds. The provisions of local franchises are subject to federal
regulation under the Communications Act. See "Legislation and Regulation."
As of March 31, 1998, the Systems were subject to 309 franchises. These
franchises, which are non-exclusive, provide for the payment of fees to the
issuing authority. In most of the Systems, such franchise fees are passed
through directly to the customers. The Cable Acts prohibit franchising
authorities from imposing franchise fees in excess of 5% of gross revenue and
also permit the cable television system operator to seek renegotiation and
modification of franchise requirements if warranted by changed circumstances.
See "Legislation and Regulation."
Substantially all of the Systems' basic subscribers are in service areas
that require a franchise. The table below groups the franchises of the Systems
by date of expiration and presents the approximate number and percentage of
basic subscribers for each group of franchises as of March 31, 1998.
PERCENTAGE OF NUMBER OF PERCENTAGE OF
YEAR OF FRANCHISE NUMBER OF TOTAL BASIC TOTAL BASIC
EXPIRATION FRANCHISES FRANCHISES SUBSCRIBERS SUBSCRIBERS
----------------- ---------- ------------- ----------- -------------
1998 through 2001....... 88 28.5% 88,880 25.9%
2002 and thereafter..... 221 71.5 254,820 74.1
--- ------ ------- ------
Total................. 309 100.0% 343,700 100.0%
=== ====== ======= ======
The Cable Acts provide, among other things, for an orderly franchise renewal
process in which franchise renewal will not be unreasonably withheld or, if
renewal is denied and the franchising authority acquires ownership of the
system or effects a transfer of the system to another person, the operator
generally is entitled to the "fair market value" for the system covered by
such franchise. In addition, the Cable Acts established comprehensive renewal
procedures which require that an incumbent franchisee's renewal application be
assessed on its own merits and not as part of a comparative process with
competing applications. See "Legislation and Regulation."
The Company believes that it generally has good relationships with its
franchising communities. The Company has never had a franchise revoked or
failed to have a franchise renewed. In addition, all of the franchises of the
Company eligible for renewal have been renewed or extended at or prior to
their stated expirations, and no franchise community has refused to consent to
a franchise transfer to the Company.
COMPETITION
Cable television systems face competition from alternative methods of
distributing video programming and from other sources of news, information and
entertainment such as off-air television
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broadcast programming, newspapers, movie theaters, live sporting events,
interactive online computer services and home video products, including
videotape cassette recorders. The extent to which a cable television system is
competitive depends, in part, upon that system's ability to provide, at a
reasonable price to customers, a greater variety of programming and other
communications services than those which are available off-air or through
other alternative delivery sources and upon superior technical performance and
customer service.
Cable television systems generally operate pursuant to franchises granted on
a nonexclusive basis. The 1992 Cable Act prohibits franchising authorities
from unreasonably denying requests for additional franchises and permits
franchising authorities to operate cable television systems. See "Legislation
and Regulation." Well-financed businesses from outside the cable television
industry (such as the public utilities that own the poles to which cable is
attached) may become competitors for franchises or providers of competing
services. See "Legislation and Regulation." Competition from other video
service providers exists in areas served by the Company. In a limited number
of the franchise areas served by the Systems, the Company faces direct
competition from other franchised cable television operators. There can be no
assurance, however, that additional cable television systems will not be
constructed in other franchise areas of the Systems.
Cable television operators also face competition from private satellite
master antenna television ("SMATV") systems that serve condominiums, apartment
and office complexes and private residential developments. SMATV systems offer
both improved reception of local television stations and many of the same
satellite-delivered program services offered by franchised cable television
systems. SMATV operators often enter into exclusive agreements with building
owners or homeowners associations, although some states have enacted laws that
authorize franchised cable television operators access to such private
complexes. These laws have been challenged in the courts with varying results.
In addition, some companies are developing and/or offering to these private
residential and commercial developments packages of telephony, data and video
services. Under the 1996 Telecom Act, SMATV systems can interconnect non-
commonly owned buildings without having to comply with local, state and
federal regulatory requirements that are imposed on cable television systems
providing similar services, as long as they do not use public rights-of-way.
For instance, while a franchised cable television system typically is
obligated to extend service to all areas of a community regardless of
population density or economic risk, a SMATV system may confine its operation
to small areas that are easy to serve and are more likely to be profitable.
The ability of the Company to compete for customers in residential and
commercial developments served by SMATV operators is uncertain.
The FCC has recently allocated a sizable amount of spectrum in the 27-31 GHz
band for use by a new wireless service, Local Multipoint Distribution Service
("LMDS"), which among other uses, can deliver over 100 channels of programming
directly to consumers' homes. The FCC completed an auction of this spectrum to
the public in March 1998, with cable television operators and local telephone
companies restricted in their participation in this auction. The extent to
which the winning licensees in this service will use this spectrum in
particular regions of the country to deliver multichannel video programming
and other services to subscribers, and therefore provide competition to
franchises cable television systems, is uncertain at this time.
Individuals presently have the option to purchase earth stations, which
allow the direct reception of satellite-delivered broadcast and non-broadcast
program services formerly available only to cable television subscribers. Most
satellite-distributed program signals are electronically scrambled so as to
permit reception only with authorized decoding equipment for which the
consumer must pay a fee. The 1992 Cable Act enhances the right of satellite
distributors and other competitors to purchase non-broadcast satellite-
delivered programming. The fastest growing method of satellite distribution is
by high-powered direct broadcast satellites (DBS) utilizing video compression
technology. This technology has the capability of providing more than 100
channels of programming over a single high- powered DBS satellite with
significantly higher capacity available if multiple satellites are placed in
the same
61
orbital position. DBS service can be received virtually anywhere in the United
States through the installation of a small rooftop or side-mounted antenna.
DBS service is presently being heavily marketed on a nationwide basis by three
service providers. The 1996 Telecom Act and FCC regulations preempt certain
local restrictions on the location and use of DBS and other satellite receiver
dishes.
DBS systems currently have certain advantages over cable television systems
with respect to programming and digital quality, as well as disadvantages that
include high upfront costs and a lack of local programming, service and
equipment distribution. One DBS provider, EchoStar, has announced plans to
offer some local signals in a limited number of markets. A review by the U.S.
Copyright Office is underway to determine if such offerings are permissible
under the copyright law. In addition, legislation has been introduced in
Congress to include carriage of local signals by DBS providers under the
copyright law. The ability of DBS to deliver local signals would eliminate a
significant advantage that cable television operators currently have over DBS
providers. The Company will magnify its competitive service price points and
seek to maintain programming parity with DBS by selectively increasing channel
capacities of the Systems to between 54 and 78 channels and introducing new
premium channels, pay-per-view and other services.
Cable television systems also compete with wireless program distribution
services such as MMDS, which uses low power microwave frequencies to transmit
video programming over the air to customers. Wireless distribution services
generally provide many of the programming services provided by cable
television systems, and digital compression technology is likely to increase
significantly the channel capacity of their systems. MMDS service requires
unobstructed "line of sight" transmission paths. In the majority of the
Company's franchise service areas, prohibitive topography and "line of sight"
access have and are likely to continue to limit competition from MMDS systems.
Moreover, in the majority of the Company's franchise areas, MMDS operators
face significant barriers to growth since the lower population densities make
these areas less attractive. The Company is not aware of any significant MMDS
operation currently within its cable television franchise service areas.
However, Wireless One, Inc., an MMDS operator, does compete in five market
areas in the Southeast Region. The Company estimates that Wireless One's
overall penetration in these markets is less than 1.5%. The Company is not
aware of any other MMDS operator in any of its other markets.
The 1996 Telecom Act makes it easier for local exchange carriers ("LECs")
and others to provide a wide variety of video services competitive with
services provided by cable television systems and to provide cable television
services directly to subscribers. For example, telephone companies may now
provide video programming directly to their subscribers in their telephone
service territory, subject to certain regulatory requirements. See
"Legislation and Regulation." Various LECs currently are providing video
programming services within and outside their telephone service areas through
a variety of distribution methods, including both the deployment of broadband
wire facilities and the use of wireless transmission facilities. Cable
television systems could be placed at a competitive disadvantage if the
delivery of video programming services by LECs becomes widespread, since LECs
are not required, under certain circumstances, to obtain local franchises to
deliver such video services or to comply with the variety of obligations
imposed upon cable television systems under such franchises. Issues of cross-
subsidization by LECs of video and telephony services also pose strategic
disadvantages for cable television operators seeking to compete with LECs that
provide video services. The Company cannot predict the likelihood of success
of video service ventures by LECs or the impact on the Company of such
competitive ventures. The Company believes, however, that the non-metropolitan
markets in which it provides or expects to provide cable television services
are unlikely to support competition in the provision of video and
telecommunications broadband services given the lower population densities and
higher capital costs per household of installing plant. The 1996 Telecom Act's
provision promoting facilities-based broadband competition is primarily
targeted at larger markets, and its prohibition on buy-outs and joint ventures
between incumbent cable television
62
operators and LECs exempts small cable television operators and carriers
meeting certain criteria. See "Legislation and Regulation." The Company
believes that significant growth opportunities exist for the Company by
establishing cooperative rather than competitive relationships with LECs
within its service areas, to the extent permitted by law.
Other new technologies, including Internet-based services, may become
competitive with services that cable television systems can offer. The 1996
Telecom Act directed the FCC to establish, and the FCC has adopted,
regulations and policies for the issuance of licenses for digital television
("DTV") to incumbent television broadcast licensees. DTV is expected to
deliver high definition television pictures, multiple digital-quality program
streams, as well as CD-quality audio programming and advanced digital
services, such as data transfer or subscription video. The FCC also has
authorized television broadcast stations to transmit textual and graphic
information useful both to consumers and businesses. The FCC also permits
commercial and noncommercial FM stations to use their subcarrier frequencies
to provide nonbroadcast services including data transmissions. The FCC
established an over-the-air Interactive Video and Data Service that will
permit two-way interaction with commercial and educational programming along
with informational and data services. LECs and other common carriers provide
facilities for the transmission and distribution to homes and businesses of
video services, including interactive computer-based services like the
Internet, data and other nonvideo services.
The 1996 Telecom Act provides that registered utility holding companies and
their subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act of 1935,
as amended. Electric utilities must establish separate subsidiaries known as
"exempt telecommunications companies" and must apply to the FCC for operating
authority. Due to their resources, electric utilities could be formidable
competitors to traditional cable television systems.
Advances in communications technology as well as changes in the marketplace
and the regulatory and legislative environments are constantly occurring.
Thus, it is not possible to predict the effect that ongoing or future
developments might have on the cable industry or on the operations of the
Company.
EMPLOYEES
Other than the Executive Officers named under "Management" below, the
Issuers have no employees. As of May 29, 1998, the Subsidiaries had
approximately 621 full-time equivalent employees. None of the Company's
employees is represented by a labor union. The Company considers its relations
with its employees to be good.
PROPERTIES
The Company's principal physical assets consist of cable television
operating plant and equipment, including signal receiving, encoding and
decoding devices, headends and distribution systems and customer house drop
equipment for each of its cable television systems. The signal receiving
apparatus typically includes a tower, antenna, ancillary electronic equipment
and earth stations for reception of satellite signals. Headends, consisting of
associated electronic equipment necessary for the reception, amplification and
modulation of signals, are located near the receiving devices. Some basic
subscribers of the Systems utilize converters that can be addressed by sending
coded signals from the headend facility over the cable network. See "--
Technological Developments" above. The Company's distribution system consists
primarily of coaxial and fiber optic cables and related electronic equipment.
The Company owns or leases parcels of real property for signal reception
sites (antenna towers and headends), microwave facilities and business
offices, and owns all of its service vehicles. The
63
Company believes that its properties, both owned and leased, are in good
condition and are suitable and adequate for the Company's operations.
The Company's cables generally are attached to utility poles under pole
rental agreements with local public utilities, although in some areas the
distribution cable is buried in underground ducts or trenches. The physical
components of the Systems require periodic upgrading to improve system
performance and capacity.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or to which any of its properties are subject.
64
LEGISLATION AND REGULATION
The cable television industry is regulated by the FCC, some state
governments and substantially all local governments. In addition, various
legislative and regulatory proposals under consideration from time to time by
the Congress and various federal agencies have in the past, and may in the
future, materially affect the Company and the cable television industry. The
following is a summary of federal laws and regulations materially affecting
the growth and operation of the cable television industry and a description of
certain state and local laws. The Company believes that the regulation of its
industry remains a matter of interest to Congress, the FCC and other
regulatory authorities. There can be no assurance as to what, if any, future
actions such legislative and regulatory authorities may take or the effect
thereof on the Company.
FEDERAL LEGISLATION
The principal federal statute governing the cable television industry is the
Communications Act. As it affects the cable television industry, the
Communications Act has been significantly amended on three occasions, by the
1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act. The 1996 Telecom
Act altered the regulatory structure governing the nation's telecommunications
providers. It removed barriers to competition in both the cable television
market and the local telephone market. Among other things, it also reduced the
scope of cable rate regulation. In addition, the 1996 Telecom Act required the
FCC to undertake a host of rulemakings to implement the 1996 Telecom Act, the
final outcome of which cannot yet be determined.
FEDERAL REGULATION
The FCC, the principal federal regulatory agency with jurisdiction over
cable television, has adopted regulations covering such areas as cross-
ownership between cable television systems and other communications
businesses, carriage of television broadcast programming, cable rates,
consumer protection and customer service, leased access, indecent programming,
programmer access to cable television systems, programming agreements,
technical standards, consumer electronics equipment compatibility, ownership
of home wiring, program exclusivity, equal employment opportunity, consumer
education and lockbox enforcement, origination cablecasting and sponsorship
identification, children's programming, signal leakage and frequency use,
maintenance of various records, and antenna structure notification, marking
and lighting, The FCC has the authority to enforce these regulations through
the imposition of substantial fines, the issuance of cease and desist orders
and/or the imposition of other administrative sanctions, such as the
revocation of FCC licenses needed to operate certain transmission facilities
often used in connection with cable operations. A brief summary of certain of
these federal regulations as adopted to date follows.
Rate Regulation
The 1984 Cable Act codified existing FCC preemption of rate regulation for
premium channels and optional nonbasic program tiers. The 1984 Cable Act also
deregulated basic cable rates for cable television systems determined by the
FCC to be subject to effective competition. The 1992 Cable Act substantially
changed the previous statutory and FCC rate regulation standards. The 1992
Cable Act replaced the FCC's old standard for determining effective
competition, under which most cable television systems were not subject to
local rate regulation, with a statutory provision that resulted in nearly all
cable television systems becoming subject to local rate regulation of basic
service. The 1996 Telecom Act expands the definition of effective competition
to cover situations where a local telephone company or its affiliate, or any
multichannel video provider using telephone company facilities, offers
comparable video service by any means except DBS. Satisfaction of this test
deregulates both basic and nonbasic tiers. Additionally, the 1992 Cable Act
required the FCC to adopt a formula, for franchising authorities to implement
to assure that basic cable rates are reasonable; allowed the FCC
65
to review rates for cable programming service tiers ("CPST") (other than per-
channel or per-program services) in response to complaints filed by
franchising authorities and/or cable customers; prohibited cable television
systems from requiring basic subscribers to purchase service tiers above basic
service in order to purchase premium services if the system is technically
capable of doing so; required the FCC to adopt regulations to establish, on
the basis of actual costs, the price for installation of cable service, remote
controls, converter boxes and additional outlets; and allowed the FCC to
impose restrictions on the retiering and rearrangement of cable services under
certain limited circumstances. The 1996 Telecom Act limits the class of
complainants regarding CPST rates to franchising authorities only, after first
receiving two rate complaints from local subscribers, and ends FCC regulation
of CPST rates immediately for small systems owned by small cable operators and
on March 31, 1999 for all other cable television systems.
The FCC's implementing regulations contain standards for the regulation of
basic service and CPST rates (other than per-channel or per-program services).
Local franchising authorities and the FCC, respectively, are empowered to
order a reduction of existing rates which exceed the maximum permitted level
for basic and CPST services and associated equipment, and refunds can be
required. The FCC adopted a benchmark price cap system for measuring the
reasonableness of existing basic service and CPST rates. Alternatively, cable
operators have the opportunity to make cost-of-service showings which, in some
cases, may justify rates above the applicable benchmarks. The rules also
require that charges for cable-related equipment (e.g., converter boxes and
remote control devices) and installation services be unbundled from the
provision of cable service and based upon actual costs plus a reasonable
profit. The regulations also provide that future rate increases may not exceed
an inflation-indexed amount, plus increases in certain costs beyond the cable
operator's control, such as taxes, franchise fees and increased programming
costs. Cost-based adjustments to these capped rates can also be made in the
event a cable television operator adds or deletes channels. In addition, new
product tiers consisting of services new to the cable television system can be
created free of rate regulation as long as certain conditions are met such as
not moving services from existing tiers to the new tier. There is also a
streamlined cost-of-service methodology available to justify a rate increase
on basic and regulated CPST tiers for "significant" system rebuilds or
upgrades.
As a further alternative, in 1995 the FCC adopted a simplified cost-of-
service methodology which can be used by "small cable systems" owned by "small
cable companies" (the "small system rules"). A "small system" is defined as a
cable television system which has, on a headend basis, 15,000 or fewer basic
subscribers. A "small cable company" is defined as an entity serving a total
of 400,000 or fewer basic subscribers that is not affiliated with a larger
cable television company, (i.e., a larger cable television company does not
own more than a 20 percent equity share or exercise de jure control). This
small system rate-setting methodology establishes maximum rates for the basic
and CPST services, as well as for installation and equipment charges. This
methodology almost always results in rates which exceed those produced by the
cost-of-service rules applicable to larger cable television operators. Under
this simplified cost-of-service methodology, a small cable company's rate
showing is presumed reasonable so long as the aggregate monthly per-
subscriber, per-channel charge for all regulated services does not exceed
$1.24. Once the initial rates are set they can be adjusted periodically for
inflation and external cost changes as described above. When an eligible
"small system" grows larger than 15,000 basic subscribers, it can maintain its
then current rates but it cannot increase its rates in the normal course until
an increase would be warranted under the rules applicable to other systems.
When a "small cable company" grows larger than 400,000 basic subscribers, the
qualified systems it then owns will not lose their small system eligibility.
If a small cable company sells a qualified system, or if the company itself is
sold, the qualified systems retain that status even if the acquiring company
is not a small cable company. The Company is an eligible "small cable company"
under these rules because it has fewer than 400,000 basic subscribers and is
not affiliated with another MSO that would bring it over that limit.
Approximately 82% of the basic subscribers served by the Systems are covered
by the small system rules.
66
The 1996 Telecom Act provides for immediate deregulation of the CPST (or the
basic tier if that was the only tier being offered as of December 31, 1994)
for small cable television systems owned by "small cable operators" (the "1996
Rules"). An eligible small system is one where the cable television operator
does not serve more than 50,000 basic subscribers in any one franchise area
(as opposed to the system size definition used in the 1995 rules). An eligible
small cable operator is one which does not serve, directly or through an
affiliate, one percent or more of basic subscribers nationwide and is not
affiliated with any entity or entities whose gross annual revenues aggregate
more than $250 million. The FCC has proposed in a pending rulemaking
proceeding to use the same affiliation standard (i.e., 20 percent ownership)
in the 1996 Rules as it uses for the small system rules. If the FCC were to
adopt this rule as proposed, the Company would not be eligible for immediate
deregulation of the CPST under the 1996 Telecom Act because an investor in the
Company owns more than 20 percent of the Company and that investor has in
excess of $250 million in annual revenues. The FCC has concluded that its
small system rules and the 1996 Rules will coexist.
Finally, there are regulations which require cable television systems to
permit customers to purchase video programming 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 cable television system is
technically incapable of doing so. Generally, this exemption from compliance
with the statute for cable television systems that do not have such technical
capability is available until a cable television system obtains the
capability, but not later than December 2002.
Carriage of Broadcast Television Signals
The 1992 Cable Act contains signal carriage requirements which allow
commercial television broadcast stations that are "local" to a cable
television system, (i.e., the system is located in the station's Area of
Dominant Influence) to elect every three years whether to require the cable
television system to carry the station, subject to certain exceptions, or
whether the cable television system will have to negotiate for "retransmission
consent" to carry the station. The next election between must-carry and
retransmission consent will be October 1, 1999. A cable television system is
generally required to devote up to one-third of its activated channel capacity
for the carriage of local commercial television stations whether pursuant to
mandatory carriage requirements or retransmission consent requirements of the
1992 Cable Act. Local non-commercial television stations are also given
mandatory carriage rights, subject to certain exceptions, within the larger
of: (i) a 50 mile radius from the station's city of license; or (ii) the
station's Grade B contour (a measure of signal strength). Unlike commercial
stations, noncommercial stations are not given the option to negotiate
retransmission consent for the carriage of their signal. In addition, cable
television systems have to 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 WGN). To date, compliance with the "retransmission consent" and "must
carry" provisions of the 1992 Cable Act has not had a material effect on the
Company, although this result may change in the future depending on such
factors as market conditions, channel capacity and similar matters when such
arrangements are renegotiated. The FCC has initiated a rulemaking proceeding
on the carriage of television signals in high definition and digital formats.
The outcome of this proceeding could have a material effect on the number of
services that a cable operator will be required to carry.
Franchise Fees
Although franchising authorities may impose franchise fees under the 1984
Cable Act, such payments cannot exceed 5% of a cable television system's
annual gross revenues. Under the 1996 Telecom Act, franchising authorities may
not exact franchise fees from revenues derived from telecommunications
services although they may be able to exact some additional compensation for
the use of public rights-of-way. Franchising authorities are also empowered in
awarding new franchises or renewing existing franchises to require cable
television operators to provide cable-related facilities and
67
equipment and to enforce compliance with voluntary commitments. In the case of
franchises in effect prior to the effective date of the 1984 Cable Act,
franchising authorities may enforce requirements contained in the franchise
relating to facilities, equipment and services, whether or not cable-related.
The 1984 Cable Act, under certain limited circumstances, permits a cable
operator to obtain modifications of franchise obligations.
Renewal of Franchises
The 1984 Cable Act established renewal procedures and criteria designed to
protect incumbent franchisees against arbitrary denials of renewal. While
these formal procedures are not mandatory unless timely invoked by either the
cable television operator or the franchising authority, they can provide
substantial protection to incumbent franchisees. Even after the formal renewal
procedures are invoked, franchising authorities and cable television operators
remain free to negotiate a renewal outside the formal process. Nevertheless,
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. Historically, franchises have been renewed for cable television
operators that have provided satisfactory services and have complied with the
terms of their franchises. At this time, the Company is not aware of any
current or past material failure on its part to comply with its franchise
agreements. The Company believes that it has generally complied with the terms
of its franchises and has provided quality levels of service.
The 1992 Cable Act makes several changes to the process under which a cable
television operator seeks to enforce his renewal rights which could make it
easier in some cases for a franchising authority to deny renewal. Franchising
authorities may consider the "level" of programming service provided by a
cable television operator in deciding whether to renew. For alleged franchise
violations occurring after December 29, 1984, 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 if, after giving the cable television operator notice
and opportunity to cure, it fails to respond to a written notice from the
cable television 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
television operators to set aside certain television channels for public,
educational and governmental access programming. The 1984 Cable Act further
requires cable television systems with thirty-six or more activated channels
to designate a portion of their channel capacity for commercial leased access
by unaffiliated third parties to provide programming that may compete with
services offered by the cable television operator. The 1992 Cable Act requires
leased access rates to be set according to a formula determined by the FCC.
The leased access rules were recently modified by the FCC to provide for lower
rates than the original formula produced.
Ownership
The 1996 Telecom Act repealed the statutory ban against local exchange
telephone companies ("LECs") providing video programming directly to customers
within their local exchange telephone service areas. Thus, under the 1996
Telecom Act and FCC rules recently adopted to implement the 1996 Telecom Act,
LECs may now provide video service as broadcasters, common carriers, or cable
operators. In addition, LECs and others may also provide video service through
"open video systems" ("OVS"), a regulatory regime that may give them more
flexibility than traditional cable television systems. OVS operators
(including LECs) may operate open video systems without obtaining a local
68
cable franchise, although they can be required to make payments to local
governmental bodies in lieu of cable franchise fees. In general, OVS operators
must make their systems available to programming providers on rates, terms and
conditions that are reasonable and nondiscriminatory. Where carriage demand by
programming providers exceeds the channel capacity of an open video system,
two-thirds of the channels must be made available to programmers unaffiliated
with the OVS operator.
The 1996 Telecom Act generally prohibits LECs from purchasing cable
television systems (i.e, any ownership interest exceeding 10%) located within
the LEC's telephone service area, prohibits cable operators from purchasing
LECs whose service areas are located within the cable operator's franchise
area, and prohibits joint ventures between operators of cable television
systems and LECs operating in overlapping markets. There are some statutory
exceptions, including a rural exemption that permits buyouts in which the
purchased cable television system or LEC serves a non-urban area with fewer
than 35,000 inhabitants, and exemptions for the purchase of small cable
television systems located in non-urbanized areas. Also, the FCC may grant
waivers of the buyout provisions in cases where: (i) the operator of a cable
television system or the LEC would be subject to undue economic distress if
such provisions were enforced; (ii) the system or facilities would not be
economically viable in the absence of a buyout or a joint venture; or (iii)
the anticompetitive effects of the proposed transaction are clearly outweighed
by the transaction's effect in light of community needs. The respective local
franchising authority must approve any such waiver.
Pursuant to the 1992 Cable Act, the FCC has imposed limits on the number of
cable television systems which a single cable television operator can own. In
general, no cable television operator can have an attributable interest in
cable television 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. The FCC
has stayed the effectiveness of these rules pending the outcome of an appeal
from the U.S. District Court decision holding the multiple ownership limit
provision of the 1992 Cable Act unconstitutional.
The FCC has also adopted rules which limit the number of channels on a cable
television system which can be occupied by national video programming services
in which the entity which owns the cable television system has an attributable
interest. The limit is 40% of the first 75 activated channels.
The 1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act of 1935,
as amended. Electric utilities must establish separate subsidiaries known as
"exempt telecommunications companies" and must apply to the FCC for operating
authority. Due to their resources, electric utilities could be formidable
competitors to traditional cable television systems.
EEO
The 1984 Cable Act includes provisions to ensure that minorities and women
are provided equal employment opportunities within the cable television
industry. The statute requires the FCC to adopt reporting and certification
rules that apply to all cable television system operators with more than five
full-time employees. Pursuant to the requirements of the 1992 Cable Act, the
FCC has imposed more detailed annual EEO reporting requirements on cable
operators and has expanded those requirements to all multichannel video
service distributors. 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 television operators can collect and disclose data about individual
system customers. The statute also requires
69
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 television operator were 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 were strengthened to require that cable
television operators take such actions as are necessary to prevent
unauthorized access to personally identifiable information.
Franchise Transfers
The 1992 Cable Act requires franchising authorities to act on any franchise
transfer request within 120 days after receipt of all information required by
FCC regulations and by the franchising authority. Approval is deemed to be
granted if the franchising authority fails to act within such period.
Technical Requirements
The FCC has imposed technical standards applicable to all classes of
channels which carry downstream National Television System Committee (NTSC)
video programming. The FCC also has adopted additional standards applicable to
cable television systems using frequencies in the 108-137MHz and 225-400MHz
bands in order to prevent harmful interference with aeronautical navigation
and safety radio services and has also established limits on cable television
system signal leakage. Periodic testing by cable television operators for
compliance with the technical standards and signal leakage limits is required
and an annual filing of the results of these measurements is required. The
1992 Cable Act requires the FCC to periodically update its technical standards
to take into account changes in technology. Under the 1996 Telecom Act, local
franchising authorities may not prohibit, condition or restrict a cable
television system's use of any type of subscriber equipment or transmission
technology.
The FCC has adopted regulations to implement the requirements of the 1992
Cable Act designed to improve the compatibility of cable television systems
and consumer electronics equipment. These regulations, inter alia, generally
prohibit cable television operators from scrambling their basic service tier
and from changing the infrared codes used in their existing customer premises
equipment. This latter requirement could make it more difficult or costly for
cable television operators to upgrade their customer premises equipment and
the FCC has been asked to reconsider its regulations. The 1996 Telecom Act
directs the FCC to set only minimal standards to assure compatibility between
television sets, VCRs and cable television systems, and to rely on the
marketplace. Pursuant to this statutory mandate, the FCC has adopted rules to
assure the competitive availability to consumers of customer premises
equipment, such as converters, used to access the services offered by cable
television systems and other multichannel video programming distributors
("MVPD"). Pursuant to those rules, consumers are given the right to attach
compatible equipment to the facilities of their MVPD so long as the equipment
does not harm the network, does not interfere with the services purchased by
other customers, and is not used to receive unauthorized services. As of July
1, 2000, MVPDs (other than DBS operators) are required to separate security
from non-security functions in the customer premises equipment which they sell
or lease to their customers and offer their customers the option of using
component security modules obtained from the MVPD with set-top units purchased
or leased from retail outlets. As of January 1, 2005, MVPDs will be prohibited
from distributing new set-top equipment integrating both security and non-
security functions to their customers.
Pursuant to the 1992 Cable Act, the FCC has adopted rules implementing an
Emergency Alert System ("EAS"). The rules require all cable television systems
to provide an audio and video EAS message on at least one programmed channel
and a video interruption and an audio alert message on all programmed
channels. The audio alert message is required to state which channel is
carrying
70
the full audio and video EAS message. The FCC rules permit cable television
systems either to provide a separate means of alerting persons with hearing
disabilities of EAS messages, such as a terminal that displays EAS messages
and activates other alerting mechanisms or lights, or to provide audio and
video EAS messages on all channels. Cable television systems with 10,000 or
more basic subscribers per headend will be required to install EAS equipment
capable of providing audio and video EAS messages on all programmed channels
by December 31, 1998. Cable television systems with 5,000 or more but fewer
than 10,000 basic subscribers per headend will have until October 1, 2002 to
comply with that requirement. Cable television systems with fewer than 5,000
basic subscribers per headend will have a choice of providing either a
national level EAS message on all programmed channels or installing EAS
equipment capable of providing audio alert messages on all programmed
channels, a video interrupt on all channels, and an audio and video EAS
message on one programmed channel. This must be accomplished by October 1,
2002.
Pole Attachments
The FCC currently regulates the rates and conditions imposed by investor-
owned public utilities for use of their poles and conduits unless state public
service commissions are able to demonstrate that they adequately regulate the
rates, terms and conditions of cable television pole attachments. A number of
states and the District of Columbia have certified to the FCC that they
adequately regulate the rates, terms and conditions for pole attachments. Of
the states in which the Company operates, California, Delaware and Kentucky
have made such certification. In the absence of state regulation, the FCC
administers such pole attachment and conduit use rates through use of a
formula which it has devised. Pursuant to the 1996 Telecom Act, the FCC has
adopted a new rate formula for any attaching party, including cable television
systems, which offer telecommunications services. This new formula will result
in higher attachment rates than at present, but they will apply only to cable
television systems which elect to offer telecommunications services. Any
increases pursuant to this new formula will not begin until 2001, and will be
phased in by equal increments over the five ensuing years. The FCC has also
initiated a proceeding to determine whether it should adjust certain elements
of the current rate formula. If adopted, these adjustments could increase
rates for pole attachments and conduit space.
Other FCC Matters
FCC regulation pursuant to the Communications Act also includes matters
regarding a cable television system's carriage of local sports programming;
restrictions on origination and cablecasting by cable television operators;
rules governing political broadcasts; nonduplication of network programming;
deletion of syndicated programming; registration procedure and reporting
requirements; customer service; closed captioning; obscenity and indecency;
program access and exclusivity arrangements; and limitations on advertising
contained in nonbroadcast children's programming.
The FCC recently adopted new procedural guidelines governing the disposition
of home run wiring (a line running to an individual subscriber's unit from a
common feeder or riser cable) in multi-dwelling units ("MDUs"). MDU owners can
use these new rules to attempt to force cable television operators without
contracts to either sell, abandon or remove home run wiring and terminate
service to MDU subscribers unless operators retain rights under common or
state law to maintain ownership rights in the home run wiring.
The 1996 Telecom Act requires video programming distributors to employ
technology to restrict the reception of programming by persons not subscribing
to those channels. In the case of channels primarily dedicated to sexually-
oriented programming, the distributor must fully block reception of the audio
and video portion of the channels; a distributor that is unable to comply with
this requirement may only provide such programming during a "safe harbor"
period when children are not likely to be
71
in the audience, as determined by the FCC. With respect to other kinds of
channels, the 1996 Telecom Act requires that the audio and video portions of
the channel be fully blocked, at no charge, upon request of the person not
subscribing to the channel.
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
television operators obtain a statutory license to retransmit broadcast
signals. The amount of this royalty payment varies, depending on the amount of
system revenues from certain sources, the number of distant signals carried,
and the location of the cable television system with respect to over-the-air
television stations. Any future adjustment to the copyright royalty rates will
be done through an arbitration process to be supervised by the U.S. Copyright
Office. Cable television 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.
Various bills have been introduced into Congress over the past several years
that would eliminate or modify the cable television compulsory license.
Without the compulsory license, cable television operators would have to
negotiate rights from the copyright owners for all of the programming on the
broadcast stations carried by cable television systems. Such negotiated
agreements would likely increase the cost to cable television operators of
carrying broadcast signals. The 1992 Cable Act's retransmission consent
provisions expressly provide that retransmission consent agreements between
television broadcast stations and cable television operators do not obviate
the need for cable operators to obtain a copyright license for the programming
carried on each broadcaster's signal.
Copyrighted music performed in programming supplied to cable television
systems by pay cable networks (such as HBO) and basic cable networks (such as
USA Network) is 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. As a
result of extensive litigation, both ASCAP and BMI now 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 customers.
Licenses to perform copyrighted music by cable television systems
themselves, including on local origination channels, in advertisements
inserted locally on cable television networks, and in cross promotional
announcements, must be obtained by the cable television operator. Cable
television industry negotiations with ASCAP, BMI and SESAC, Inc. (a smaller
performing rights organization) are in progress.
STATE AND LOCAL REGULATION
Cable television systems generally are operated pursuant to nonexclusive
franchises, permits or licenses granted by a municipality or other state or
local government entity. The terms and conditions of franchises vary
materially from jurisdiction to jurisdiction, and even from city to city
within the same state, historically ranging from reasonable to highly
restrictive or burdensome. Franchises generally contain provisions governing
fees to be paid to the franchising authority, length of the franchise term,
renewal, sale or transfer of the franchise, territory of the franchise, design
and technical performance of the system, use and occupancy of public streets
and number and types of cable television services provided. The terms and
conditions of each franchise and the laws and regulations under which it was
granted directly affect the profitability of the cable television system. The
1984 Cable Act places certain limitations on a franchising authority's ability
to control the operation of a cable television system. The 1992 Cable Act
prohibits exclusive franchises, and allows franchising authorities to exercise
greater control over the operation of franchised cable television systems,
especially in the area of customer
72
service and rate regulation. The 1992 Cable Act also allows franchising
authorities to operate their own multichannel video distribution system
without having to obtain a franchise and permits states or local franchising
authorities to adopt certain restrictions on the ownership of cable television
systems. Moreover, franchising authorities are immunized from monetary damage
awards arising from regulation of cable television systems or decisions made
on franchise grants, renewals, transfers and amendments. The 1996 Telecom Act
prohibits a franchising authority from either requiring or limiting a cable
television operator's provision of telecommunications services.
Various proposals have been introduced at the state and local levels with
regard to the regulation of cable television systems, and a number of states
have adopted legislation subjecting cable television systems to the
jurisdiction of centralized state governmental agencies, some of which impose
regulation of a character similar to that of a public utility. To date, other
than Delaware, no state in which the Company currently operates has enacted
state level regulation.
The foregoing does not purport to describe all present and proposed federal,
state and local regulations and legislation relating to the cable television
industry. Other existing federal regulations, copyright licensing and, in many
jurisdictions, state and local franchise requirements, currently are the
subject of a variety of judicial proceedings, legislative hearings and
administrative and legislative proposals which could change, in varying
degrees, the manner in which cable television systems operate. Neither the
outcome of these proceedings nor their impact upon the cable television
industry or the Company can be predicted at this time.
73
MANAGEMENT
The following table sets forth certain information concerning the executive
officers of Mediacom (the "Executive Officers"), none of whom are compensated
by the Company for their respective services to the Company. The Executive
Officers are instead compensated by Mediacom Management which receives
management fees pursuant to management agreements with the Company. All such
Executive Officers hold the same positions in Mediacom Management and the
Subsidiaries. Mr. Commisso is also the sole manager of Mediacom (the
"Manager") pursuant to the Operating Agreement, and the President and sole
Director of Mediacom Management and Mediacom Capital. Mr. Stephan is also the
Treasurer and Secretary of Mediacom Capital. Mr. Commisso and Mr. Stephan are
members of the Executive Committee of Mediacom, for which Mr. Commisso acts as
Chairman.
EXECUTIVE OFFICERS
NAME AGE POSITION
---- --- --------
Rocco B. Commisso........ 48 Chairman and Chief Executive Officer
Mark E. Stephan.......... 41 Senior Vice President, Chief Financial Officer
and Treasurer
Joseph Van Loan.......... 56 Senior Vice President-Technology
Italia Commisso Weinand.. 44 Senior Vice President-Programming and
Human Resources and Secretary
John G. Pascarelli....... 36 Vice President-Marketing
Brian M. Walsh........... 32 Vice President and Controller
The following table sets forth information concerning persons who hold key
operating management positions within the Subsidiaries of the Company.
FIELD MANAGEMENT
NAME AGE POSITION
---- --- --------
James M. Carey........... 47 Senior Vice President-Operations of
Mediacom Southeast
Gene E. Brock............ 55 Regional Manager-Southeast Region
Richard L. Hale.......... 49 Regional Manager-Central Region
Frederick D. Lord........ 42 Regional Manager-Western Region
Donald E. Zagorski....... 39 General Manager-Lower Delaware Cluster
ROCCO B. COMMISSO has over 20 years of experience with the cable television
industry and has served as the Chairman and Chief Executive Officer since
founding Mediacom in July 1995. From August 1986 to March 1995, Mr. Commisso
served as Executive Vice President, Chief Financial Officer and Director of
Cablevision Industries Corporation ("CVI"). At the time of Mr. Commisso's
arrival, CVI was a regional cable company serving less than 300,000 basic
subscribers in four states. During his tenure, CVI completed 40 acquisitions
of cable television systems with an aggregate value exceeding $1.2 billion.
Mr. Commisso was directly responsible for all aspects of CVI's financing
activities, including the completion of over 35 separate financing
transactions with aggregate capital commitments exceeding $5.0 billion.
Prior to that time, Mr. Commisso served as Senior Vice President of Royal
Bank of Canada's affiliate in the United States from 1981 where he founded and
directed a specialized lending group to manage the bank's lending activities
to media and communications companies. Mr. Commisso began his association with
the cable television industry in 1978 at The Chase Manhattan Bank, where he
was
74
assigned to manage the bank's lending activities to communications firms
including the nascent cable television industry. Mr. Commisso holds a Bachelor
of Science in Industrial Engineering and a Masters of Business Administration
from Columbia University.
MARK E. STEPHAN has 11 years of experience with the cable television
industry and has served as the Senior Vice President, Chief Financial Officer
and Treasurer since March 1996. Previously, Mr. Stephan served as Vice
President, Finance for CVI from July 1993 to February 1996. From 1987 to June
1993, he served for six years as Manager of the telecommunications and media
lending group of Royal Bank of Canada where he engaged in financing activities
for the cable television, wireless telecommunications and diversified media
industries. Mr. Stephan holds a Bachelor of Science in Economics from Colorado
State University.
JOSEPH VAN LOAN has 22 years of experience in the cable television industry
and has served as the Senior Vice President-Technology since November 1996.
Previously, Mr. Van Loan served as Senior Vice President of Engineering for
CVI from 1990. From 1988 to 1990, he managed a private telecommunications
consulting practice specializing in domestic and international cable
television and broadcasting. Prior to that time, Mr. Van Loan served as Vice
President of Engineering for Viacom Cable from 1976 to 1988. Mr. Van Loan
received the 1986 Vanguard Award for Science and Technology from the National
Cable Television Association. Mr. Van Loan holds a Bachelor of Science in
Electrical Engineering from California State Polytechnic University.
ITALIA COMMISSO WEINAND has 20 years of experience in the cable television
industry and has served as the Senior Vice President-Programming and Human
Resources and Secretary since February 1998. Ms. Weinand joined the Company in
April 1996 as Vice President-Operations. Previously, she served as System
Manager and Regional Manager for Comcast Corporation from July 1985 to June
1997. Ms. Weinand held various management positions in system operations,
marketing, customer service, and government relations with Time Warner Inc.,
Times Mirror Cable, and Tele-Communications, Inc. from June 1978 to July 1985.
Ms. Weinand holds a Bachelor of Science in Marketing from Fordham University.
Ms. Weinand is the sister of Mr. Commisso.
JOHN G. PASCARELLI has 18 years of experience in the cable television
industry and joined the Company as Vice President-Marketing in March 1998.
Previously, Mr. Pascarelli served as Vice President of Marketing for Helicon
Corporation from January 1996 to February 1998, and as Corporate and
Divisional Director of Marketing for CVI from November 1988 to December 1995.
Mr. Pascarelli has worked in the cable television industry since 1980 when he
joined Continental Cablevision as a sales manager and thereafter held
positions in sales and marketing with Cablevision Systems Corporation
("Cablevision") and Storer Communications.
BRIAN M. WALSH has 10 years of experience in the cable television industry
and has served as Vice President and Controller since February 1998. Mr. Walsh
joined the Company in April 1996 as Director of Accounting. Previously, he
served as Divisional Business Manager-Metro Systems for CVI from January 1994
to December 1995 and as Regional Business Manager for CVI's South Carolina
region from January 1992 to December 1993. Mr. Walsh has worked in the cable
television industry since 1988 when he joined CVI as a staff accountant. Mr.
Walsh holds a Bachelor of Science in Accounting from Siena College.
JAMES M. CAREY has 17 years of experience in the cable television industry
and has served as the Senior Vice President-Operations of Mediacom Southeast
since February 1998, and as a consultant to Mediacom since September 1997.
Previously, Mr. Carey was founder and President of Infinet Results, a
consulting firm to the telecommunications industry, from December 1996 to
August 1997. Prior to that time, Mr. Carey served as Executive Vice President
of Operations at MediaOne Inc. from August 1995 to November 1996, responsible
for MediaOne's Atlanta cluster consisting of 500,000 basic subscribers. From
December 1988 to July 1995, he served as Regional Vice President of CVI's
75
southeast region serving 180,000 basic subscribers. Mr. Carey holds a Bachelor
of Business Administration in Management from Georgia College.
GENE E. BROCK has 34 years of experience in the cable television industry
and has served as Regional Manager of the Southeast Region since January 1998.
Previously, Mr. Brock served as Regional Manager for Cablevision's Kentucky
and Florida regions from March 1992 to December 1997. Prior to that time he
served as Regional Engineer for MultiVision Cable Television from 1988 to 1992
and as the Vice President of Engineering for Cardiff Cablevision from 1982 to
1987.
RICHARD L. HALE has 15 years of experience in the cable television industry
and has served as the Regional Manager of the Central Region since January
1998. Previously, Mr. Hale served as Regional Manager of Cablevision's
Kentucky/Missouri Region from February 1996 to December 1997, as General
Manager of Cablevision's cable television systems in Arkansas and Missouri
from 1992 to 1996 and as a Regional Sales and Marketing Director of such
systems from 1988 to 1991. Mr. Hale began his career in the cable television
industry in 1984 as a Regional Sales and Marketing Director of Adams-Russell,
Inc.
FREDERICK D. LORD has 19 years of experience in the cable television
industry and served as the Regional Manager of the Western Region since
February 1998. Mr. Lord joined the Company in May 1997 as General Manager of
the Ridgecrest Cluster. Prior to that time, Mr. Lord served as the General
Manager of Saipan Cable Television from February 1993 to December 1996. From
1979 to 1993, Mr. Lord held various marketing, franchising and sales
management positions with Time Warner Inc., Group W Cable, and Wometco Cable
TV Inc. Mr. Lord has a Bachelor of Arts in Broadcast Journalism from the
University of Maine.
DONALD E. ZAGORSKI has 17 years of experience in the cable television
industry and has been the General Manager of the Lower Delaware Cluster since
June 1997. Previously, Mr. Zagorski served as system and regional manager for
Tele-Media Company from March 1990 to June 1997. From 1981 to 1988, Mr.
Zagorski held various technical and supervisory positions with Outer Banks
Cablevision and Group W Cable. Mr. Zagorski holds a Bachelor of Arts in
Business Administration from the State University of New York.
MANAGEMENT AND EXECUTIVE COMMITTEE
The Operating Agreement provides that one Manager shall have overall
management and control of the business and affairs of the Company, and that
Rocco B. Commisso is to serve as the Manager until his resignation and (other
than as set forth in the following sentence) the approval of his successor by
the vote of a majority of the outstanding membership interests. Without the
consent or approval of members, Mr. Commisso may designate a corporation or
other entity controlled by him and of which he and members of his immediate
family own at least 51% of the equity interests to serve as Manager of
Mediacom. The Manager may resign at any time and may be removed for gross
negligence or willful misconduct by a vote of no less than two-thirds of the
outstanding membership interests (exclusive of those held by the Manager).
The Operating Agreement provides for the establishment of a five-member
executive committee (the "Executive Committee") to whom Mr. Commisso, as
Manager, is required to report with respect to certain matters. Approval of
the Executive Committee must be obtained for certain extraordinary actions.
Pursuant to the Operating Agreement, Mr. Commisso serves as Chairman of the
Executive Committee and is entitled to designate two additional members, one
of whom may be an employee of Mediacom Management or a Subsidiary. The
remaining two members of the Executive Committee are designated by the other
member or members of Mediacom having the largest equity holdings. The
Executive Committee's members are Rocco B. Commisso, Mark E. Stephan, Robert
L. Winikoff,
76
William S. Morris III and Craig S. Mitchell. Each member of the Executive
Committee shall serve until a successor is duly elected and duly qualified.
See "Description of the Operating Agreement."
EXECUTIVE AND OTHER COMPENSATION
Pursuant to the Operating Agreement, the Company will not make any payments
in respect of compensation to any of its executive management personnel.
Rather, executive management personnel receive compensation from Mediacom
Management. Accordingly, Mediacom Management utilizes fees received from the
Company to pay for all of its operating expenses for managing the day-to-day
affairs of the Systems, as well as executive management salaries, benefits and
overhead, but excluding certain out-of-pocket expenses to be reimbursed
pursuant to the terms of the Operating Agreement. No employee of the
Subsidiaries received compensation in excess of $100,000 in 1997. See "Certain
Relationships and Related Transactions."
401(K) PLAN
The Company maintains a retirement plan (the "401(k) Plan") established in
conformity with Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code"), covering all of the eligible employees of the Company.
Pursuant to the 401(k) Plan, employees may elect to defer up to 15% of their
current pre-tax compensation and have the amount of such deferral contributed
to the 401(k) Plan. The maximum elective deferral contribution was $10,000 in
1997, subject to adjustment for cost-of-living in subsequent years. Certain
highly compensated employees may be subject to a lesser limit on their maximum
elective deferral contribution. The 401(k) Plan permits, but does not require,
matching contributions and non-matching (profit sharing) contributions to be
made by the Company up to a maximum dollar amount or maximum percentage of
participant contributions, as determined annually by the Company. The Company
presently matches 50% on the first 6% of employee contributions. The Company's
contributions under such Plan totaled approximately $10,000 for the period
from commencement of operations (March 12, 1996) to December 31, 1996,
approximately $14,000 for the year ended December 31, 1997 and approximately
$6,990 for the three months ended March 31, 1998. The 401(k) Plan is qualified
under Section 401 of the Code so that contributions by employees and employer,
if any, to the 401(k) Plan, and income earned on plan contributions, are not
taxable to employees until withdrawn from the 401(k) Plan, and so that
contributions by the Company, if any, will be deductible by the Company when
made.
77
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENTS
Pursuant to the Operating Agreement, the Manager or its affiliate, including
Mediacom Management, is to be paid compensation for management services
performed for the Company. In accordance with the Operating Agreement and
separate management agreements with each of the Subsidiaries, Mediacom
Management, which is wholly-owned by Mr. Commisso, is paid management fees for
managing the day-to-day operations of the Company. Pursuant to the Operating
Agreement and such management agreements, Mediacom Management is entitled to
receive annual management fees of 5.0% of the first $50.0 million of annual
gross operating revenues of the Company, 4.5% of such revenues in excess
thereof up to $75.0 million, and 4.0% of such revenues in excess of $75.0
million. The respective Subsidiary Credit Facilities prohibit the payment of
these management fees by the Subsidiaries if an event of default is continuing
thereunder. The aggregate amount of management fees paid to Mediacom
Management was approximately $270,000 and $882,000 in 1996 and 1997,
respectively, and approximately $1,207,000 for the three months ended March
31, 1998. See "Management--Executive and Other Compensation" and "Description
of the Operating Agreement--Management and Executive Committee."
TRANSACTION FEES AND EXPENSE REIMBURSEMENT
Pursuant to the Operating Agreement, Mediacom Management is entitled to
receive a fee of 1.0% of the purchase price of acquisitions made by the
Company until the Company's pro forma consolidated operating revenues equal
$75.0 million, and 0.5% of such purchase price thereafter. The Company paid
Mediacom Management approximately $453,000 and $544,000 in respect of such
acquisition fees in 1996 and 1997, respectively, and approximately
$3.3 million in connection with the purchase of the 1998 Systems during the
three months ended March 31, 1998. In addition, the Operating Agreement
provides for reimbursement of reasonable out-of-pocket expenses of the Manager
or its affiliates (including Mediacom Management) incurred in connection with
the operation of the business of the Company and acting for or on behalf of
the Company in connection with any potential acquisition of a cable television
system. During 1996, the Company reimbursed Mediacom Management approximately
$514,000 for certain management services incurred in connection with the
start-up of the Company's operations and for other out-of-pocket expenses. In
1997, the Company reimbursed Mediacom Management approximately $59,000 for
out-of-pocket expenses. There were no such reimbursements during the three
months ended March 31, 1998.
OTHER RELATIONSHIPS WITH MEMBERS OF MEDIACOM
Chase Manhattan Capital, L.P. and CB Capital Investors, L.P., which
collectively hold approximately 9.5% of the membership interests in Mediacom,
are affiliates of Chase Securities Inc. as well as The Chase Manhattan Bank.
The Chase Manhattan Bank is the administrative agent and a lender under each
of the Subsidiary Credit Facilities and has received customary fees for acting
in such capacities. The Chase Manhattan Bank received its proportionate share
of any repayment by the Subsidiaries of amounts outstanding under the
respective Subsidiary Credit Facilities from the proceeds of the Series A
Notes Offering. In connection with the financing of the purchase of the
Cablevision Systems, Mediacom issued to The Chase Manhattan Bank $20.0 million
principal amount of the Holding Company Notes, which principal amount plus all
interest accrued thereon was repaid with the proceeds of the Series A Notes
Offering. The Chase Manhattan Bank also issued on August 29, 1997 an
irrevocable letter of credit on behalf of Mediacom in the amount of $15.0
million in favor of the sellers of the Cablevision Systems to secure
Mediacom's performance under the acquisition agreement for the Cablevision
Systems. Such letter of credit was terminated upon the consummation of the
purchase of the Cablevision Systems on January 23, 1998. Chase Securities
Inc., as the Initial Purchaser, received fees in connection with the Series A
Notes Offering. See "Plan of Distribution." Chase Securities Inc. acted as
placement agent in connection with the placement of membership
78
interests in Mediacom and acted as advisory agent in connection with the
Company's purchase of the Cablevision Systems. For such services, Chase
Securities Inc. has received or is entitled to receive fees totaling
approximately $3.5 million.
BMO Financial, Inc., which holds approximately 3.8% of the membership
interests in Mediacom, is an affiliate of Bank of Montreal, a lender under
each of the Subsidiary Credit Facilities. Bank of Montreal has received
customary fees for acting as such. Bank of Montreal Trust Company, an
affiliate of Bank of Montreal, is the Trustee under the Notes.
Morris Communications Corporation, which holds approximately 64.5% of the
membership interests in Mediacom, has received fees totaling approximately
$2.0 million with respect to its equity commitment to Mediacom in connection
with the acquisition of the Cablevision Systems, and is entitled to receive
additional fees in the amount of approximately $270,000 in respect of its
remaining uncalled equity commitment.
SELLER NOTE
In connection with the purchase of a cable television system in Kern County,
California from Booth American Company ("Booth"), Mediacom California issued
to Booth, who holds approximately 6.9% of the membership interests in
Mediacom, the Seller Note in the original principal amount of $2.8 million.
See "Description of Other Indebtedness--Seller Note."
79
MEMBERSHIP INTERESTS OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth as of the date of this Prospectus certain
information regarding each of the beneficial owners of membership interests in
Mediacom. Rocco B. Commisso is the only Executive Officer owning such
interests. Mediacom Capital was incorporated in March 1998 and is a wholly-
owned subsidiary of Mediacom, has no assets and does not conduct any
operations.
NUMBER OF PERCENTAGE OF OUTSTANDING
BENEFICIAL OWNER MEMBERSHIP UNITS MEMBERSHIP INTERESTS
- ---------------- ---------------- -------------------------
Rocco B. Commisso................... 14,474.37 9.65%
c/o Mediacom LLC
100 Crystal Run Road
Middletown, New York 10941
Morris Communications Corporation... 96,776.25 64.51
725 Broad Street
Augusta, GA 30901
CB Capital Investors, L.P.(1)....... 14,306.01 9.54
c/o Chase Manhattan Capital
Corporation
380 Madison Avenue
New York, NY 10017
U.S. Investor, Inc.(2).............. 10,379.76 6.92
333 West Fort Street
Detroit, MI 48226
Private Market Fund, L.P. .......... 7,931.33 5.29
c/o Pacific Corporate Group
1200 Prospect Street, Suite 200
La Jolla, CA 92037
BMO Financial, Inc. ................ 5,682.52 3.79
c/o Bank of Montreal
430 Park Avenue
New York, NY 10022
Other investors..................... 449.76 0.30
---------- ------
Total............................. 150,000.00 100.00%
========== ======
- --------
(1) Includes approximately 2.0% in respect of membership interests owned by
its affiliate, Chase Manhattan Capital, L.P.
(2) An affiliate of Booth American Company.
80
DESCRIPTION OF THE OPERATING AGREEMENT
The following is a summary of certain provisions of the Third Amended and
Restated Operating Agreement of Mediacom dated as of January 20, 1998 (the
"Operating Agreement"). This summary does not purport to be a complete
description of the Operating Agreement, and is qualified in its entirety by
reference to the Operating Agreement which is available upon request of
Mediacom at 100 Crystal Run Road, Middletown, New York 10941, Attention: Chief
Financial Officer.
ESTABLISHMENT, PURPOSE AND DURATION
Mediacom was formed as a limited liability company pursuant to the
provisions of the New York Limited Liability Company Law (the "New York Act")
on July 17, 1995. The purposes of Mediacom, as set forth in the Operating
Agreement, are to acquire, directly or through investments, franchises to
operate, and to own, invest in, design, construct, maintain, manage and
operate, exchange and dispose of, one or more cable television systems or
other businesses providing telecommunications services, and to do all things
reasonably incidental thereto, including borrowing and lending money and
securing such borrowings by mortgage, pledge, or other lien, and leasing or
disposing of such systems or businesses.
Mediacom will be dissolved upon the first to occur of the following: (i)
December 31, 2020; (ii) certain events of bankruptcy involving the Manager or
the occurrence of any other event terminating the continued membership of the
Manager, unless within one hundred eighty days after such event the Company is
continued by the vote or written consent of no less than two-thirds of the
remaining membership interests; or (iii) the entry of a decree of judicial
dissolution.
MANAGEMENT AND EXECUTIVE COMMITTEE
The Operating Agreement provides that one Manager shall have overall
management and control of the business and affairs of the Company, and that
Rocco B. Commisso is to serve as the Manager until his resignation and (other
than as set forth in the following sentence) the approval of his successor by
the vote of a majority of the outstanding membership interests. Without the
consent or approval of members, Mr. Commisso may designate a corporation or
other entity controlled by him and of which he and members of his immediate
family own at least 51% of the equity interests to serve as Manager of
Mediacom. The Manager may resign at any time and may be removed for gross
negligence or willful misconduct by a vote of no less than two-thirds of the
outstanding membership interests (exclusive of those held by the Manager).
The Operating Agreement provides for a five-member Executive Committee to
whom the Manager is required to report with respect to certain matters,
including the financial status of the Company. As Manager, Mr. Commisso is the
Chairman of the Executive Committee and is entitled to designate two
additional members, one of whom may be an employee of Mediacom Management or a
Subsidiary. The remaining two members of the Executive Committee are
designated by the member or members of Mediacom having the largest equity
holdings which presently is Morris Communications Corporation. Informational
meetings must be held at least quarterly.
Approval of the Executive Committee (acting by majority vote) is required
for the following actions: (i) acquisitions requiring a capital call in excess
of $10 million or having a purchase price in excess of $40 million; (ii) the
making of a capital call exceeding $8 million not involving an acquisition;
(iii) financing transactions increasing the Indebtedness of the Company by $40
million or more; (iv) dispositions of assets having a sale price in excess of
$40 million; (v) transactions with affiliates of Mediacom or the Manager
requiring payments in excess of $1 million (exclusive of fee payments and
reimbursement of expenses specified in the Operating Agreement); (vi)
offerings of membership interests or other equity interests in Mediacom, and
any amendments to the Operating Agreement
81
necessary or desirable to complete the offering; (vii) determination of
Mediacom's equity value upon the occurrence of certain events specified in the
Operating Agreement; (viii) proposed transfers of more than 5,000 units of
membership interest by any member (other than to an affiliate of such member);
(ix) the resolution of conflicts of interest between Mediacom and its
affiliates (including the Manager); (x) the merger or consolidation of
Mediacom with or into any other business entity; and (xi) taking any actions
relating to bankruptcy or similar relief.
The number of members of the Executive Committee would be increased to seven
upon the occurrence of any of the following: (i) bankruptcy, incapacity or
withdrawal of the Manager or any other event that terminates the membership of
the Manager; (ii) the Manager is no longer chief executive officer and
controlling shareholder of Mediacom Management while any management agreement
between Mediacom Management and a Subsidiary is in effect; (iii) Mediacom has
not disposed of its assets and redeemed the membership interests of all
members other than Mr. Commisso and his affiliates within two years of the
approval by the members of such a disposition, as discussed below under "--
Voting Rights"; or (iv) consolidated System Cash Flow of the Company for any
two consecutive fiscal quarters is less than 80% of the financial projections
for such fiscal quarters, as provided to lenders of the Company in connection
with proposed acquisitions or refinancings. In such a case, Mr. Commisso and
his affiliates would be entitled to designate three of the members of the
Executive Committee and the other members of Mediacom would designate the
remaining four.
RIGHT OF FIRST OFFER
If the Executive Committee or the members of Mediacom determine to sell any
or all of the Company's assets or Subsidiaries, the Manager has the right of
first offer with respect to such sale. Within 30 days of a determination to
sell, the Manager may present the proposed terms of an offer for purchase to
the members, a majority of which will be necessary to approve the transaction.
Within 30 days of delivery of the Manager's offer, Mediacom shall hold a
meeting at which a vote of the majority of the membership interests not held
by the Manager and his affiliates shall be required to accept or reject the
Manager's offer. If the Manager's offer is rejected, the Executive Committee
would have 120 days within which to solicit offers from prospective buyers
(including other members). If within such 120-day period, the Executive
Committee is unable to solicit a bona fide offer from a qualified buyer or
negotiate a contract on terms at least as favorable as those offered by the
Manager and for a purchase price of not less than 105% of the Manager's
offered purchase price, the Executive Committee must accept the Manager's
offer unless such sale is to be effected prior to December 31, 2004, in which
case it may reject the offer. If the Manager's offer is accepted, Mediacom
(acting through the Executive Committee) and the Manager shall proceed to
prepare a contract of sale.
VOTING RIGHTS
The members of Mediacom do not have the right to vote on any matters, except
that the vote of no less than two-thirds of the outstanding membership
interests is required for (i) the disposition of substantially all of the
assets of the Company which, if to be effected prior to December 31, 2004,
shall also require the approval of the Manager; (ii) the amendment of the
Operating Agreement (other than for administrative purposes); (iii) a material
change to the business purposes of the Company; (iv) the removal of the
Manager for gross negligence or willful misconduct; and (v) the continuation
of the business of Mediacom following the bankruptcy, death, disability, legal
incapacity, removal or withdrawal of the Manager.
CAPITAL CONTRIBUTIONS; CAPITAL CALLS
Under the Operating Agreement, the members of Mediacom have made capital
contributions to Mediacom pursuant to certain capital commitment agreements.
To the extent any member has a capital commitment in excess of such member's
capital contributions (an "Unfunded Capital
82
Commitment"), the Manager may make capital calls on a pro rata basis to all
members with respect to no less than 5% of each member's Unfunded Capital
Commitment. The Operating Agreement provides Mediacom with several remedies in
the event a member fails to pay any of the amounts requested pursuant to a
capital call, including redeeming the defaulting member's membership interests
for 50% of the equity value less costs of collection and interest accrued on
unpaid capital call amounts. The Company presently has Unfunded Capital
Commitments in the aggregate amount of $10.5 million from its members.
PUT RIGHTS
Each member has the right to require Mediacom to redeem its membership
interests at any time if the holding of such interests exceeds the amount
permitted, or its otherwise prohibited or becomes unduly burdensome, by any
law to which such member is subject, or, in the case of any member which is a
Small Business Investment Company as defined in and subject to regulation
under the Small Business Investment Act of 1958, as amended, upon a change in
the Company's principal business activities to an activity not eligible for
investment by a Small Business Investment Company or a change in the reported
use of proceeds of a member's investment in Mediacom. If Mediacom is unable to
redeem for cash any or all of such membership interests at such time, Mediacom
will issue as payment for such interests a junior subordinated promissory note
with a five-year maturity date and deferred interest which accrues and
compounds at an annual rate of 5% over prime.
In addition, in connection with the acquisition of the Cablevision Systems
on January 23, 1998, the FCC issued a transactional forbearance from its
cross-ownership restrictions, effective for a period of one year, permitting
CB Capital Investors, L.P. ("CB") to purchase additional units of membership
interest in Mediacom. If at the end of such one-year period, CB's membership
interest in Mediacom remains above the limitations imposed by the FCC's cross-
ownership restrictions, Mediacom will be required to repurchase such number of
CB's units of membership interest which exceed the permissible ownership
level. If such repurchase were to occur on January 23, 1999 (i.e., upon
expiration of the transactional forbearance), and assuming no changes in the
number of outstanding membership units of Mediacom and no changes in such
cross-ownership rules, the repurchase price for such excess membership
interests would be approximately $7.5 million. See "Membership Interests of
Certain Beneficial Owners and Management" and "Legislation and Regulation."
Except as set forth above, no member has the right to have its membership
interests redeemed or its capital contributions returned prior to dissolution
of Mediacom.
TRANSFER OF MEMBERSHIP INTERESTS; PREEMPTIVE RIGHTS
Under the Operating Agreement, members may not transfer their interests in
Mediacom without the Manager's consent, except for transfers to affiliates of
the members, and certain significant transfers that also require the consent
of the Executive Committee. If it becomes illegal for a member to hold
membership interests or if by reason of legal or regulatory restrictions the
cost to such member of holding such interests becomes significantly increased,
the affected member, upon three business days prior notice to the other
members, may transfer its interests to accredited investors and qualified
institutional buyers who are "U.S. Persons" for Federal income tax purposes
and who may lawfully hold such interests under the Communications Act and the
FCC rules and regulations adopted thereunder. Any permitted transferee must
agree to be bound by the provisions of the Operating Agreement.
Mediacom may admit additional members provided that, other than in
connection with an acquisition or other business combination or in
contemplation of an initial public offering of equity securities, notice is
first given to each of the members. Each member shall then have the preemptive
right to purchase a portion of the offered interests up to such member's pro
rata share based upon the ratio of such member's interests to all outstanding
interests. If any member does not exercise its preemptive right, the
exercising members may subscribe for the remaining offered interests.
83
DESCRIPTION OF THE NOTES
GENERAL
The Series A Notes are, and the Series B Notes will be, issued under an
Indenture (the "Indenture") dated as of April 1, 1998, among Mediacom and
Mediacom Capital, as joint and several obligors, and Bank of Montreal Trust
Company, as Trustee (the "Trustee"). The Notes initially issued will not be
guaranteed by any Subsidiary of Mediacom, but Mediacom will agree in the
Indenture to cause a Restricted Subsidiary to guarantee payment of the Notes
in certain limited circumstances specified therein. See "Covenants--Limitation
on Guarantees of Certain Indebtedness" below. The Notes will be issued in
fully registered form only, in denominations of $1,000 and integral multiples
thereof. The Notes will be represented by one or more registered Notes in
global form and in certain circumstances may be represented by Notes in
certificated form. See "Book-Entry; Delivery and Form."
The following statements are subject to the detailed provisions of the
Indenture and are qualified in their entirety by reference to the Indenture,
including the terms made a part thereof by the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). A copy of the Indenture will be provided
upon request without charge to each person to whom a copy of this Prospectus
is delivered. Capitalized terms used herein which are not otherwise defined
shall have the meaning assigned to them in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes initially issued under the Indenture were issued in an aggregate
principal amount of $200.0 million and will mature on April 15, 2008. Interest
on the Notes will accrue at the rate of 8 1/2% per annum from April 1, 1998,
or from the most recent date on which interest has been paid or provided for,
payable semi-annually to holders of record at the close of business on the
April 1 or October 1 (whether or not such day is a business day) immediately
preceding the interest payment date on April 15 and October 15 of each year
commencing October 15, 1998. Interest will be computed on the basis of a 360-
day year comprised of twelve 30-day months. The Indenture provides for the
issuance thereunder of up to $150.0 million aggregate principal amount of
additional Notes having substantially identical terms and conditions to the
Notes offered by the Series A Notes Offering (the "Additional Notes"), subject
to compliance with the covenants contained in the Indenture (including
"Covenants--Limitation on Indebtedness" as a new Incurrence of Indebtedness by
the Issuers). Any Additional Notes will be part of the same issue as the Notes
(and accordingly will participate in purchase offers and partial redemptions)
and will vote on all matters with the Notes. Unless the context otherwise
requires, for purposes of this "Description of the Notes," reference to the
Notes includes Additional Notes.
Principal of, premium, if any, and interest, including Liquidated Damages,
if any, on the Notes will be payable, and the Notes may be exchanged or
transferred, at the office or agency of the Issuers maintained for such
purpose in the Borough of Manhattan, The City of New York (which initially
shall be the corporate trust office of the Trustee at 88 Pine Street, New
York, New York 10005), except that, at the option of the Issuers, payment of
interest and Liquidated Damages, if any, may be made by check mailed to the
registered holders of the Notes at their registered addresses; provided that
all payments with respect to global Notes and certificated Notes the holders
of which have given written wire transfer instructions to the Trustee by no
later than five business days prior to the relevant payment date will be
required to be made by wire transfer of immediately available funds to the
accounts specified by the holders thereof.
RANKING
The Notes will be unsecured, senior obligations of the Issuers, ranking pari
passu in right of payment with all existing and future unsecured Indebtedness
of the Issuers, other than any
84
Subordinated Obligations. The Notes will be effectively subordinated to any
secured Indebtedness of the Issuers. Since Mediacom is a holding company and
conducts its business through its Subsidiaries, the Notes will be effectively
subordinated to all existing and future Indebtedness and other liabilities
(including trade payables) of the Subsidiaries.
As of March 31, 1998, after giving pro forma effect to the Series A Notes
Offering and the use of the net proceeds therefrom, the Company would have had
approximately $321.3 million of Indebtedness outstanding (including $121.3
million of Indebtedness of the Subsidiaries), with the Subsidiaries having the
ability to borrow up to an additional $207.0 million in the aggregate under
the Subsidiary Credit Facilities.
OPTIONAL REDEMPTION
Except as set forth below, the Notes are not redeemable prior to April 15,
2003. Thereafter, the Notes will be redeemable, in whole or in part, from time
to time at the option of the Issuers, on not less than 30 and not more than 60
days' notice prior to the redemption date by first class mail to each holder
of Notes to be redeemed at such holder's address appearing in the register of
Notes maintained by the Registrar at the following redemption prices
(expressed as percentages of principal amount) if redeemed during the twelve-
month period beginning with April 15 of the year indicated below, in each case
together with accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of redemption:
REDEMPTION
YEAR PRICE
---- ----------
2003............................................................ 104.250%
2004............................................................ 102.833%
2005............................................................ 101.417%
2006 and thereafter............................................. 100.000%
In addition, at any time and from time to time, on or prior to April 15,
2001, the Issuers may redeem up to 35% of the original principal amount of the
Notes (calculated to give effect to any issuance of Additional Notes) with the
Net Cash Proceeds of one or more Equity Offerings of Mediacom, at a redemption
price in cash equal to 108.5% of the principal to be redeemed plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of redemption;
provided that at least 65% of the original principal amount of Notes (as so
calculated) remains outstanding immediately after each such redemption. Any
such redemption will be required to occur within 90 days following the closing
of any such Equity Offering.
If fewer than all the Notes are to be redeemed, the Trustee will select the
Notes to be redeemed, if the Notes are listed on a national securities
exchange, in accordance with the rules of such exchange or, if the Notes are
not so listed, on a pro rata basis or by lot or by such other method that the
Trustee deems to be fair and equitable to holders. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed and a
new Note or Notes in principal amount equal to the unredeemed principal
portion thereof will be issued; provided, that no Notes of a principal amount
of $1,000 or less shall be redeemed in part. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Issuers have deposited with the Paying Agent for the
Notes funds in satisfaction of the applicable redemption price pursuant to the
Indenture.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
The Indenture will provide that upon the occurrence of a Change of Control,
each holder of Notes shall have the right to require the Issuers to repurchase
all or any part of such holder's Notes pursuant
85
to an offer described below (the "Change of Control Offer") at a purchase
price equal to 101% of the principal amount thereof plus any accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of
repurchase (the "Change of Control Payment").
A "Change of Control" means the occurrence of any of the following events:
(i) any Person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act, including any group acting for the purpose of acquiring, holding
or disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than one or more Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening
of an event or otherwise), directly or indirectly, of more than 50% of the
total voting power of the then outstanding Voting Equity Interests of
Mediacom; (ii) Mediacom consolidates with, or merges with or into, another
Person (other than a Wholly Owned Restricted Subsidiary) or Mediacom or any
its Subsidiaries sells, assigns, conveys, transfers, leases or otherwise
disposes of all or substantially all of the assets of Mediacom and its
Subsidiaries (determined on a consolidated basis) to any Person (other than
Mediacom or any Wholly Owned Restricted Subsidiary), other than any such
transaction where immediately after such transaction the Person or Persons
that "beneficially owned" (as defined in Rule 13d-3 and 13d-5 under the
Exchange Act, except that a Person shall be deemed to have "beneficial
ownership" of all shares that any such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time, upon the happening of an event or otherwise) immediately prior to such
transaction, directly or indirectly, a majority of the total voting power of
the then outstanding Voting Equity Interests of Mediacom, "beneficially own"
(as so determined), directly or indirectly, more than 50% of the total voting
power of the then outstanding Voting Equity Interests of the surviving or
transferee Person; (iii) Mediacom is liquidated or dissolved or adopts a plan
of liquidation or dissolution (whether or not otherwise in compliance with the
provisions of the Indenture); (iv) a majority of the members of the Executive
Committee of Mediacom shall consist of Persons who are not Continuing Members;
or (v) Mediacom ceases to own 100% of the issued and outstanding Equity
Interests of Mediacom Capital, other than by reason of a merger of Mediacom
Capital into and with a corporate successor to Mediacom; provided, however,
that a Change of Control will be deemed not to have occurred in any of the
circumstances described in clauses (i) through (iv) above if after the
occurrence of any such circumstance (A) Rocco B. Commisso continues to be the
manager of Mediacom pursuant to the Operating Agreement and/or the chief
executive officer of Mediacom (or the surviving or transferee Person in the
case of clause (ii) above), or (B) Rocco B. Commisso and the other Permitted
Holders together with their respective designees constitute the majority of
the members of the Executive Committee.
Within 30 days of the occurrence of a Change of Control, the Issuers shall
send by first-class mail, postage prepaid, to the Trustee and to each holder
of the Notes, at the address appearing in the register of Notes maintained by
the Registrar, a notice stating: (1) that the Change of Control Offer is being
made pursuant to this covenant and that all Notes tendered will be accepted
for payment; (2) the purchase price and the purchase date, which shall be a
business day no earlier than 30 days nor later than 60 days from the date such
notice is mailed (the "Change of Control Payment Date"); (3) that any Note not
tendered will continue to accrue interest; (4) that, unless the Issuers
default in the payment of the Change of Control Payment, any Notes accepted
for payment pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Payment Date; (5) that holders accepting
the offer to have their Notes purchased pursuant to a Change of Control Offer
will be required to surrender the Notes to the Paying Agent at the address
specified in the notice prior to the close of business on the business day
preceding the Change of Control Payment Date; (6) that holders will be
entitled to withdraw their acceptance if the Paying Agent receives, not later
than the close of business on the third Business Day preceding the Change of
Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the holder, the principal
86
amount of the Notes delivered for purchase, and a statement that such holder
is withdrawing its election to have such Notes purchased; (7) that holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, provided
that each Note purchased and each such new Note issued shall be in an original
principal amount in denominations of $1,000 and integral multiples thereof;
(8) any other procedures that a holder must follow to accept a Change of
Control Offer or effect withdrawal of such acceptance; and (9) the name and
address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the extent
lawful (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Issuers. The Paying Agent shall promptly mail to each
holder of Notes so accepted payment in an amount equal to the purchase price
for such Notes, and the Issuers shall execute and issue, and the Trustee shall
promptly authenticate and mail to such holder, a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered; provided that each
such new Note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof. The Issuers will send to the Trustee
and the holders of Notes on or as soon as practicable after the Change of
Control Payment Date a notice setting forth the results of the Change of
Control Offer.
The Issuers will not be required to make a Change of Control Offer if a
third party makes the Change of Control Offer in the manner, at the time and
otherwise in compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Issuers and purchases all
Notes or portions thereof validly tendered and not withdrawn under such Change
of Control Offer. In addition, the Issuers will not be required to make a
Change of Control Offer in the event of a highly leveraged transaction that
does not constitute a Change of Control.
The Issuers will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant.
The Subsidiary Credit Facilities include "change of control" provisions that
permit the lenders thereunder to accelerate the repayment of Indebtedness
thereunder. The Subsidiary Credit Facilities will not permit the Subsidiaries
of Mediacom to make distributions to the Issuers so as to permit the Issuers
to effect a purchase of the Notes upon the Change of Control without the prior
satisfaction of certain financial tests and other conditions. Any future
credit facilities or other agreements relating to Indebtedness to which the
Issuers or Subsidiaries of Mediacom become a party may contain similar
restrictions and provisions. If a Change of Control were to occur, the Issuers
may not have sufficient available funds to pay the Change of Control Payment
for all Notes that might be delivered by holders of the Notes seeking to
accept the Change of Control Offer after first satisfying its obligations
under the Subsidiary Credit Facilities or other agreements relating to
Indebtedness, if accelerated. The failure of the Issuers to make or consummate
the Change of Control Offer or to pay the Change of Control Payment when due
will give the Trustee and the holders of the Notes the rights described under
"Events of Default" below.
The definition of Change of Control includes a phrase relating to the sale,
assignment, conveyance, transfer, lease or other disposition of "all or
substantially all" of the assets of Mediacom and its Subsidiaries. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is not a precise or established definition of the phrase under
applicable law. Accordingly, the ability of a holder of the Notes to require
the Issuers to repurchase such Notes as a result of a sale, assignment,
conveyance, transfer, lease or other disposition of less than all of the
assets of Mediacom and its Subsidiaries to another Person or group may be
uncertain.
87
Asset Sales
The Indenture will provide that Mediacom shall not, and shall not permit any
Restricted Subsidiary to, consummate an Asset Sale unless (i) Mediacom or such
Restricted Subsidiary, as the case may be, receives consideration at the time
of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Executive Committee, whose
determination shall be conclusive and evidenced by a Committee Resolution);
(ii) not less than 75% of the consideration received by Mediacom or such
Restricted Subsidiary, as the case may be, is in the form of cash or Cash
Equivalents; and (iii) the Asset Sale Proceeds received by Mediacom or such
Restricted Subsidiary are applied (a) first, to the extent Mediacom elects, or
is required, to prepay, repay or purchase debt under any then existing
Indebtedness of Mediacom or any Restricted Subsidiary within 360 days
following the receipt of the Asset Sale Proceeds from any Asset Sale or, to
the extent Mediacom elects, to make an investment in assets (including Equity
Interests or other securities purchased in connection with the acquisition of
Equity Interests or property of another Person) used or useful in a Related
Business, provided that such investment occurs and such Asset Sale Proceeds
are so applied within 360 days following the receipt of such Asset Sale
Proceeds (the "Reinvestment Date"), and (b) second, on a pro rata basis (1) to
the repayment of an amount of Other Pari Passu Debt not exceeding the Other
Pari Passu Debt Pro Rata Share (provided that any such repayment shall result
in a permanent reduction of any commitment in respect thereof in an amount
equal to the principal amount so repaid) and (2) if on the Reinvestment Date
with respect to any Asset Sale the Excess Proceeds exceed $10.0 million, the
Issuers shall apply an amount equal to such Excess Proceeds to an offer to
repurchase the Notes, at a purchase price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of repurchase (an "Excess Proceeds Offer"). If an
Excess Proceeds Offer is not fully subscribed, the Issuers may retain the
portion of the Excess Proceeds not required to repurchase Notes. For purposes
of determining in clause (ii) above the percentage of cash consideration
received by Mediacom or any Restricted Subsidiary, the amount of any (x)
liabilities (as shown on Mediacom's or such Restricted Subsidiary's most
recent balance sheet) of Mediacom or any Restricted Subsidiary that are
actually assumed by the transferee in such Asset Sale and from which Mediacom
and the Restricted Subsidiaries are fully released shall be deemed to be cash,
and (y) securities, notes or other similar obligations received by Mediacom or
such Restricted Subsidiary from such transferee that are immediately converted
(or are converted within 30 days of the related Asset Sale) by Mediacom or
such Restricted Subsidiary into cash shall be deemed to be cash in an amount
equal to the net cash proceeds realized upon such conversion.
If the Issuers are required to make an Excess Proceeds Offer, the Issuers
shall mail, within 30 days following the Reinvestment Date, a notice to the
holders of Notes stating, among other things: (1) that such holders have the
right to require the Issuers to apply the Excess Proceeds to repurchase such
Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, to
the date of purchase; (2) the purchase date, which shall be no earlier than 30
days and not later than 60 days from the date such notice is mailed; (3) the
instructions, determined by the Issuers, that each holder must follow in order
to have such Notes repurchased; and (4) the calculations used in determining
the amount of Excess Proceeds to be applied to the repurchase of such Notes.
If the aggregate principal amount of Notes surrendered by holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to
be purchased on a pro rata basis or by lot or by such other method that the
Trustee deems to be fair and equitable to holders. Upon completion of the
Excess Proceeds Offer, the amount of Excess Proceeds shall be reset to zero.
The Issuers will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant.
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Notwithstanding the foregoing, the Indenture will provide that Mediacom or
any Restricted Subsidiary will be permitted to consummate an Asset Swap if (i)
at the time of entering into the related Asset Swap Agreement or immediately
after giving effect to such Asset Swap no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof and
(ii) such Asset Swap shall have been approved in good faith by the Executive
Committee, whose approval shall be conclusive and evidenced by a Committee
Resolution, which states that such Asset Swap is fair to Mediacom or such
Restricted Subsidiary, as the case may be, from a financial point of view.
If a Restricted Subsidiary were to consummate an Asset Sale, the Subsidiary
Credit Facilities would not permit such Restricted Subsidiary to make a
distribution to the Issuers of the related Asset Sale Proceeds so as to permit
the Issuers to effect an Excess Proceeds Offer with such Asset Sale Proceeds
without the prior satisfaction of certain financial tests and other
conditions. Any future credit agreements or other agreements relating to
Indebtedness to which the Issuers or Subsidiaries of Mediacom become a party
may contain similar restrictions or other provisions which would prohibit the
Issuers from purchasing any Notes from Asset Sale Proceeds. In the event an
Excess Proceeds Offer occurs at a time when the Issuers are prohibited from
receiving Asset Sale Proceeds or purchasing the Notes, the Issuers could seek
the consent of their lenders to the distribution of Asset Sales Proceeds or
the purchase of Notes or could attempt to refinance the Indebtedness that
contains such prohibition. If the Issuers do not obtain such a consent or
repay such Indebtedness, the Issuers may remain prohibited from purchasing the
Notes. In such case, the Issuers' failure to purchase tendered Notes when due
will give the Trustee and the holders of the Notes the rights described under
"Events of Default" below.
EVENTS OF DEFAULT
An Event of Default is defined in the Indenture as being: default in payment
of any principal of, or premium, if any, on the Notes when due; default for 30
days in payment of any interest or Liquidated Damages, if any, on the Notes
when due; default by the Issuers for 60 days after written notice by holders
of not less than 25% in principal amount of the Notes then outstanding in the
observance or performance of any other covenant in the Notes or the Indenture;
default in the payment at maturity (continued for the longer of any applicable
grace period or 30 days) of any Indebtedness aggregating $15.0 million or more
of the Issuers or any Significant Subsidiary or any group of Restricted
Subsidiaries of Mediacom which, if merged into each other, would constitute a
Significant Subsidiary, or the acceleration of any such Indebtedness which
default shall not be cured or waived, or such acceleration shall not be
rescinded or annulled, within 30 days after written notice by holders of not
less than 25% in principal amount of the Notes then outstanding; any final
judgment or judgments for the payment of money in excess of $15.0 million (net
of amounts covered by insurance) shall be rendered against the Issuers or any
Significant Subsidiary or any group of Restricted Subsidiaries of Mediacom
which, if merged into each other, would constitute a Significant Subsidiary,
and shall not be discharged for any period of 60 consecutive days, during
which a stay of enforcement of such judgment shall not be in effect; or
certain events involving bankruptcy, insolvency or reorganization of the
Issuers or a Significant Subsidiary or any group of Restricted Subsidiaries of
Mediacom which, if merged into each other, would constitute a Significant
Subsidiary. The Indenture provides that the Trustee may withhold notice to the
holders of Notes of any default (except in payment of principal of or premium,
if any, or interest on the Notes) if the Trustee considers it to be in the
best interest of the holders of the Notes to do so.
The Indenture will provide that if an Event of Default (other than an Event
of Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, the Trustee or the
holders of not less than 25% in principal amount of the Notes then outstanding
may declare the principal of all the Notes to be due and payable immediately,
but if the Issuers shall cure (or the holders of a majority in principal
amount of the Notes, if permitted by the Indenture, shall waive) all defaults
(except the nonpayment of principal, interest and premium, if any, on any
Notes which shall
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have become due by acceleration) and certain other conditions are met, such
declaration may be annulled by the holders of a majority in principal amount
of the Notes then outstanding. In case an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization shall occur, such
amount with respect to all of the Notes shall be due and payable immediately
without any declaration or other act on the part of the Trustee or the holders
of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee subject to certain
limitations specified in the Indenture. Subject to the provisions of the
Indenture relating to the duties of the Trustee, in case an Event of Default
shall occur and be continuing, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any of the holders of the Notes, unless such holders have offered
to the Trustee reasonable indemnity.
COVENANTS
Limitation on Restricted Payments
The Indenture will provide that, so long as any of the Notes remain
outstanding, Mediacom shall not, and shall not permit any Restricted
Subsidiary to, make any Restricted Payment if (i) at the time of such proposed
Restricted Payment, a Default or Event of Default shall have occurred and be
continuing or shall occur as a consequence of such Restricted Payment; (ii)
immediately after giving effect to such proposed Restricted Payment, Mediacom
would not be able to Incur $1.00 of additional Indebtedness under the Debt to
Operating Cash Flow Ratio of the first paragraph of "--Limitation on
Indebtedness" below; or (iii) immediately after giving effect to any such
Restricted Payment, the aggregate of all Restricted Payments which shall have
been made on or after the date of the Indenture (the amount of any Restricted
Payment, if other than cash, to be based upon the fair market value thereof on
the date of such Restricted Payment (without giving effect to subsequent
changes in value) as determined in good faith by the Executive Committee,
whose determination shall be conclusive and evidenced by a Committee
Resolution) would exceed an amount equal to the difference between (a) the
Cumulative Credit and (b) 1.4 times Cumulative Interest Expense.
"Restricted Payment" means (i) any dividend (whether made in cash, property
or securities) on or with respect to any Equity Interests of Mediacom or of
any Restricted Subsidiary (other than with respect to Disqualified Equity
Interests and other than any dividend made to Mediacom or another Restricted
Subsidiary or any dividend payable in Equity Interests of Mediacom or any
Restricted Subsidiary); or (ii) any distribution (whether made in cash,
property or securities) on or with respect to any Equity Interests of Mediacom
or of any Restricted Subsidiary (other than with respect to Disqualified
Equity Interests and other than any distribution made to Mediacom or another
Restricted Subsidiary or any distribution payable in Equity Interests of
Mediacom or any Restricted Subsidiary); or (iii) any redemption, repurchase,
retirement or other direct or indirect acquisition of any Equity Interests of
Mediacom (other than Disqualified Equity Interests), or any warrants, rights
or options to purchase or acquire any such Equity Interests or any securities
exchangeable for or convertible into any such Equity Interests; or (iv) any
redemption, repurchase, retirement or other direct or indirect acquisition for
value or other payment of principal, prior to any scheduled final maturity,
scheduled repayment or scheduled sinking fund payment, of any Subordinated
Obligations; or (v) any Investment (other than a Permitted Investment).
The provisions of the first paragraph of this covenant shall not prevent (i)
the retirement of any of Mediacom's Equity Interests in exchange for, or out
of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of Mediacom or an employee stock ownership plan or to a trust
established by Mediacom or any Subsidiary of Mediacom for the benefit of its
employees) of Equity Interests of Mediacom; (ii) the payment of any dividend
or distribution on, or redemption of Equity Interests within 60 days after the
date of declaration of such dividend or distribution or the giving of
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formal notice of such redemption, if at the date of such declaration or giving
of such formal notice such payment or redemption would comply with the
provisions of the Indenture; (iii) Investments constituting Restricted
Payments made as a result of the receipt of non-cash consideration from any
Asset Sale made pursuant to and in compliance with the provisions described
under "Repurchase at the Option of Holders--Asset Sales" above; (iv) payments
of compensation to officers, directors and employees of Mediacom or any
Restricted Subsidiary so long as the Executive Committee or the manager of
Mediacom in good faith shall have approved the terms thereof; (v) the payment
of dividends on any Equity Interests of any Restricted Subsidiary following
the issuance thereof in an amount per annum of up to 6% of the net proceeds
received by Mediacom or such Restricted Subsidiary from an Equity Offering of
such Equity Interests; (vi) the payment of management, consulting and advisory
fees, and any related reimbursement of expenses or indemnity, to Mediacom
Management or any Affiliate thereof and other amounts payable pursuant to the
Operating Agreement, other than any dividend or distribution (whether made in
cash, property or securities) on or with respect to any Equity Interests of
Mediacom or any redemption, repurchase, retirement or other direct or indirect
acquisition of any Equity Interests of Mediacom, or any warrants, rights or
options to purchase or acquire any such Equity Interests or any securities
exchangeable for or convertible into any such Equity Interests; (vii) the
payment of amounts in connection with any merger, consolidation, or sale of
assets effected in accordance with the "--Merger or Sales of Assets" covenant
below, provided that no such payment may be made pursuant to this clause (vii)
unless, after giving effect to such transaction (and the Incurrence of any
Indebtedness in connection therewith and the use of the proceeds thereof),
Mediacom would be able to Incur $1.00 of additional Indebtedness in compliance
with the first paragraph of "--Limitation on Indebtedness" below such that
after incurring that $1.00 of additional Indebtedness, the Debt to Operating
Cash Flow Ratio would be less than or equal to 6.0 to 1.0; (viii) the
retirement, redemption or repurchase (a "Regulatory Equity Interest
Repurchase") of any of Mediacom's Equity Interests pursuant to Article 11 of
the Operating Agreement as a result of the occurrence of a Triggering Event
(as defined in the Operating Agreement and which relates to certain small
business investment company, Federal Communications Commission and other
regulatory violations described therein); (ix) the redemption, repurchase,
retirement, defeasance or other acquisition of any Subordinated Obligations in
exchange for, or out of net cash proceeds of the substantially concurrent sale
(other than to a Subsidiary of Mediacom or an employee stock ownership plan or
to a trust established by Mediacom or any Subsidiary of Mediacom (for the
benefit of its employees) of Equity Interests of Mediacom or Subordinated
Obligations of Mediacom; (x) the payment of any dividend or distribution on or
distribution on or with respect to any Equity Interests of any Restricted
Subsidiary to the holders of its Equity Interests on a pro rata basis; (xi)
the making and consummation of (A) an Excess Proceeds Offer in accordance with
the provisions of the Indenture with any Excess Proceeds or (B) a Change of
Control Offer with respect to the Notes in accordance with the provisions of
the Indenture; (xii) during the period Mediacom is treated as a partnership
for U.S. federal income tax purposes and after such period to the extent
relating to the liability for such period, the payment of distributions in
respect of members' or partners' income tax liability with respect to Mediacom
in an amount not to exceed the aggregate amount of tax distributions, if any,
permitted to be made by Mediacom to its members under the Operating Agreement
(such amount not to include amounts in respect of taxes resulting from
Mediacom's reorganization as or change in the status to a corporation); (xiii)
the payment by any Restricted Subsidiary to Mediacom or another Restricted
Subsidiary of principal and interest due in respect of intercompany
Indebtedness and dividends and other distributions in respect of Preferred
Equity Interests in such Restricted Subsidiary; (xiv) the payment by Mediacom
California of all amounts due in respect of the promissory note in the
original principal amount of $2.8 million issued to Booth American Company;
and (xv) the distribution of any Investment originally made by Mediacom or any
Restricted Subsidiary pursuant to the first paragraph of this covenant to
holders of Equity Interests of Mediacom or such Restricted Subsidiary, as the
case may be; provided, however, that in the case of clauses (ii), (v), (vii),
(x), (xi) and (xv) of this paragraph, no Default or Event of Default shall
have occurred and be continuing at the time of such Restricted Payment or as a
result thereof. In determining the aggregate amount of Restricted Payments
made on
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or after the date of the Indenture, Restricted Payments made pursuant to
clauses (ii) and (v) and any Restricted Payment deemed to have been made
pursuant to the "--Limitation on Transactions with Affiliates" covenant below
shall be included in such calculation.
Limitation on Indebtedness
The Indenture will provide that Mediacom shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness) or issue any Disqualified Equity Interests
except for Permitted Indebtedness; provided, however, that Mediacom or any
Restricted Subsidiary may Incur Indebtedness or issue Disqualified Equity
Interests if, at the time of and immediately after giving pro forma effect to
such Incurrence of Indebtedness or issuance of Disqualified Equity Interests
and the application of the proceeds therefrom, the Debt to Operating Cash Flow
Ratio would be less than or equal to 7.0 to 1.0.
The foregoing limitations will not apply to the Incurrence of any of the
following (collectively, "Permitted Indebtedness"), each of which shall be
given independent effect:
(a) Indebtedness under the Notes issued on the date of the Indenture, the
Exchange Notes and the Indenture;
(b) Indebtedness and Disqualified Equity Interests of Mediacom and the
Restricted Subsidiaries outstanding on the Issue Date other than
Indebtedness described in clause (a), (c), (d) or (f) of this paragraph;
(c) (i) Indebtedness of the Restricted Subsidiaries under the Subsidiary
Credit Facilities (including any refinancing thereof), and (ii)
Indebtedness of the Restricted Subsidiaries (including any refinancing
thereof) if, at the time of and immediately after giving pro forma effect
to the Incurrence of such Indebtedness and the application of the proceeds
therefrom, the Debt to Operating Cash Flow Ratio would be less than or
equal to 6.0 to 1.0; provided, however, that for purposes of the
calculation of such Ratio, the term "Consolidated Total Indebtedness" shall
refer only to the Consolidated Total Indebtedness of the Restricted
Subsidiaries (including Indebtedness Incurred under the Subsidiary Credit
Facilities and the Future Subsidiary Credit Facilities) outstanding as of
the Determination Date (as defined hereafter in the term "Debt to Operating
Cash Flow Ratio") and the term "Operating Cash Flow" shall refer only to
the Subsidiary Operating Cash Flow of the Restricted Subsidiaries for the
related Measurement Period (as defined hereafter in the term "Debt to
Operating Cash Flow Ratio");
(d) Indebtedness and Disqualified Equity Interests of (x) any Restricted
Subsidiary owed to or issued to and held by Mediacom or any Restricted
Subsidiary and (y) Mediacom owed to and held by any Restricted Subsidiary
which is unsecured and subordinated in right of payment to the payment and
performance of the Issuers' obligations under the Indenture and the Notes;
provided, however, that an Incurrence of Indebtedness and Disqualified
Equity Interests that is not permitted by this clause (d) shall be deemed
to have occurred upon (i) any sale or other disposition of any Indebtedness
or Disqualified Equity Interests of Mediacom or a Restricted Subsidiary
referred to in this clause (d) to any Person (other than Mediacom or a
Restricted Subsidiary), (ii) any sale or other disposition of Equity
Interests of a Restricted Subsidiary which holds Indebtedness or
Disqualified Equity Interests of Mediacom or another Restricted Subsidiary
such that such Restricted Subsidiary ceases to be a Restricted Subsidiary
or (iii) any designation of a Restricted Subsidiary which holds
Indebtedness or Disqualified Equity Interests of Mediacom as an
Unrestricted Subsidiary;
(e) guarantees by any Restricted Subsidiary of Indebtedness of Mediacom
or any other Restricted Subsidiary Incurred in accordance with the
provisions of the Indenture;
(f) Hedging Agreements of Mediacom or any Restricted Subsidiary relating
to any Indebtedness of Mediacom or such Restricted Subsidiary, as the case
may be, Incurred in
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accordance with the provisions of the Indenture; provided that such Hedging
Agreements have been entered into for bona fide business purposes and not
for speculation;
(g) Indebtedness or Disqualified Equity Interests of Mediacom or any
Restricted Subsidiary to the extent representing a replacement, renewal,
refinancing or extension (collectively, a "refinancing") of outstanding
Indebtedness or Disqualified Equity Interests of Mediacom or any Restricted
Subsidiary, as the case may be, Incurred in compliance with the Debt to
Operating Cash Flow Ratio of the first paragraph of this covenant or clause
(a) or (b) of this paragraph of this covenant; provided, however, that (i)
Indebtedness or Disqualified Equity Interests of Mediacom may not be
refinanced under this clause (g) with Indebtedness or Disqualified Equity
Interests of any Restricted Subsidiary, (ii) any such refinancing shall not
exceed the sum of the principal amount or liquidation preference or
redemption payment value (or, if such Indebtedness or Disqualified Equity
Interests provides for a lesser amount to be due and payable upon a
declaration of acceleration thereof at the time of such refinancing, an
amount no greater than such lesser amount) of the Indebtedness or
Disqualified Equity Interests being refinanced plus the amount of accrued
interest or dividends thereon and the amount of any reasonably determined
prepayment premium necessary to accomplish such refinancing and such
reasonable fees and expenses incurred in connection therewith, (iii)
Indebtedness representing a refinancing of Indebtedness of Mediacom shall
have a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Indebtedness being refinanced,
(iv) Subordinated Obligations of Mediacom or Disqualified Equity Interests
of Mediacom may only be refinanced with Subordinated Obligations of
Mediacom or Disqualified Equity Interests of Mediacom, and (v) Other Pari
Passu Debt which is unsecured may only be refinanced with unsecured
Indebtedness, which is either Other Pari Passu Debt or Subordinated
Obligations, or with Disqualified Equity Interests;
(h) Indebtedness of Mediacom or a Restricted Subsidiary Incurred as a
result of the pledge by Mediacom or such Restricted Subsidiary of
intercompany indebtedness or Equity Interests in another Restricted
Subsidiary or Equity Interests in an Unrestricted Subsidiary in the
circumstance where recourse to Mediacom or such Restricted Subsidiary is
limited to the value of the intercompany Indebtedness or the Equity
Interests so pledged;
(i) Indebtedness of Mediacom or a Restricted Subsidiary represented by
Capitalized Lease Obligations, mortgage financings, purchase money
obligations or letters of credit, in each case Incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of
Mediacom or such Restricted Subsidiary or a Related Business in an
aggregate principal amount not to exceed $15.0 million at any time
outstanding;
(j) Indebtedness of Mediacom Incurred to finance (including any
refinancing thereof) one or more Regulatory Equity Interest Repurchases
occurring in accordance with and pursuant to the Operating Agreement; and
(k) In addition to any Indebtedness described in clauses (a) through (j)
above, Indebtedness of Mediacom or any of the Restricted Subsidiaries so
long as the aggregate principal amount of all such Indebtedness incurred
pursuant to this clause (k) does not exceed $10.0 million at any one time
outstanding.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Indebtedness described in clauses (a) through (k) above or is
entitled to be incurred pursuant to the first paragraph of this covenant,
Mediacom shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this covenant and such item of Indebtedness
shall be treated as having been incurred pursuant to only one of such clauses
or pursuant to the first paragraph hereof.
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Limitation on Transactions with Affiliates
The Indenture will provide that Mediacom shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, engage in any transaction
(or series of related transactions) involving in the aggregate $5.0 million or
more with any Affiliate unless such transaction (or series of related
transactions) shall have been approved pursuant to a Committee Resolution
rendered in good faith by the Executive Committee or, if applicable, a
committee comprising the independent members of the Executive Committee, which
approval in each case shall be conclusive, to the effect that such transaction
(or series of related transactions) is (a) in the best interest of Mediacom or
such Restricted Subsidiary and (b) upon terms which would be obtainable by
Mediacom or a Restricted Subsidiary in a comparable arm's-length transaction
with a Person which is not an Affiliate, except that the foregoing shall not
apply in the case of any of the following transactions (the "Specified
Affiliate Transactions"): (i) the making of any Restricted Payment (including
the making of any Permitted Investment that is permitted pursuant to "--
Limitation on Restricted Payments"); (ii) any transaction or series of
transactions between Mediacom and one or more Restricted Subsidiaries or
between two or more Restricted Subsidiaries; (iii) the payment of compensation
(including, without limitation, amounts paid pursuant to employee benefit
plans) for the personal services of, and indemnity provided on behalf of,
officers, members, directors and employees of Mediacom or any Restricted
Subsidiary, and management, consulting or advisory fees and reimbursements of
expenses and indemnity in each case so long as the Executive Committee in good
faith shall have approved the terms thereof and deemed the services
theretofore or thereafter to be performed for such compensation or fees to be
fair consideration therefor; (iv) any payments for goods or services purchased
in the ordinary course of business, upon terms which would be obtainable by
Mediacom or a Restricted Subsidiary in a comparable arm's-length transaction
with a Person which is not an Affiliate; and (v) any transaction pursuant to
any agreement with any Affiliate in effect on the date of the Indenture
(including, but not limited to, the Operating Agreement and other agreements
relating to the payment of management fees, acquisition fees and expense
reimbursements), including any amendments thereto entered into after the date
of the Indenture, provided, that the terms of any such amendment are not less
favorable to Mediacom than the terms of the relevant agreement in effect prior
to any such amendment, as determined in good faith by the Executive Committee.
The Indenture will further provide that, except in the case of a Specified
Affiliate Transaction, Mediacom shall not, and shall not permit any Restricted
Subsidiary, directly or indirectly, to engage in any transaction (or series of
related transactions) involving in the aggregate $25.0 million or more with
any Affiliate unless (i) such transaction (or series of related transactions)
shall have been approved pursuant to a Committee Resolution rendered in good
faith by the Executive Committee or, if applicable, a committee comprising the
independent members of the Executive Committee to the effect set forth in
clauses (a) and (b) above; and (ii) Mediacom shall have received an opinion
from an independent nationally recognized accounting, appraisal or investment
banking firm experienced in the review of similar types of transactions
stating that the terms of such transaction (or series of related transactions)
are fair to Mediacom or such Restricted Subsidiary, as the case may be, from a
financial point of view. Notwithstanding the foregoing, any transaction (or
series of related transactions) entered into by Mediacom or any Restricted
Subsidiary with any Affiliate without complying with the foregoing provisions
of this covenant shall not constitute a violation of the provisions of this
covenant if Mediacom or such Restricted Subsidiary would be permitted to make
a Restricted Payment pursuant to the first paragraph of "--Limitation on
Restricted Payments" at the time of the completion of such transaction (or
series of related transactions) in an amount equal to the fair market value of
such transaction (or series of related transactions), as determined in good
faith by the Executive Committee, whose determination shall be conclusive and
evidenced by a Committee Resolution. In such a case, Mediacom or such
Restricted Subsidiary, as the case may be, shall be deemed to have made a
Restricted Payment for purposes of the calculation of Restricted Payments
pursuant to clause (iii) of the first paragraph of "--Limitation on Restricted
Payments."
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Limitation on Liens
The Indenture will provide that Mediacom shall not Incur any Indebtedness
secured by a Lien against or on any of its property or assets now owned or
hereafter acquired by Mediacom unless contemporaneously therewith effective
provision is made to secure the Notes equally and ratably with such secured
Indebtedness. This restriction does not, however, apply to Indebtedness
secured by (i) Liens, if any, in effect on the date of the Indenture; (ii)
Liens in favor of governmental bodies to secure progress or advance payments;
(iii) Liens on Equity Interests or Indebtedness existing at the time of the
acquisition thereof (including acquisition through merger or consolidation),
provided that such Liens were not Incurred in anticipation of such
acquisition; (iv) Liens securing industrial revenue or pollution control
bonds; (v) Liens securing the Notes; (vi) Liens securing Indebtedness of
Mediacom in an amount not to exceed $10.0 million at any time outstanding;
(vii) Other Permitted Liens; and (viii) any extension, renewal or replacement
of any Lien referred to in the foregoing clauses (i) through (vii), inclusive.
Limitation on Business Activities of Mediacom Capital
The Indenture will provide that Mediacom Capital shall not hold any material
assets, become liable for any material obligations, engage in any trade or
business, or conduct any business activity, other than the issuance of Equity
Interests to Mediacom or any Wholly Owned Restricted Subsidiary, the
Incurrence of Indebtedness as a co-obligor or guarantor of Indebtedness
Incurred by Mediacom, including the Notes and the Exchange Notes, if any, that
is permitted to be Incurred by Mediacom under "--Limitation on Indebtedness"
above (provided that the net proceeds of such Indebtedness are retained by
Mediacom or loaned to or contributed as capital to one or more of the
Restricted Subsidiaries other than Mediacom Capital), and activities
incidental thereto. Neither Mediacom nor any Restricted Subsidiary shall
engage in any transactions with Mediacom Capital in violation of the
immediately preceding sentence.
Designation of Unrestricted Subsidiaries
The Indenture will provide that Mediacom may designate any Subsidiary
(including any newly acquired or newly formed Subsidiary or a Person becoming
a Subsidiary through merger or consolidation or Investment therein) as an
"Unrestricted Subsidiary" under the Indenture (a "Designation") only if (a) no
Default or Event of Default shall have occurred and be continuing at the time
of or after giving effect to such Designation; (b) at the time of and after
giving effect to such Designation, Mediacom would be able to Incur $1.00 of
additional Indebtedness under the Debt to Operating Cash Flow Ratio of the
first paragraph of "--Limitation on Indebtedness" above; and (c) Mediacom
would be permitted to make a Restricted Payment at the time of Designation
(assuming the effectiveness of such Designation) pursuant to the first
paragraph of "--Limitation on Restricted Payments" above in an amount (the
"Designation Amount") equal to Mediacom's proportionate interest in the fair
market value of such Subsidiary on such date (as determined in good faith by
the Executive Committee, whose determination shall be conclusive and evidenced
by a Committee Resolution). Notwithstanding the foregoing, neither Mediacom
Capital nor any of its Subsidiaries may be designated as Unrestricted
Subsidiaries.
The Indenture will further provide that at the time of Designation all of
the Indebtedness of such Unrestricted Subsidiary shall consist of, and will at
all times thereafter consist of, Non-Recourse Indebtedness, and that neither
Mediacom nor any Restricted Subsidiary shall at any time have any direct or
indirect obligation to (x) make additional Investments (other than Permitted
Investments) in any Unrestricted Subsidiary or (y) maintain or preserve the
financial condition of any Unrestricted Subsidiary or cause any Unrestricted
Subsidiary to achieve any specified levels of operating results or (z) be
party to any agreement, contract, arrangement or understanding with any
Unrestricted Subsidiary unless the terms of any such agreement, contract,
arrangement or understanding are no
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less favorable to Mediacom or such Restricted Subsidiary than those that might
be obtained, in light of all the circumstances, at the time from Persons who
are not Affiliates of Mediacom. If, at any time, any Unrestricted Subsidiary
would violate the foregoing requirements, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be Incurred as of such date.
Mediacom may revoke any Designation of a Subsidiary as an Unrestricted
Subsidiary (a "Revocation") if (a) no Default or Event of Default shall have
occurred and be continuing at the time of or after giving effect to such
Revocation; (b) at the time of and after giving effect to such Revocation,
Mediacom would be able to Incur $1.00 of additional Indebtedness under the
Debt to Operating Cash Flow Ratio of the first paragraph of "--Limitation on
Indebtedness" above; and (c) all Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such Revocation would, if
Incurred at such time, have been permitted to be Incurred for all purposes of
the Indenture.
All Designations and Revocations must be evidenced by Committee Resolutions
delivered to the Trustee certifying compliance with the foregoing provisions.
Limitation on Guarantees of Certain Indebtedness
The Indenture will provide that Mediacom shall not (a) permit any Restricted
Subsidiary to guarantee any Indebtedness of either Issuer other than the Notes
(the "Other Indebtedness"), or (b) pledge any intercompany Indebtedness
representing obligations of any of its Restricted Subsidiaries to secure the
payment of Other Indebtedness, in each case unless such Restricted Subsidiary,
the Issuers and the Trustee execute and deliver a supplemental indenture
causing such Restricted Subsidiary to guarantee the Issuers' obligations under
the Indenture and the Notes to the same extent that such Restricted Subsidiary
guaranteed the Issuers' obligations under the Other Indebtedness (including
waiver of subrogation, if any). Thereafter, such Restricted Subsidiary shall
be a Guarantor for all purposes of the Indenture.
The guarantee of a Restricted Subsidiary will be released upon (i) the sale
of all of the Equity Interests, or all or substantially all of the assets, of
the applicable Guarantor (in each case other than to Mediacom or a
Subsidiary), (ii) the designation by Mediacom of the applicable Guarantor as
an Unrestricted Subsidiary, or (iii) the release of the guarantee of such
Guarantor with respect to the obligations which caused such Guarantor to
deliver a guarantee of the Notes in accordance with the preceding paragraph,
in each case in compliance with the Indenture (including, in the event of a
sale of Equity Interests or assets described in clause (i) above, that the net
cash proceeds are applied in accordance with the requirements of the
applicable provision of the Indenture described under "Repurchase at the
Option of Holders--Asset Sales" above).
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Indenture will provide that Mediacom shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
of any kind on the ability of any Restricted Subsidiary to (a) pay dividends
or make any other distributions to Mediacom or any Restricted Subsidiary on
its Equity Interests; (b) pay any Indebtedness owed to Mediacom or any
Restricted Subsidiary; (c) make loans or advances, or guarantee any such loans
or advances, to Mediacom or any Restricted Subsidiary; (d) transfer any of its
properties or assets to Mediacom or any Restricted Subsidiary; (e) grant Liens
on the assets of Mediacom or any Restricted Subsidiary in favor of the holders
of the Notes; or (f) guarantee the Notes or any renewals or refinancings
thereof (any of the actions described in clauses (a) through (f) above is
referred to herein as a "Specified Action"), except for (i) such encumbrances
or restrictions arising by reason of Acquired Indebtedness of any Restricted
Subsidiary existing at the time such Person became a Restricted Subsidiary,
provided that such encumbrances or restrictions were not created in
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anticipation of such Person becoming a Restricted Subsidiary and are not
applicable to Mediacom or any other Restricted Subsidiary, (ii) such
encumbrances or restrictions arising under refinancing Indebtedness permitted
by clause (g) of the second paragraph under "--Limitation on Indebtedness"
above; provided that the terms and conditions of any such restrictions are no
less favorable to the holders of Notes than those under the Indebtedness being
refinanced, (iii) customary provisions restricting the assignment of any
contract or interest of Mediacom or any Restricted Subsidiary, (iv)
restrictions contained in the Indenture or any other indenture governing debt
securities that are no more restrictive than those contained in the Indenture,
and (v) restrictions under the Subsidiary Credit Facilities and under the
Future Subsidiary Credit Facilities, provided that, in the case of any Future
Subsidiary Credit Facility Mediacom shall have used commercially reasonable
efforts to include in the agreements relating to such Future Subsidiary Credit
Facility provisions concerning the encumbrance or restriction on the ability
of any Restricted Subsidiary to take any Specified Action that are no more
restrictive than those in effect in the Subsidiary Credit Facilities on the
date of the creation of the applicable restriction in such Future Subsidiary
Credit Facility ("Comparable Restriction Provisions"), and provided further
that if Mediacom shall conclude in its sole discretion based on then
prevailing market conditions that it is not in the best interest of Mediacom
and the Restricted Subsidiaries to comply with the foregoing proviso, the
failure to include Comparable Restriction Provisions in the agreements
relating to such Future Subsidiary Credit Facility shall not constitute a
violation of the provisions of this covenant.
Reports
The Indenture will provide that, whether or not the Issuers are then subject
to Section 13(a) or 15(d) of the Exchange Act or any successor provision
thereto, the Issuers shall file with the SEC (if permitted by SEC practice and
applicable law and regulations) so long as the Notes are outstanding the
annual reports, quarterly reports and other periodic reports which the Issuers
would have been required to file with the SEC pursuant to Section 13(a) or
15(d) or any successor provision thereto if the Issuers were so subject on or
prior to the respective dates (the "Required Filing Dates") by which the
Issuers would have been required to file such documents if the Issuers were so
subject. The Issuers shall also in any event (a) within 15 days of each
Required Filing Date (whether or not permitted or required to be filed with
the SEC) (i) transmit or cause to be transmitted by mail to all holders of
Notes, at such holder's address appearing in the register maintained by the
Registrar, without cost to such holders, and (ii) file with the Trustee,
copies of the annual reports, quarterly reports and other documents which the
Issuers are required to file with the SEC pursuant to the preceding sentence,
or if such filing is not so permitted, information and data of a similar
nature, and (b) if, notwithstanding the preceding sentence, filing such
documents by the Issuers with the SEC is not permitted by SEC practice or
applicable law or regulations, promptly upon written request supply copies of
such documents to any holder of Notes. In addition, for so long as any Notes
remain outstanding and prior to the later of the consummation of the Exchange
Offer and the effectiveness of the Shelf Registration Statement, if required,
the Issuers shall furnish to holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Merger or Sales of Assets
The Indenture will provide that neither of the Issuers shall consolidate or
merge with or into, or transfer all or substantially all of its assets to,
another Person unless (i) either (A) such Issuer shall be the continuing
Person, or (B) the Person formed by or surviving any such consolidation or
merger (if other than such Issuer), or to which any such transfer shall have
been made, is a corporation, limited liability company or limited partnership
organized and existing under the laws of the United States, any State thereof
or the District of Columbia; (ii) the surviving Person (if other than such
Issuer) expressly assumes by supplemental indenture all the obligations of
such Issuer under the Notes and the Indenture; (iii) immediately after giving
effect to such transaction, no Default or Event of Default shall
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have occurred and be continuing; (iv) immediately after giving effect to such
transaction, the surviving Person would be able to Incur $1.00 of additional
Indebtedness under the Debt to Operating Cash Flow Ratio of the first
paragraph of "--Limitation on Indebtedness" above; and (v) Mediacom shall have
delivered to the Trustee prior to the proposed transaction an Officers'
Certificate and an Opinion of Counsel, each stating that the proposed
consolidation, merger or transfer and such supplemental indenture will comply
with the Indenture.
The Indenture will provide that no Guarantor shall consolidate or merge with
or into, or transfer all or substantially all of its assets to, another Person
unless (i) either (A) such Guarantor shall be the continuing Person, or (B)
the Person formed by or surviving any such consolidation or merger (if other
than such Guarantor), or to which any such transfer shall have been made, is a
corporation, limited liability company or limited partnership organized and
existing under the laws of the United States, any State thereof or the
District of Columbia; (ii) the surviving Person (if other than such Guarantor)
expressly assumes by supplemental indenture all the obligations of such
Guarantor under its guarantee of the Notes and the Indenture; (iii)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iv) Mediacom shall have
delivered to the Trustee prior to the proposed transaction an Officers'
Certificate and an Opinion of Counsel, each stating that the proposed
consolidation, merger or transfer and such supplemental indenture will comply
with the Indenture.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for
the full definition of all such terms as well as any other capitalized terms
used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition from such Person and not Incurred in connection with, or in
anticipation of, such Person becoming a Restricted Subsidiary or such Asset
Acquisition.
"Affiliate" means (i) any Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, Mediacom; (ii) any spouse, immediate family member or other relative who
has the same principal residence as any Person described in clause (i) above;
(iii) any trust in which any such Persons described in clauses (i) and (ii)
above has a beneficial interest; and (iv) any corporation or other
organization of which any such Persons described above collectively owns 5% or
more of the equity of such entity. For purposes of this definition, "control "
(including, with correlative meaning, the terms "controlling," "controlled
by " and "under common control with ") when used with respect to any specified
Person includes the direct or indirect beneficial ownership of more than 5% of
the voting securities of such Person or the power to direct or cause the
direction of the management and policies of such Person whether by contract or
otherwise.
"Asset Acquisition" means (i) an Investment by Mediacom or any Restricted
Subsidiary in any other Person pursuant to which such Person shall become a
Restricted Subsidiary or shall be consolidated or merged with or into Mediacom
or any Restricted Subsidiary, or (ii) any acquisition by Mediacom or any
Restricted Subsidiary of the assets of any Person which constitute
substantially all of an operating unit, a division or a line of business of
such Person or which is otherwise outside of the ordinary course of business.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including,
without limitation, any merger, consolidation or sale-leaseback transaction)
to any Person other than Mediacom or any Wholly Owned Restricted Subsidiary or
any Controlled Subsidiary, in one transaction or a series of related
transactions, of
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(i) any Equity Interest of any Restricted Subsidiary, (ii) any material
license, franchise or other authorization of Mediacom or any Restricted
Subsidiary, (iii) any assets of Mediacom or any Restricted Subsidiary which
constitute substantially all of an operating unit, a division or a line of
business of Mediacom or any Restricted Subsidiary or (iv) any other property
or asset of Mediacom or any Restricted Subsidiary outside of the ordinary
course of business. For the purposes of this definition, the term "Asset Sale"
shall not include (i) any transaction consummated in compliance with
"Repurchase at the Option of Holders--Change of Control" above and
"Covenants--Merger or Sales of Assets" above, and the creation of any Lien not
prohibited under "Covenants--Limitation on Liens" above, (ii) the sale of
property or equipment that has become worn out, obsolete or damaged or
otherwise unsuitable for use in connection with the business of Mediacom or
any Restricted Subsidiary, as the case may be, (iii) any transaction
consummated in compliance with "Covenants--Limitation on Restricted Payments"
above, and (iv) Asset Swaps permitted pursuant to "Repurchase at the Option of
Holders--Asset Sales." In addition, solely for purposes of "Repurchase at the
Option of Holders--Asset Sales" above, any sale, conveyance, transfer, lease
or other disposition, whether in one transaction or a series of related
transactions, involving assets with a fair market value not in excess of $2.0
million in any fiscal year shall be deemed not to be an Asset Sale.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by Mediacom or any of its Restricted Subsidiaries from such Asset
Sale (including cash received as consideration for the assumption of
liabilities incurred in connection with or in anticipation of such Asset
Sale), after (a) provision for all income or other taxes measured by or
resulting from such Asset Sale, (b) payment of all brokerage commissions,
underwriting, legal, accounting and other fees and expenses related to such
Asset Sale, and any relocation expenses incurred as a result thereof, (c)
provision for minority interest holders in any Restricted Subsidiary as a
result of such Asset Sale by such Restricted Subsidiary, (d) payment of
amounts required to be applied to the repayment of Indebtedness secured by a
Lien on the asset or assets that were the subject of such Asset Sale
(including payments made to obtain or avoid the need for the consent of any
holder of such Indebtedness), and (e) deduction of appropriate amounts to be
provided by Mediacom or such Restricted Subsidiary as a reserve, in accordance
with generally accepted accounting principles consistently applied, against
any liabilities associated with the assets sold or disposed of in such Asset
Sale and retained by Mediacom or such Restricted Subsidiary after such Asset
Sale, including, without limitation, pension and other post employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such Asset Sale; and (ii) promissory notes and other non-cash consideration
received by Mediacom or any Restricted Subsidiary from such Asset Sale or
other disposition upon the liquidation or conversion of such notes or non-cash
consideration into cash.
"Asset Swap" means the substantially concurrent purchase and sale, or
exchange, of Productive Assets between Mediacom or any of the Restricted
Subsidiaries and another Person or group of affiliated Persons (which Person
or group of affiliated Persons is not affiliated with Mediacom and the
Restricted Subsidiaries) pursuant to an Asset Swap Agreement; it being
understood that an Asset Swap may include a cash equalization payment made in
connection therewith, provided that such cash payment, if received by Mediacom
or any of the Restricted Subsidiaries, shall be deemed to be proceeds received
from an Asset Sale and shall be applied in accordance with "Repurchase at the
Option of Holders--Asset Sales."
"Asset Swap Agreement" means a definitive agreement, subject only to
customary closing conditions that Mediacom in good faith believes will be
satisfied, providing for an Asset Swap; provided, however, that any amendment
to, or waiver of, any closing condition that individually or in the aggregate
is material to such Asset Swap shall be deemed to be a new Asset Swap.
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied
in accordance with clause (iii)(a) and that
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have not yet been the basis for application in accordance with clause (iii)(b)
of the first paragraph of "Repurchase at the Option of Holders--Asset Sales"
above.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with generally accepted accounting principles
and the amount of such Indebtedness shall be the capitalized amount of such
obligations determined in accordance with generally accepted accounting
principles consistently applied.
"Cash Equivalents" means (i) United States dollars; (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition; (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to any
Subsidiary Credit Facility or any Future Subsidiary Credit Facility or with
any domestic commercial bank having capital and surplus in excess of $500.0
million; (iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above; (v) commercial paper having a rating of at
least P-1 from Moody's or a rating of at least A-1 from S&P; and (vi) money
market mutual or similar funds having assets in excess of $100.0 million, at
least 95% of the assets of which are comprised of assets specified in clauses
(i) through (v) above.
"Committee Resolution" means with respect to Mediacom, a duly adopted
resolution of the Executive Committee of Mediacom.
"Consolidated Income Tax Expense" means, with respect to Mediacom for any
period, the provision for federal, state, local and foreign income taxes
payable by Mediacom and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied.
"Consolidated Interest Expense" means, with respect to Mediacom and the
Restricted Subsidiaries for any period, without duplication, the sum of (i)
the interest expense of Mediacom and the Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied, including, without
limitation, amortization of original issued discount on any Indebtedness and
the interest portion of any deferred payment obligation and after taking into
account the effect of elections made under any Hedging Agreements, however
denominated, with respect to such Indebtedness; (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by Mediacom and the Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied; and (iii) dividends and
distributions in respect of Disqualified Equity Interests actually paid in
cash by Mediacom and the Restricted Subsidiaries during such period as
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied. For purposes of this definition,
interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined by Mediacom to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with generally
accepted accounting principles consistently applied.
"Consolidated Net Income" means, with respect to any period, the net income
(loss) of Mediacom and the Restricted Subsidiaries for such period determined
on a consolidated basis in accordance with generally accepted accounting
principles consistently applied, adjusted, to the extent included in
calculating such net income (loss), by excluding, without duplication, (i) all
extraordinary, unusual or nonrecurring items of income or expense and of gains
or losses and all gains and losses from the sale
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or other disposition of assets out of the ordinary course of business (net of
taxes, fees and expenses relating to the transaction giving rise thereto) for
such period; (ii) that portion of such net income (loss) derived from or in
respect of Investments in Persons other than any Restricted Subsidiary, except
to the extent actually received in cash by Mediacom or any Restricted
Subsidiary; (iii) the portion of such net income (loss) allocable to minority
interests in unconsolidated Persons for such period, except to the extent
actually received in cash by Mediacom or any Restricted Subsidiary; (iv) net
income (loss) of any other Person combined with Mediacom or any Restricted
Subsidiary on a "pooling of interests" basis attributable to any period prior
to the date of combination; (v) net income (loss) of any Restricted Subsidiary
to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that net income (loss) is not
at the date of determination permitted without any prior governmental approval
(which has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or the holders of its Equity Interests; (vi) the cumulative effect
of a change in accounting principles after the date of the Indenture; (vii)
net income (loss) attributable to discontinued operations; (viii) management
fees payable to the "manager" as defined in the Operating Agreement and to
Mediacom Management and its Affiliates pursuant to management agreements with
Subsidiaries of Mediacom accrued for such period that have not been paid
during such period; and (ix) any other item of expense, other than "interest
expense," which appears on Mediacom's consolidated statement of income (loss)
below the line item "Operating Income," determined on a consolidated basis in
accordance with generally accepted accounting principles consistently applied.
"Consolidated Total Indebtedness" means, as at any date of determination, an
amount equal to the aggregate amount of all outstanding Indebtedness and the
aggregate liquidation preference or redemption payment value of all
Disqualified Equity Interests of Mediacom and the Restricted Subsidiaries
outstanding as of such date of determination, less the obligations of Mediacom
or any Restricted Subsidiary under any Hedging Agreement as of such date of
determination that would appear as a liability on the balance sheet of such
Person, in each case determined on a consolidated basis in accordance with
generally accepted accounting principles consistently applied.
"Continuing Member" means, as of the date of determination, any Person who
(i) was a member of the Executive Committee of Mediacom on the date of the
Indenture, (ii) was nominated for election or elected to the Executive
Committee of Mediacom with the affirmative vote of a majority of the
Continuing Members who were members of the Executive Committee at the time of
such nomination or election or (iii) is a representative of, or was approved
by, a Permitted Holder.
"Controlled Subsidiary" means a Restricted Subsidiary which is engaged in a
Related Business (i) 80% or more of the outstanding Equity Interests of which
(other than Equity Interests constituting directors' qualifying shares to the
extent mandated by applicable law) are owned by Mediacom or by one or more
Wholly Owned Restricted Subsidiaries or Controlled Subsidiaries or by Mediacom
and one or more Wholly Owned Restricted Subsidiaries or Controlled
Subsidiaries, (ii) of which Mediacom possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies, whether
through the ownership of Voting Equity Interests, by agreement or otherwise,
and (iii) all of whose Indebtedness is Non-Recourse Indebtedness.
"Cumulative Credit" means the sum of (i) $10.0 million, plus (ii) the
aggregate Net Cash Proceeds received by Mediacom or a Restricted Subsidiary
from the issue or sale (other than to a Restricted Subsidiary) of Equity
Interests of Mediacom or a Restricted Subsidiary (other than Disqualified
Equity Interests) on or after April 1, 1998, plus (iii) the principal amount
(or accreted amount (determined in accordance with generally accepted
accounting principles), if less) of any Indebtedness, or the liquidation
preference or redemption payment value of any Disqualified Equity Interests,
of Mediacom or any Restricted Subsidiary which has been converted into or
exchanged for Equity Interests of Mediacom or a Restricted Subsidiary (other
than Disqualified Equity Interests) on or after April 1, 1998,
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plus (iv) cumulative Operating Cash Flow on or after April 1, 1998, to the end
of the fiscal quarter immediately preceding the date of the proposed
Restricted Payment, or, if cumulative Operating Cash Flow for such period is
negative, minus the amount by which cumulative Operating Cash Flow is less
than zero, plus (v) to the extent not already included in Operating Cash Flow,
if any Investment constituting a Restricted Payment that was made after the
date of the Indenture is sold or otherwise liquidated or repaid or any
Unrestricted Subsidiary which was designated as an Unrestricted Subsidiary
after the date of the Indenture is sold or otherwise liquidated, the fair
market value of such Restricted Payment (less the cost of disposition, if any)
on the date of such sale, liquidation or repayment, as determined in good
faith by the Executive Committee, whose determination shall be conclusive and
evidenced by a Committee Resolution, plus (vi) if any Unrestricted Subsidiary
is redesignated as a Restricted Subsidiary, the value of the Restricted
Payment that would result if such Subsidiary were redesignated as an
Unrestricted Subsidiary at such time, determined in accordance with the
provisions described under "Covenants--Designation of Unrestricted
Subsidiaries" above.
"Cumulative Interest Expense" means the aggregate amount of Consolidated
Interest Expense paid or accrued of the Issuers and the Restricted
Subsidiaries on or after April 1, 1998, to the end of the fiscal quarter
immediately preceding the proposed Restricted Payment.
"Debt to Operating Cash Flow Ratio" means the ratio of (i) the Consolidated
Total Indebtedness as of the date of calculation (the "Determination Date") to
(ii) four times the Operating Cash Flow for the latest three months for which
financial information is available immediately preceding such Determination
Date (the "Measurement Period"). For purposes of calculating Operating Cash
Flow for the Measurement Period immediately prior to the relevant
Determination Date, (I) any Person that is a Restricted Subsidiary on the
Determination Date (or would become a Restricted Subsidiary on such
Determination Date in connection with the transaction that requires the
determination of such Operating Cash Flow) will be deemed to have been a
Restricted Subsidiary at all times during such Measurement Period; (II) any
Person that is not a Restricted Subsidiary on such Determination Date (or
would cease to be a Restricted Subsidiary on such Determination Date in
connection with the transaction that requires the determination of such
Operating Cash Flow) will be deemed not have been a Restricted Subsidiary at
any time during such Measurement Period; and (III) if Mediacom or any
Restricted Subsidiary shall have in any manner (x) acquired (including through
an Asset Acquisition or the commencement of activities constituting such
operating business) or (y) disposed of (including by way of an Asset Sale or
the termination or discontinuance of activities constituting such operating
business) any operating business during such Measurement Period or after the
end of such period and on or prior to such Determination Date, such
calculation will be made on a pro forma basis in accordance with generally
accepted accounting principles consistently applied, as if, in the case of an
Asset Acquisition or the commencement of activities constituting such
operating business, all such transactions had been consummated on the first
day of such Measurement Period, and, in the case of an Asset Sale or
termination or discontinuance of activities constituting such operating
business, all such transactions had been consummated prior to the first day of
such Measurement Period.
"Disqualified Equity Interest" means (i) any Equity Interest issued by
Mediacom which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof (except, in each such case,
upon the occurrence of a Change of Control or a Regulatory Equity Interest
Repurchase), in whole or in part, or is exchangeable into Indebtedness, on or
prior to the earlier of the maturity date of the Notes or the date on which no
Notes remain outstanding; and (ii) any Equity Interest issued by any
Restricted Subsidiary which, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable at the option of
the holder thereof), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, or is
exchangeable into Indebtedness.
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"Equity Interest" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited,
and membership interests in such Person, including any Preferred Equity
Interests.
"Equity Offering" means a public or private offering by Mediacom or a
Restricted Subsidiary for cash of its respective Equity Interests (other than
Disqualified Equity Interests) or options, warrants or rights with respect to
such Equity Interests.
"Excess Proceeds" means, with respect to any Asset Sale, the then Available
Asset Sale Proceeds less any such Available Asset Sale Proceeds that are
required to be applied and are applied in accordance with clause (iii)(b)(1)
of the first paragraph of "Repurchase at the Option of Holders--Asset Sales"
above.
"Executive Committee" means (i) so long as Mediacom is a limited liability
company, (x) while the Operating Agreement is in effect, the Executive
Committee authorized thereunder, and (y) at any other time, the manager or
board of managers of Mediacom, or management committee or similar governing
body responsible for the management of the business and affairs of Mediacom;
(ii) if Mediacom were to be reorganized as a corporation, the board of
directors of Mediacom; and (iii) if Mediacom were to be reorganized as a
partnership, the board of directors of the corporate general partner of such
partnership (or if such general partner is itself a partnership, the board of
directors of such general partner's corporate general partner).
"Future Subsidiary Credit Facilities" means one or more debt facilities
(other than the Subsidiary Credit Facilities) entered into from time to time
after the date of the Indenture by one or more Restricted Subsidiaries or
groups of Restricted Subsidiaries with banks or other institutional lenders,
together with all loan documents and instruments thereunder (including,
without limitation, any guarantee agreements and security documents),
including any amendment (including any amendment and restatement),
modification or supplement thereto or any refinancing, refunding, deferral,
renewal, extension or replacement thereof (including, in any such case and
without limitation, adding or removing Subsidiaries of Mediacom as borrowers
or guarantors thereunder), whether by the same or any other lender or group of
lenders.
"Guarantor" means any Subsidiary of Mediacom that guarantees the Issuers'
obligations under the Indenture and the Notes issued after the date of the
Indenture pursuant to "Covenants--Limitation on Guarantees of Certain
Indebtedness" above.
"Hedging Agreement" means any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement or other similar agreement
providing for the transfer or mitigation of interest rate risks either
generally or under specific contingencies.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to
generally accepted accounting principles or otherwise, of any such
Indebtedness or other obligation on the balance sheet of such Person (and
"Incurrence", "Incurred" and "Incurring" shall have meanings correlative to
the foregoing). Indebtedness of any Person or any of its Subsidiaries existing
at the time such Person becomes a Restricted Subsidiary (or is merged into or
consolidates with Mediacom or any Restricted Subsidiary), whether or not such
Indebtedness was incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary (or being merged into or consolidated
with Mediacom or any Restricted Subsidiary), shall be deemed Incurred at the
time any such Person becomes a Restricted Subsidiary or merges into or
consolidates with Mediacom or any Restricted Subsidiary.
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"Indebtedness" means, with respect to any Person, without duplication, any
indebtedness, secured or unsecured, contingent or otherwise, in respect of
borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such Person or only to a portion thereof), or evidenced by
bonds, notes, debentures or similar instruments or letters of credit or
representing the deferred and unpaid balance of the purchase price of property
or services (but excluding trade payables incurred in the ordinary course of
business and non-interest bearing installment obligations and other accrued
liabilities arising in the ordinary course of business) if and to the extent
any of the foregoing indebtedness would appear as a liability upon a balance
sheet of such Person prepared in accordance with generally accepted accounting
principles, and shall also include, to the extent not otherwise included (but
without duplication), (i) any Capitalized Lease Obligations, (ii) obligations
secured by a lien to which any property or assets owned or held by such Person
is subject, whether or not the obligation or obligations secured thereby shall
have been assumed, (iii) guarantees of items of other Persons which would be
included within this definition for such other Persons (whether or not such
items would appear upon the balance sheet of the guarantor), and (iv)
obligations of Mediacom or any Restricted Subsidiary under any Hedging
Agreement applicable to any of the foregoing (if and only to the extent any
amount due in respect of such Hedging Agreement would appear as a liability
upon a balance sheet of such Person prepared in accordance with generally
accepted accounting principles). Indebtedness (i) shall not include
obligations under performance bonds, performance guarantees, surety bonds and
appeal bonds, letters of credit or similar obligations, Incurred in the
ordinary course of business, including in connection with pole rental or
conduit attachments and the like or the requirements of cable television
franchising authorities, and otherwise consistent with industry practice; (ii)
shall not include obligations of any Person (x) arising from the honoring by a
bank or other financial institution of a check, draft or other similar
instrument inadvertently drawn against insufficient funds in the ordinary
course of business, provided such obligations are extinguished within five
business days of their Incurrence, (y) resulting from the endorsement of
negotiable instruments for collection in the ordinary course of business and
consistent with past practice and (z) under stand-by letters of credit to the
extent collateralized by cash or Cash Equivalents; and (iii) which provides
that an amount less than the principal amount thereof shall be due upon any
declaration of acceleration thereof shall be deemed to be Incurred or
outstanding in an amount equal to the accreted value thereof at the date of
determination.
"Investment" means, directly or indirectly, any advance, loan or other
extension of credit (including by means of a guarantee) or capital
contribution to (by means of transfers of property to others, payments for
property or services for the account or use of others or otherwise), the
acquisition, by purchase or otherwise, of any stock, bonds, notes, debentures,
partnership, membership or joint venture interests or other securities or
other evidence of beneficial interest of any Person, provided that the term
"Investment" shall not include any such advance, loan or extension of credit
having a term not exceeding 90 days arising in the ordinary course of business
or any pledge of Equity Interests pursuant to the Subsidiary Credit Facilities
or any Future Subsidiary Credit Facilities. If Mediacom or any Restricted
Subsidiary sells or otherwise disposes of any Voting Equity Interest of any
direct or indirect Restricted Subsidiary such that, after giving effect to
such sale or disposition, Mediacom no longer owns, directly or indirectly,
greater than 50% of the outstanding Voting Equity Interests of such Restricted
Subsidiary, Mediacom shall be deemed to have made an Investment on the date of
any such sale or disposition equal to the fair market value of the Voting
Equity Interests of such former Restricted Subsidiary not sold or disposed of.
"Lien" means any mortgage, pledge, lien, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including
any conditional sale or capital lease or other title retention agreement, any
lease in the nature thereof or any agreement to give a security interest).
"Liquidated Damages" has the meaning specified in the section of this
Offering Memorandum entitled "Exchange and Registration Rights Agreement."
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"Mediacom Management" means Mediacom Management Corporation, a Delaware
corporation.
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" means, with respect to any issuance or sale of Equity
Interests, the proceeds in the form of cash or Cash Equivalents received by
Mediacom or any Restricted Subsidiary of such issuance or sale net of
attorneys' fees, accountants fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Non-Recourse Indebtedness" means Indebtedness of a Person (i) as to which
neither of the Issuers nor any of the Restricted Subsidiaries (other than such
Person or any Subsidiaries of such Person) (a) provides any guarantee or
credit support of any kind (including any undertaking, guarantee, indemnity,
agreement or instrument that would constitute Indebtedness) or (b) is directly
or indirectly liable (as a guarantor or otherwise); and (ii) the incurrence of
which will not result in any recourse against any of the assets of either of
the Issuers or the Restricted Subsidiaries (other than to such Person or to
any Subsidiaries of such Person and other than to the Equity Interests in such
Person or in another Restricted Subsidiary or an Unrestricted Subsidiary
pledged by Mediacom, a Restricted Subsidiary or an Unrestricted Subsidiary);
provided, however, that Mediacom or any Restricted Subsidiary may make a loan
to a Controlled Subsidiary or an Unrestricted Subsidiary, or guarantee a loan
made to a Controlled Subsidiary or an Unrestricted Subsidiary, if such loan or
guarantee is permitted by "Covenants--Limitation on Restricted Payments" above
at the time of the making of such loan or guarantee, and such loan or
guarantee shall not constitute Indebtedness which is not Non-Recourse
Indebtedness.
"Operating Agreement" means the Third Amended and Restated Operating
Agreement of Mediacom dated as of January 20, 1998, as the same may be
amended, supplemented or modified from time to time.
"Operating Cash Flow" means, with respect to Mediacom and the Restricted
Subsidiaries on a consolidated basis, for any period, an amount equal to
Consolidated Net Income for such period increased (without duplication) by the
sum of (i) Consolidated Income Tax Expense accrued for such period to the
extent deducted in determining Consolidated Net Income for such period; (ii)
Consolidated Interest Expense for such period to the extent deducted in
determining Consolidated Net Income for such period; and (iii) depreciation,
amortization and any other non-cash items for such period to the extent
deducted in determining Consolidated Net Income for such period (other than
any non-cash item (other than the management fees referred to in clause (viii)
of the definition of "Consolidated Net Income") which requires the accrual of,
or a reserve for, cash charges for any future period) of Mediacom and the
Restricted Subsidiaries, including, without limitation, amortization of
capitalized debt issuance costs for such period, all of the foregoing
determined on a consolidated basis in accordance with generally accepted
accounting principles consistently applied, and decreased by non-cash items to
the extent they increase Consolidated Net Income (including the partial or
entire reversal of reserves taken in prior periods) for such period.
"Other Pari Passu Debt" means Indebtedness of Mediacom or any Restricted
Subsidiary that does not constitute Subordinated Obligations, is not senior in
right of payment to the Notes and has a stated final maturity which is the
same as the stated final maturity of the Notes.
"Other Pari Passu Debt Pro Rata Share" means the amount of the applicable
Available Asset Sale Proceeds obtained by multiplying the amount of such
Available Asset Sale Proceeds by a fraction, (i) the numerator of which is the
aggregate principal amount and/or accreted value, as the case may be, of all
Other Pari Passu Debt outstanding at the time of the applicable Asset Sale
with respect to which Mediacom or any Restricted Subsidiary is required to use
Available Asset Sale Proceeds to repay or
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make an offer to purchase or repay and (ii) the denominator of which is the
sum of (a) the aggregate principal amount of all Notes outstanding at the time
of the applicable Asset Sale and (b) the aggregate principal amount and/or
accreted value, as the case may be, of all Other Pari Passu Debt outstanding
at the time of the applicable Asset Sale Offer with respect to which Mediacom
or any Restricted Subsidiary is required to use the applicable Available Asset
Sale Proceeds to offer to repay or make an offer to purchase or repay.
"Other Permitted Liens" means (i) Liens imposed by law, such as carriers',
warehousemen's and mechanics' liens and other similar liens arising in the
ordinary course of business which secure payment of obligations that are not
yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and for which an
appropriate reserve or provision shall have been made in accordance with
generally accepted accounting principles consistently applied; (ii) Liens for
taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and for which an
appropriate reserve or provision shall have been made in accordance with
generally accepted accounting principles consistently applied;
(iii) easements, rights of way, and other restrictions on use of property or
minor imperfections of title that in the aggregate are not material in amount
and do not in any case materially detract from the property subject thereto or
interfere with the ordinary conduct of the business of Mediacom or its
Subsidiaries; (iv) Liens related to Capitalized Lease Obligations, mortgage
financings or purchase money obligations (including refinancings thereof), in
each case Incurred for the purpose of financing all or any part of the
purchase price or cost of construction or improvement of property, plant or
equipment used in the business of Mediacom or any Restricted Subsidiary or a
Related Business, provided that any such Lien encumbers only the asset or
assets so financed, purchased, constructed or improved; (v) Liens resulting
from the pledge by Mediacom of Equity Interests in a Restricted Subsidiary in
connection with a Subsidiary Credit Facility or a Future Subsidiary Credit
Facility or in an Unrestricted Subsidiary in any circumstance, in each such
case where recourse to Mediacom is limited to the value of the Equity
Interests so pledged; (vi) Liens resulting from the pledge by Mediacom of
intercompany indebtedness owed to Mediacom in connection with a Subsidiary
Credit Facility or a Future Subsidiary Credit Facility; (vii) Liens incurred
or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (viii) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds, deposits to secure the performance
of bids, trade contracts, government contracts, leases or licenses or other
obligations of a like nature incurred in the ordinary course of business
(including without limitation, landlord Liens on leased properties); (ix)
leases or subleases granted to third Persons not interfering with the ordinary
course of business of Mediacom; (x) deposits made in the ordinary course of
business to secure liability to insurance carriers; (xi) Liens securing
reimbursement obligations with respect to letters of credit which encumber
documents and other property relating to such letters of credit and the
products and proceeds thereof; (xii) Liens on the assets of Mediacom to secure
hedging agreements with respect to Indebtedness permitted by the Indenture to
be Incurred; (xiii) attachment or judgment Liens not giving rise to a Default
or an Event of Default; (xiv) any interest or title of a lessor under any
capital lease or operating lease; and (xv) Liens resulting from the pledge of
"Unfunded Capital Commitments" (as defined in the Operating Agreement)
securing the repayment of Indebtedness in respect of reimbursement obligations
for letters of credit given in connection with or in contemplation of the
acquisition of a Related Business.
"Permitted Holder" means (i) Rocco B. Commisso or his spouse or siblings,
any of their lineal descendants and their spouses, (ii) any controlled
Affiliate of any individual described in clause (i) above, (iii) in the event
of the death or incompetence of any individual described in clause (i) above,
such Person's estate, executor, administrator, committee or other personal
representative, in each case who at any particular date will beneficially own
or have the right to acquire, directly or indirectly, Equity Interests of
Mediacom, (iv) any trust or trusts created for the benefit of each Person
described
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in this definition, including any trust for the benefit of the parents or
siblings of any individual described in clause (i) above, (v) any trust for
the benefit of any such trust, (vi) any of the holders of Equity Interests in
Mediacom on the date of the Indenture, or (vii) any of the Affiliates of any
Person described in clause (vi) above.
"Permitted Investments" means (i) Cash Equivalents; (ii) Investments in
prepaid expenses, negotiable instruments held for collection and lease,
utility and workers' compensation, performance and other similar deposits;
(iii) the extension of credit to vendors, suppliers and customers in the
ordinary course of business; (iv) Investments existing as of the date of the
Indenture, and any amendment, modification, extension or renewal thereof to
the extent such amendment, modification, extension or renewal does not require
Mediacom or any Restricted Subsidiary to make any additional cash or non-cash
payments or provide additional services in connection therewith; (v) Hedging
Agreements; (vi) any Investment for which the sole consideration provided is
Equity Interests (other than Disqualified Equity Interests) of Mediacom; (vii)
any Investment consisting of a guarantee permitted under clause (e) of the
second paragraph of "Covenants--Limitation on Indebtedness" above; (viii)
Investments in Mediacom, in any Wholly Owned Restricted Subsidiary or in any
Controlled Subsidiary or any Person that, as a result of or in connection with
such Investment, becomes a Wholly Owned Restricted Subsidiary or a Controlled
Subsidiary or is merged with or into or consolidated with Mediacom or a Wholly
Owned Restricted Subsidiary or a Controlled Subsidiary; (ix) loans and
advances to officers, directors and employees of Mediacom and the Restricted
Subsidiaries for business-related travel expenses, moving expenses and other
similar expenses in each case incurred in the ordinary course of business; (x)
any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Equity Interests) of Mediacom; (xi) Related
Business Investments; and (xii) other Investments made pursuant to this clause
(xii) at any time, and from time to time, after the date of the Indenture, in
addition to any Permitted Investments described in clauses (i) through (xi)
above, in an aggregate amount at any one time outstanding not to exceed $10.0
million.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"Preferred Equity Interest" means, in any Person, an Equity Interest of any
class or classes, however designated, which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over
Equity Interests of any other class in such Person.
"Productive Assets" means assets of a kind used or useable by Mediacom and
the Restricted Subsidiaries in any Related Business and specifically includes
assets acquired through Asset Acquisitions (it being understood that "assets"
may include Equity Interests of a Person that owns such Productive Assets,
provided that after giving effect to such transaction, such Person would be a
Restricted Subsidiary).
"Related Business" means a cable television, media and communications,
telecommunications or data transmission business, and businesses ancillary,
complementary or reasonably related thereto, and reasonable extensions
thereof.
"Related Business Investment" means (i) any capital expenditure or
Investment, in each case related to the business of Mediacom and its
Restricted Subsidiaries as conducted on the date of the Indenture and as such
business may thereafter evolve in the fields of Related Businesses, (ii) any
Investment in any other Person primarily engaged in a Related Business and
(iii) any customary deposits or earnest money payments made by Mediacom or any
Restricted Subsidiary in connection with or in contemplation of the
acquisition of a Related Business.
107
"Restricted Subsidiary" means any Subsidiary of Mediacom that has not been
designated by the Executive Committee of Mediacom by a Committee Resolution
delivered to the Trustee as an Unrestricted Subsidiary pursuant to
"Covenants--Designation of Unrestricted Subsidiaries" above. Any such
designation may be revoked by a Committee Resolution delivered to the Trustee,
subject to the provisions of such covenant.
"S&P" means Standard & Poor's Ratings Group.
"Significant Subsidiary" means any Restricted Subsidiary which at the time
of determination had (A) total assets which, as of the date of Mediacom's most
recent quarterly consolidated balance sheet, constituted at least 10% of
Mediacom's total assets on a consolidated basis as of such date, or (B)
revenues for the three-month period ending on the date of Mediacom's most
recent quarterly consolidated statement of income which constituted at least
10% of Mediacom's total revenues on a consolidated basis for such period, or
(C) Subsidiary Operating Cash Flow for the three-month period ending on the
date of Mediacom's most recent quarterly consolidated statement of income
which constituted at least 10% of Mediacom's total Operating Cash Flow on a
consolidated basis for such period.
"Subordinated Obligations" means, with respect to either of the Issuers, any
Indebtedness of either of the Issuers which is expressly subordinated in right
of payment to the Notes.
"Subsidiary" means a Person the majority of whose voting stock, membership
interests or other Voting Equity Interests is or are owned by Mediacom or a
Subsidiary. Voting stock in a corporation is Equity Interests having voting
power under ordinary circumstances to elect directors.
"Subsidiary Credit Facilities" means the Southeast Credit Facility and the
Western Credit Facility, together with all loan documents and instruments
thereunder (including, without limitation, any guarantee agreements and
security documents), including any amendment (including any amendment and
restatement), modification or supplement thereto or any refinancing,
refunding, deferral, renewal, extension or replacement thereof (including, in
any such case and without limitation, adding or removing Subsidiaries of
Mediacom as borrowers or guarantors thereunder), whether by the same or any
other lender or group of lenders, pursuant to which (i) an aggregate amount of
Indebtedness up to $325.0 million may be Incurred pursuant to clause (c)(i) of
the second paragraph of "Covenants--Limitation on Indebtedness" and (ii) any
additional amount of Indebtedness in excess of $325.0 million may be Incurred
pursuant to the first paragraph or pursuant to clause (c)(ii) or any other
applicable clause (other than clause (c)(i)) of the second paragraph of
"Covenants--Limitation on Indebtedness."
"Subsidiary Operating Cash Flow" means, with respect to any Subsidiary for
any period, the "Operating Cash Flow" of such Subsidiary and its Subsidiaries
for such period determined by utilizing all of the elements of the definition
of "Operating Cash Flow" in the Indenture, including the defined terms used in
such definition, consistently applied only to such Subsidiary and its
Subsidiaries on a consolidated basis for such period.
"Unrestricted Subsidiary" means any Subsidiary of Mediacom designated as
such pursuant to the provisions of "Covenants--Designation of Unrestricted
Subsidiaries" above, and any Subsidiary of an Unrestricted Subsidiary. Any
such designation may be revoked by a Committee Resolution delivered to the
Trustee, subject to the provisions of such covenant.
"Voting Equity Interests" means Equity Interests in any Person with voting
power under ordinary circumstances entitling the holders thereof to elect the
Executive Committee, the board of managers, board of directors or other
governing body of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount
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of each then remaining installment, sinking fund, serial maturity or other
required scheduled payment of principal, including payment of final maturity,
in respect thereof by (b) the number of years (calculated to the nearest one-
twelfth) that will elapse between such date and the making of such payment, by
(ii) the then outstanding aggregate principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" means a Restricted Subsidiary 99% or
more of the outstanding Equity Interests of which (other than Equity Interests
constituting directors' qualifying shares to the extent mandated by applicable
law) are owned by Mediacom or by one or more Wholly Owned Restricted
Subsidiaries or by Mediacom and one or more Wholly Owned Restricted
Subsidiaries.
NO LIABILITY OF MANAGERS, OFFICERS, EMPLOYEES, OR SHAREHOLDERS
No manager, director, officer, employee, member, shareholder, partner or
incorporator of either Issuer or any Subsidiary, as such, will have any
liability for any obligations of the Issuers under the Notes, the Exchange
Notes, if any, or the Indenture or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each holder of Notes by
accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such waiver
may not be effective to waive liabilities under the Federal securities laws
and the SEC is of the view that such a waiver is against public policy.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture will provide that the Issuers may elect either (a) to defease
and be discharged from any and all obligations with respect to the Notes
(except for the obligations to register the transfer or exchange of such
Notes, to replace temporary or mutilated, destroyed, lost or stolen Notes, to
maintain an office or agency in respect of the Notes and to hold moneys for
payment in trust) ("defeasance") or (b) to be released from its obligations
with respect to the Notes under certain covenants (and related Events of
Default) contained in the Indenture, including but not limited to those
described above under "Covenants" ("covenant defeasance"), upon the deposit
with the Trustee (or other qualifying trustee), in trust for such purpose, of
money and/or U.S. Government Obligations which through the payment of
principal and interest in accordance with their terms will provide money, in
an amount sufficient to pay the principal of, premium, if any, and interest
and Liquidated Damages, if any, on the Notes, on the scheduled due dates
therefor. Such a trust may only be established if, among other things, (x) no
Default or Event of Default has occurred and is continuing or would arise
therefrom (or, with respect to Events of Default resulting from certain events
of bankruptcy, insolvency or reorganization, would occur at any time in the
period ending on the 91st day after the date of deposit) and (y) Mediacom has
delivered to the Trustee an opinion of counsel (as specified in the Indenture)
to the effect that (i) defeasance or covenant defeasance, as the case may be,
will not require registration of the Issuers, the Trustee or the trust fund
under the Investment Company Act of 1940, as amended, or the Investment
Advisors Act of 1940, as amended, and (ii) the holders of the Notes will
recognize income, gain or loss for Federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred. Such opinion, in the case
of defeasance under clause (a) above, must refer to and be based upon a
private ruling concerning the Notes of the Internal Revenue Service or a
ruling of general effect published by the Internal Revenue Service.
MODIFICATION OF INDENTURE
From time to time, the Issuers and the Trustee may, without the consent of
holders of the Notes, enter into one or more supplemental indentures for
certain specified purposes, including providing for a successor or successors
to the Issuers, adding guarantees, releasing Guarantors when permitted by the
Indenture, providing for security for the Notes, adding to the covenants of
the Issuers, surrendering
109
any right or power conferred upon the Issuers, providing for uncertificated
Notes in addition to or in place of certificated Notes, making any change that
does not adversely affect the rights of any Noteholder, complying with any
requirement of the Trust Indenture Act or curing certain ambiguities, defects
or inconsistencies. The Indenture contains provisions permitting the Issuers
and the Trustee, with the consent of holders of at least a majority in
aggregate principal amount of the Notes at the time outstanding, to modify the
Indenture or any supplemental indenture or the rights of the holders of the
Notes, except that no such modification shall, without the consent of each
holder affected thereby (i) change or extend the fixed maturity of any Notes,
reduce the rate or extend the time of payment of interest or Liquidated
Damages thereon, reduce the principal amount thereof or premium, if any,
thereon or change the currency in which the Notes are payable; (ii) reduce the
premium payable upon any redemption of Notes in accordance with the optional
redemption provisions of the Notes or change the time before which no such
redemption may be made; (iii) waive a default in the payment of principal or
interest or Liquidated Damages on the Notes (except that holders of a majority
in aggregate principal amount of the Notes at the time outstanding may (a)
rescind an acceleration of the Notes that resulted from a non-payment default
and (b) waive the payment default that resulted from such acceleration) or
alter the rights of Noteholders to waive defaults; or (iv) reduce the
aforesaid percentage of Notes, the consent of the holders of which is required
for any such modification. Any existing Event of Default, other than a default
in the payment of principal or interest or Liquidated Damages on the Notes, or
compliance with any provision of the Notes or the Indenture, other than any
provision related to the payment of principal or interest or Liquidated
Damages on the Notes, may be waived with the consent of holders of at least a
majority in aggregate principal amount of the Notes at the time outstanding.
COMPLIANCE CERTIFICATE
The Indenture will provide that Mediacom will deliver to the Trustee within
120 days after the end of each fiscal year of Mediacom an Officers'
Certificate stating whether or not the signers know of any Event of Default
that has occurred. If they do, the certificate will describe the Event of
Default and its status.
CONCERNING THE TRUSTEE
Bank of Montreal Trust Company is to be the Trustee under the Indenture and
has been appointed by the Issuers as Registrar and Paying Agent with regard to
the Notes. Bank of Montreal, an affiliate of the Trustee, is a lender under
each of the Subsidiary Credit Facilities. An affiliate of Bank of Montreal
holds approximately 3.8% of the membership interests in Mediacom.
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DESCRIPTION OF OTHER INDEBTEDNESS
SUBSIDIARY CREDIT FACILITIES
Mediacom has been organized as a holding company for its various
Subsidiaries. The Company's financing strategy is to raise equity from its
members and issue public long-term debt (including the Notes) at the holding
company level, while utilizing the Subsidiaries to access debt capital in the
bank and private placement markets through multiple stand-alone borrowing
groups. The Company believes that this financing strategy is beneficial
because it broadens the Company's access to various debt markets, enhances its
flexibility in managing the Company's capital structure, reduces the overall
cost of debt capital and permits the Company to maintain a substantial
liquidity position in the form of unused and available bank credit
commitments.
Financings of the Subsidiaries are currently effected pursuant to the
Subsidiary Credit Facilities through two stand-alone borrowing groups, the
Western Group and Mediacom Southeast, each having a separate lending group.
The credit arrangements in these borrowing groups are non-recourse to
Mediacom, have no cross-default provisions relating directly to each other,
have different revolving credit and term periods and contain separately
negotiated covenants tailored for each borrowing group. These credit
arrangements permit the relevant Subsidiaries, subject to covenant and other
restrictions, to make distributions to Mediacom.
The financing of the operations of the Subsidiaries in the Western Group is
effected through the Western Credit Facility pursuant to a Second Amended and
Restated Credit Agreement dated as of June 24, 1997, as amended, among the
Subsidiaries included in the Western Group, the lenders party thereto, and The
Chase Manhattan Bank ("Chase"), as administrative agent. Such Subsidiaries
have used the proceeds from borrowings under the Western Credit Facility to
finance, in part, the purchase of the 1997 Systems and the Jones System and
for working capital and other general corporate purposes. The Western Credit
Facility is a $100.0 million senior credit facility which includes a $70.0
million reducing revolving credit facility expiring September 30, 2005 (the
"Western Revolving Credit Facility") and a $30.0 million term loan maturing
September 30, 2005 (the "Western Term Loan"). At March 31, 1998, there was
approximately $60.6 million outstanding under the Western Revolving Credit
Facility and approximately $30.0 million outstanding under the Western Term
Loan. Interest under the Western Credit Facility is payable at the "Eurodollar
Rate" or "Base Rate," as such terms are defined therein, plus a floating
percentage tied to the senior leverage ratio, as defined, ranging from 1.375%
to 2.750% for Eurodollar Rate borrowings. The floating percentage is one
percentage point lower in the case of Base Rate loans. The weighted average
interest rate at March 31, 1998 on the outstanding borrowings under the
Western Credit Facility was approximately 8.05%. At March 31, 1998, separate
interest rate swap agreements had been entered into by the Western Group to
hedge the underlying Eurodollar Rate exposure in notional amount of $62.0
million with expiration dates ranging from September 1998 through October
2002.
The financing of the operations of Mediacom Southeast is effected through
the Southeast Credit Facility pursuant to a Credit Agreement dated as of
January 23, 1998, as amended, among Mediacom Southeast, the lenders party
thereto and Chase, as administrative agent. Mediacom Southeast has used the
proceeds from borrowings under the Southeast Credit Facility to finance, in
part, the purchase of the Cablevision Systems and for working capital and
other general corporate purposes. The Southeast Credit Facility is a $225.0
million senior credit facility which includes a $165.0 million reducing
revolving credit facility expiring June 30, 2006 (the "Southeast Revolving
Credit Facility") and a $60.0 million term loan maturing June 30, 2006 (the
"Southeast Term Loan"). At March 31, 1998, there was $141.0 million
outstanding under the Southeast Revolving Credit Facility and $60.0 million
outstanding under the Southeast Term Loan. The Southeast Credit Facility
includes an additional term loan facility which is available until December
30, 1999, pursuant to which the lenders thereunder may extend, at their
discretion, up to an additional $50.0 million of term loans to Mediacom
Southeast (the
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"Incremental Facility Loans"). Interest under the Southeast Credit Facility is
payable at the "Eurodollar Rate" or "Base Rate," as such terms are defined
therein, plus a floating percentage tied to the senior leverage ratio ranging
from 1.25% to 2.25% for Eurodollar Rate borrowings. The floating percentage is
one percentage point lower in the case of Base Rate loans. The weighted
average interest rate at March 31, 1998 on the outstanding borrowings under
the Southeast Credit Facility was approximately 7.94%.
In general, the Subsidiary Credit Facilities require the respective
borrowing groups to use the proceeds from certain specified equity and debt
issuances, as well as certain asset dispositions, to prepay borrowings under
the respective Subsidiary Credit Facilities and to reduce permanently
commitments thereunder. The Subsidiary Credit Facilities also require
mandatory prepayments of amounts outstanding and permanent reductions in the
commitments thereunder, beginning in 2000, based on a percentage of excess
cash flow, as defined.
The Subsidiary Credit Facilities are secured by Mediacom's pledge of all the
ownership interests in the Subsidiaries and a first priority lien on all the
tangible and intangible assets of the Subsidiaries, other than real property
in the case of the Southeast Credit Facility. The indebtedness under the
Subsidiary Credit Facilities is guaranteed by Mediacom on a limited recourse
basis to the extent of its ownership interests in the Subsidiaries.
The Subsidiary Credit Facilities contain covenants, including, but not
limited to, insurance requirements, limitations on mergers and acquisitions,
consolidations and sales of certain assets, restrictions on certain
transactions with affiliates, the maintenance of certain financial ratios,
limitations on liens, the incurrence of additional indebtedness and certain
restricted payments, and restrictions on the ability to engage in any
business. In addition, among other events, an event of default will occur
under the Subsidiary Credit Facilities if: (i) Mr. Commisso ceases to be the
Chairman and Chief Executive Officer of Mediacom Management; (ii) Mediacom
Management shall cease to act as manager of the Subsidiaries; (iii) Mediacom
ceases to own all of the equity interests of the Subsidiaries that it
currently owns; or (iv) certain "change of control" events specified in the
Subsidiary Credit Facilities occur and are continuing.
As of June 1, 1998, Mediacom had subordinated intercompany loans to and
preferred equity investments in the Subsidiaries in the aggregate amount of
approximately $201.1 million. The Subsidiary Credit Facilities allow the
Subsidiaries to make distributions and other payments to Mediacom, which can
in turn be used to pay interest and principal on the Notes, subject to certain
financial covenants and other conditions. The Subsidiaries are permitted to
pay to Mediacom interest on subordinated intercompany loans and make similar
distributions in respect of preferred equity contributions if no default is
then continuing under the Subsidiary Credit Facilities. Additionally, the
Subsidiaries can repay or redeem, as appropriate, such intercompany loans and
preferred equity investments if: (i) the "leverage ratio" (as set forth in the
Subsidiary Credit Facilities, using System Cash Flow) on a pro forma basis is
less than 5.5 to 1.0 (reducing over five years to 3.0 to 1.0); and (ii) the
Subsidiaries are in compliance with other specified financial covenants and no
default is then continuing. As of March 31, 1998, on a pro forma basis, after
giving effect to the Series A Notes Offering and the application of the net
proceeds therefrom, the leverage ratio of Mediacom Southeast under the
Southeast Credit Facility would be less than 2.1 to 1.0 and the leverage ratio
of the Western Group under the Western Credit Facility would be less than 2.2
to 1.0. Accordingly, the Subsidiaries would be able to make distributions to
Mediacom in respect of such repayments or redemptions in the aggregate amount
of approximately $184.0 million.
SELLER NOTE
In connection with the purchase of the Kern Valley System in June 1996,
Mediacom California issued the Seller Note in the original principal amount of
$2.8 million. Each of the Subsidiaries included
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in the Western Group is a co-obligor under the Seller Note. The Seller Note
matures on June 28, 2006 and accrues interest, payable on such maturity date,
at the rate of 9.0% until June 28, 2001, at which time the rate becomes 15.0%
until June 28, 2003, and becomes 18.0% thereafter. Interest compounds annually
and all interest rate increases described above are deemed retroactive to the
issue date of the Seller Note. The Seller Note contains certain default
provisions as well as restrictive covenants with respect to the issuance of
additional debt by the Western Group.
FEDERAL TAX CONSIDERATIONS
The following is a summary of certain federal tax consequences under the
Internal Revenue Code of 1986, as amended (the "Code"). The summary is based
upon the laws, regulations, rulings and judicial decisions in effect on the
date of this offering circular, all of which are subject to change at any time
(possibly on a retroactive basis). There can be no assurance that the Internal
Revenue Service (the "Service") will not take a contrary view, and no ruling
from the Service has been or will be sought. Unless otherwise specifically
noted, this summary applies only to those persons who acquire Notes for cash
and who hold Notes as capital assets, and it does not discuss all aspects of
federal income taxation that may be relevant to investors in light of their
particular investment circumstances. Nor does it address the consequences to
certain types of holders subject to special treatment under the federal income
tax laws (for example, tax-exempt organizations, dealers in securities,
financial institutions, life insurance companies and persons holding Notes as
part of a hedging or "conversion" transaction or a straddle). This summary
also does not discuss the consequences to a holder under state, local or
foreign tax laws, which may differ from the corresponding federal income tax
laws. Holders of Series A Notes and prospective investors in Series B Notes
are advised to consult their own tax advisors regarding the particular tax
considerations pertaining to them with respect to the exchanging of Series A
Notes for Series B Notes, and the ownership and disposition of Series B Notes,
in each case including the effects of applicable federal, state, local,
foreign or other tax laws to which they may be subject, as well as possible
changes in the tax laws.
EXCHANGE OF SERIES A NOTES FOR SERIES B NOTES
Cooperman Levitt Winikoff Lester & Newman, P.C., counsel to the Issuers, has
advised the Issuers that in its opinion, the exchange of the Series A Notes
for Series B Notes pursuant to the Exchange Offer will not be treated as an
"exchange" for federal income tax purposes because the Series B Notes will not
be considered to differ materially in kind or extent from the Series A Notes.
Rather, in the opinion of counsel to the Issuers, the Series B Notes received
by a holder will be treated as a continuation of the Series A Notes in the
hands of such holder and consequently, in the opinion of counsel to the
Issuers, there will be no federal income tax consequences to holders
exchanging Series A Notes for Series B Notes pursuant to the Exchange Offer.
The Issuers recommend that each holder of Series A Notes consult such
holder's own tax adviser as to the particular tax consequences of exchanging
such holder's Series A Notes for Series B Notes, including the applicability
and effect of any state, local or foreign tax laws.
INVESTMENTS IN SERIES B NOTES
Payments of Interest
A holder of a Series B Note generally will be required to report as ordinary
income for federal income tax purposes interest received or accrued on the
Series B Note in accordance with the holder's method of tax accounting.
Market Discount
If a holder purchases a Series B Note for an amount that is less than its
principal amount (generally other than at its original issue), the amount of
the difference will be treated as "market
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discount" for federal income tax purposes, unless such difference is less than
a specified de minimis amount. Under the de minimis exception, a Series B Note
is considered to have no market discount if the excess of the stated
redemption price at maturity of the Series B Note over the holder's tax basis
therein immediately after its acquisition is less than 0.25% of the stated
redemption price at maturity of the Series B Note multiplied by the number of
complete years to the maturity date of the Series B Note after the acquisition
date. Under the market discount rules, a holder of a Series B Note having
market discount is required to treat any principal payment on, or any gain on
the sale, exchange, retirement or other disposition of, a Series B Note as
ordinary income to the extent of the accrued market discount which has not
previously been included in income at the time of such payment or disposition.
In addition, such a holder may be required to defer until maturity of the
Series B Note or its earlier disposition in a taxable transaction the
deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such Series B Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Series B Note, unless
the holder elects to accrue the market discount on a constant interest method.
A holder of a Series B Note may elect to include market discount in income
currently as it accrues (on either a ratable or constant interest method), in
which case the rule described above regarding deferral of interest deductions
will not apply. This election to include market discount in income currently,
once made, applies to all market discount obligations acquired on or after the
first taxable year to which the election applies and may not be revoked
without the consent of the Service.
Bond Premium
A holder who purchases a Note for an amount in excess of its stated
redemption price at maturity will be considered to have purchased the Series B
Note with "amortizable bond premium" equal to the amount of such excess. A
holder generally may elect to amortize the premium on the constant yield to
maturity method. The amount amortized in any year will be treated as a
reduction of the holder's interest income from the Series B Note during such
year and will reduce the holder's adjusted tax basis in the Series B Note by
such amount. A holder of a Series B Note that does not make the election to
amortize the premium will not reduce its tax basis in the Series B Note, and
thus effectively will realize a smaller gain, or a larger loss, on a taxable
disposition of the Series B Note than it would have realized had the election
been made. The election to amortize the premium on a constant yield to
maturity method, once made, applies to all debt obligations held or acquired
by the electing holder on or after the first day of the first taxable year to
which the election applies and may not be revoked without the consent of the
Service.
Sale, Exchange or Retirement
A holder's tax basis in a Series B Note generally will equal the purchase
price paid therefor, increased by market discount previously included in
income by such holder and reduced by any amortized premium and any principal
payments on the Series B Note. Upon the sale, exchange or retirement
(including redemption) of a Series B Note, a holder of a Series B Note
generally will recognize gain or loss equal to the difference between the
amount realized upon the sale, exchange or retirement of the Series B Note
(other than in respect of accrued and unpaid interest on the Series B Note)
and the adjusted tax basis in the Series B Note. Such gain or loss generally
will be capital gain or loss, except to the extent of any accrued market
discount, which will be taxed as ordinary income.
Under current law, net capital gains of individuals generally are subject to
the following maximum federal tax rates: (i) twenty percent, for property held
more than one year; and (ii) beginning in the year 2006, eighteen percent, for
property acquired after the year 2000 and held for more than five years. The
deductibility of capital losses is subject to limitations.
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Foreign Holders
The following is a general discussion of certain United States federal tax
consequences of the ownership and sale or other disposition of the Series B
Notes by a holder that, for federal income tax purposes, is not a "United
States person" (a "Foreign Person"). For purposes of this discussion, a
"United States person" means a citizen or resident (as determined for United
States federal income tax purposes) of the United States; a corporation or
partnership (or other entity treated for U.S. federal income tax purposes as a
corporation or partnership) created or organized in the United States or under
the laws of the United States or of any political subdivision thereof; an
estate the income of which is includible in gross income for U.S. federal
income tax purposes, regardless of its source; or a trust if a court within
the United States is able to exercise primary supervision over the
administration of the trust and one or more United States fiduciaries have the
authority to control all substantial decisions of the trust. Resident alien
individuals will be subject to United States federal income tax with respect
to the Series B Notes as if they were United States citizens.
If the income or gain on the Series B Notes is "effectively connected with
the conduct of a trade or business within the United States" ("ECI") of the
Foreign Person holding the Series B Notes, such income or gain will be subject
to tax essentially in the same manner as if the Series B Notes were held by a
United States person, as discussed above, and in the case of a Foreign Person
that is a foreign corporation, may also be subject to the federal branch
profits tax.
If the income on the Series B Notes is not ECI, then under the "portfolio
interest" exception to the general rules for the withholding of tax on
interest paid to a Foreign Person, a Foreign Person will not be subject to
United States tax (or to withholding) on interest on a Series B Note, provided
that (i) the Foreign Person does not actually or constructively own 10% or
more of a capital or profits interest in Mediacom within the meaning of
Section 871(h)(3) of the Code, (ii) the Foreign Person is not a controlled
foreign corporation that is considered related to Mediacom within the meaning
of Section 864(d)(4) of the Code, and (iii) the Issuers, their paying agent or
the person who would otherwise be required to withhold tax received either (a)
a statement (an "Owner's Statement") on Service Form W-8, signed under
penalties of perjury by the beneficial owner of the Series B Note, in which
the owner certifies that the owner is not a United States person and which
provides the owner's name and address, or (B) a statement signed under
penalties of perjury by a financial institution holding the Series B Note on
behalf of the beneficial owners, together with a copy of each beneficial
owner's Owner's Statement. Recently finalized regulations, which generally
will become effective on January 1, 2000, add certain alternative
certification procedures. A Foreign Person who does not qualify for the
"portfolio interest" exception will be subject to United States withholding
tax at a flat rate of 30% (or a lower applicable treaty rate upon delivery of
requisite certification of eligibility) on interest payments on the Series B
Notes which are not ECI.
If the gain on the Series B Notes is not ECI, then gain recognized by a
Foreign Person upon the redemption, sale or exchange of a Series B Note
(including any gain representing accrued market discount) will not be subject
to United States tax unless the Foreign Person is an individual present in the
United States for 183 days or more during the taxable year in which the Series
B Note is redeemed, sold or exchanged, and certain other requirements are met,
in which case the Foreign Person will be subject to United States tax at a
flat rate of 30% (unless exempt by applicable treaty upon delivery of
requisite certification of eligibility). Foreign Persons who are individuals
may also be subject to tax pursuant to provisions of United States federal
income tax law applicable to certain United States expatriates.
A Series B Note that is held by an individual who at the time of death is
not a citizen or resident of the United States will not be subject to U.S.
federal estate tax as a result of such individual's death, provided that, at
the time of the individual's death, payments of interest with respect to such
Series B Note would have qualified for the portfolio interest exception.
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Backup Withholding
In general, a 31% backup withholding tax will apply to payments received
with respect to Series B Notes if the holder (i) fails to provide a taxpayer
identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii) is
notified by the Service that he or she has failed to report properly payments
of interest and dividends and the Service has notified the Issuers that he or
she is subject to backup withholding, or (iv) fails, under certain
circumstances, to provide a signed statement, certified under penalties of
perjury, that the TIN provided is correct and that he or she is not subject to
backup withholding. The amount of any backup withholding deducted from a
payment to a holder is allowable as a credit against the holder's federal
income tax liability, provided that certain required information is furnished
to the Service. Certain holders, (including, among others, corporations and
foreign individuals who comply with certain certification requirements
described above under "Foreign Holders") are not subject to backup
withholding. Holders should consult their tax advisors as to their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.
THE EXCHANGE OFFER
The following description of the Exchange and Registration Rights Agreement
is a summary only, does not purport to be complete and is subject to, and
qualified in its entirety by reference to, all provisions of the Exchange and
Registration Rights Agreement, a copy of which is filed as an exhibit to the
Exchange Offer Registration Statement (as defined) of which this Prospectus is
a part.
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Series A Notes were originally sold by the Issuers on April 1, 1998 to
the Initial Purchaser pursuant to the Purchase Agreement. The Initial
Purchaser subsequently resold the Series A Notes within the United States to
qualified institutional buyers in reliance on Rule 144A under the Securities
Act and outside the United States in accordance with Regulation S under the
Securities Act. As a condition to the Purchase Agreement, the Issuers and the
Initial Purchaser entered into the Exchange and Registration Rights Agreement
concurrently with the issuance of the Series A Notes. Pursuant to the Exchange
and Registration Rights Agreement, the Issuers agreed to (i) file with the
Commission on or prior to 90 days after the date of issuance of the Series A
Notes (the "Issue Date") a registration statement on Form S-1 or Form S-4, if
the use of such form is then available (the "Exchange Offer Registration
Statement") relating to a registered exchange offer (the "Exchange Offer") for
the Series A Notes under the Securities Act and (ii) use their reasonable best
efforts to cause the Exchange Offer Registration Statement to be declared
effective under the Securities Act within 150 days after the Issue Date. As
soon as practicable after the effectiveness of the Exchange Offer Registration
Statement, the Issuers will offer to the holders of Transfer Restricted
Securities who are not prohibited by any law or policy of the Commission from
participating in the Exchange Offer the opportunity to exchange their Transfer
Restricted Securities for an issue of a new issue of notes (the "Exchange
Notes") that are identical in all material respects to the Series A Notes
(except that the Exchange Notes will not contain terms with respect to
transfer restrictions) and that would be registered under the Securities Act.
The Issuers will keep the Exchange Offer open for not less than 30 days (or
longer, if required by applicable law) after the date notice of the Exchange
Offer is mailed to the holders of the Series A Notes. For purposes of the
foregoing, "Transfer Restricted Securities" means each Series A Note until (i)
the date on which such Series A Note has been exchanged for a freely
transferable Exchange Note in the Exchange Offer, (ii) the date on which such
Series A Note has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iii) the
date on which such Series A Note is distributed to the public pursuant to Rule
144 under the Securities Act or is saleable pursuant to Rule 144(k) under the
Securities Act.
116
If (i) because of any change in law or applicable interpretations thereof by
the staff of the Commission, the Issuers are not permitted to effect the
Exchange Offer as contemplated hereby, (ii) any Series A Notes validly
tendered pursuant to the Exchange Offer are not exchanged for Exchange Notes
within 180 days after the Issue Date, (iii) the Initial Purchaser so requests
with respect to Series A Notes not eligible to be exchanged for Exchange Notes
in the Exchange Offer, (iv) any applicable law or interpretations do not
permit any holder of Series A Notes to participate in the Exchange Offer, (v)
any holder of Series A Notes that participates in the Exchange Offer does not
receive freely transferable Exchange Notes in exchange for tendered Series A
Notes, or (vi) the Issuers so elect, then the Issuers will file with the
Commission a shelf registration statement (the "Shelf Registration Statement")
to cover resales of Transfer Restricted Securities by such holders who satisfy
certain conditions relating to the provision of information in connection with
the Shelf Registration Statement.
The Issuers will use their reasonable best efforts to have the Exchange
Offer Registration Statement or, if applicable, a Shelf Registration Statement
(each, a "Registration Statement") declared effective by the Commission as
promptly as practicable after the filing thereof. Unless the Exchange Offer
would not be permitted by a policy of the Commission, the Issuers will
commence the Exchange Offer and will use their reasonable best efforts to
consummate the Exchange Offer as promptly as practicable, but in any event
prior to 180 days after the Issue Date. If applicable, the Issuers will use
their reasonable best efforts to keep the Shelf Registration Statement
effective for a period of two years after the Issue Date.
If (i) the applicable Registration Statement is not filed with the
Commission on or prior to 90 days after the Issue Date, (ii) the Exchange
Offer Registration Statement or the Shelf Registration Statement, as the case
may be, is not declared effective within 150 days after the Issue Date (or in
the case of a Shelf Registration Statement required to be filed in response to
a change in law or interpretation), (iii) the Exchange Offer is not
consummated on or prior to 180 days after the Issue Date or (iv) the Shelf
Registration Statement is filed and declared effective within 150 days after
the Issue Date (or in the case of a Shelf Registration Statement required to
be filed in response to a change in law or the applicable interpretations of
the Commission's staff, if later, within 45 days after publication of the
change in law or interpretation), but shall thereafter cease to be effective
(at any time that the Issuers are obligated to maintain the effectiveness
thereof) without being succeeded within 60 days by an additional Registration
Statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default"), the Issuers will be obligated to
pay liquidated damages ("Liquidated Damages") to each holder of Transfer
Restricted Securities, during the period of one or more such Registration
Defaults, in an amount equal to $0.192 per week per $1,000 principal amount of
Series A Notes constituting Transfer Restricted Securities held by such holder
until the applicable Registration Statement is filed, the Exchange Offer
Registration Statement is declared effective and the Exchange Offer is
consummated or the Shelf Registration Statement is declared effective or again
becomes effective, as the case may be. All accrued Liquidated Damages shall be
paid to holders in the same manner as interest payments on the Series A Notes
on semi-annual payment dates which correspond to interest payment dates for
the Series A Notes. Following the cure of all Registration Defaults, the
accrual of Liquidated Damages will cease.
The Exchange and Registration Rights Agreement also provides that the
Issuers (i) shall make available for a period of 90 days after the
consummation of the Exchange Offer a prospectus meeting the requirements of
the Securities Act to any broker-dealer for use in connection with any resale
of any such Exchange Notes and (ii) shall pay all expenses incident to the
Exchange Offer (including the expenses of one counsel to the holders of the
Series A Notes) and will indemnify certain holders of the Series A Notes
(including any broker-dealer) against certain liabilities, including
liabilities under the Securities Act. A broker-dealer who delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Securities Act and will be
bound by the provisions of the Exchange and Registration Rights Agreement
(including certain indemnification rights and obligations).
117
Each holder of the Series A Notes who wishes to exchange such Series A Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii)
it has no arrangements or understanding with any person to participate in the
distribution of the Series A Notes or the Exchange Notes within the meaning of
the Securities Act and (iii) it is not an "affiliate" (as defined in Rule 405
of the Securities Act) of the Issuers or, if it is an affiliate, it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
If a holder is not a broker-dealer, it will be required to represent that it
is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If a holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Series A Notes that were acquired as
a result of market-making activities or other trading activities (an
"Exchanging Dealer"), it will be required to acknowledge that it will deliver
a prospectus in connection with any resale of such Exchange Notes. See "Plan
of Distribution."
Holders of the Series A Notes will be required to make certain
representations to the Issuers (as described above) in order to participate in
the Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement in order to have their
Series A Notes included in the Shelf Registration Statement and benefit from
the provisions regarding Liquidated Damages set forth in the preceding
paragraphs. A holder who sells Series A Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Exchange and Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations).
For so long as the Series A Notes are outstanding, the Issuers will continue
to provide to holders of the Series A Notes and to prospective purchasers of
the Series A Notes the information required by paragraph (d)(4) of Rule 144A.
Following the consummation of the Exchange Offer, holders of Series A Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Series A Notes will not have any further registration rights and such
Series A Notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Series A Notes
could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Series A
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Issuers will issue $1,000 principal amount
of Series B Notes in exchange for each $1,000 principal amount of outstanding
Series A Notes accepted in the Exchange Offer. Holders may tender some or all
of their Series A Notes pursuant to the Exchange Offer. However, Series A
Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Series B Notes are the same as the form and terms
of the Series A Notes except that (i) the Series B Notes bear a "Series B"
designation and a different CUSIP Number from the Series A Notes, (ii) the
Series B Notes have been registered under the Securities Act and hence will
not bear legends restricting the transfer thereof and (iii) the holders of the
Series B Notes will not be entitled to certain rights under the Exchange and
Registration Rights Agreement, which rights will terminate when the Exchange
Offer is terminated. The Series B Notes will evidence the same debt as the
Series A Notes and will be entitled to the benefits of the Indenture.
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As of the date of this Prospectus, $200,000,000 aggregate principal amount
of Series A Notes were outstanding. The Issuers have fixed the close of
business on , 1998 as the record date for the Exchange Offer for
purposes of determining the persons to whom this Prospectus and the Letter of
Transmittal will be mailed initially.
Holders of Series A Notes do not have any appraisal or dissenters' rights
under the New York Limited Liability Company Law, the Business Corporation Law
of New York, or the Indenture in connection with the Exchange Offer. The
Issuers intend to conduct the Exchange Offer in accordance with the applicable
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder.
The Issuers shall be deemed to have accepted validly tendered Series A Notes
when, as and if the Issuers have given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Series B Notes from the Issuers.
If any tendered Series A Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Series A Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Series A Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Series A
Notes pursuant to the Exchange Offer. The Issuers will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses" below.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Issuers, in their sole discretion, extend the Exchange
Offer, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended. Notwithstanding the foregoing,
the Issuers will not extend the Expiration Date beyond , 1998.
In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Issuers reserve the right, in their sole discretion, (i) to delay
accepting any Series A Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
INTEREST ON THE SERIES B NOTES
The Series B Notes will bear interest from their date of issuance. Holders
of Series A Notes that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the
Series B Notes. Such interest will be paid with the first interest payment on
the Series B Notes on October 15, 1998. Interest on the Series A Notes
accepted for exchange will cease to accrue upon issuance of the Series B
Notes.
Interest on the Series B Notes is payable semi-annually on each April 15 and
October 15.
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PROCEDURES FOR TENDERING
Only a holder of Series A Notes may tender such Series A Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal, or such facsimile,
together with the Series A Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
To be tendered effectively, the Series A Notes, Letter of Transmittal and
other required documents must be completed and received by the Exchange Agent
at the address set forth below under "Exchange Agent" prior to 5:00 p.m., New
York City time, on the Expiration Date. Delivery of the Series A Notes may be
made by book-entry transfer in accordance with the procedures described below.
Confirmation of such book-entry transfer must be received by the Exchange
Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the Issuers
the representations set forth above under the heading "--Purpose and Effect of
the Exchange Offer."
The tender by a holder and the acceptance thereof by the Issuers will
constitute the agreement between such holder and the Issuers in accordance
with the terms and subject to the conditions set forth herein and in the
Letter of Transmittal.
THE METHOD OF DELIVERY OF SERIES A NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR SERIES A NOTES SHOULD BE SENT TO
THE ISSUERS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner whose Series A Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of the Medallion System (an
"Eligible Institution") unless the Series A Notes tendered pursuant thereto
are tendered (i) by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, are required to
be guaranteed, such guarantee must be by an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Series A Notes listed therein, such Series A Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Series A
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Series A Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and evidence satisfactory to the
Issuers of their authority to so act must be submitted with the Letter of
Transmittal.
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The Issuers understand that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Series A Notes at the book-entry transfer facility, The Depository Trust
Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Series A Notes by causing such Book-Entry
Transfer Facility to transfer such Series A Notes into the Exchange Agent's
account with respect to the Series A Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the
Series A Notes may be effected through book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Series A Notes and withdrawal of tendered
Series A Notes will be determined by the Issuers in their sole discretion,
which determination will be final and binding. The Issuers reserve the
absolute right to reject any and all Series A Notes not properly tendered or
any Series A Notes the Issuers' acceptance of which would, in the opinion of
counsel for the Issuers, be unlawful. The Issuers also reserve the right in
their sole discretion to waive any defects, irregularities or conditions of
tender as to particular Series A Notes. The Issuers' interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Series A
Notes must be cured within such time as the Issuers shall determine. Although
the Issuers intend to notify holders of defects or irregularities with respect
to tenders of Series A Notes, neither the Issuers, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Series A Notes will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any Series A Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
by the Exchange Agent to the tendering holders, unless otherwise provided in
the Letter of Transmittal, as soon as practicable following the Expiration
Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series A Notes and (i) whose Series A Notes
are not immediately available, (ii) who cannot deliver their Series A Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent or (iii) who cannot complete the procedures for book-entry transfer,
prior to the Expiration Date, may effect a tender if;
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Series A Notes and the principal amount of Series A Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
five New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing the Series A Notes (or a confirmation of book-
entry transfer of such Series A Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility), and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and
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(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Series A Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Series A Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent upon five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Series A Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Series A Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New
York City time, on the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Series A Notes to be
withdrawn (the "Depositor"), (ii) identify the Series A Notes to be withdrawn
(including the certificate number(s) and principal amount of such Series A
Notes, or, in the case of Series A Notes transferred by book-entry transfer,
the name and number of the account at the Book-Entry Transfer Facility to be
credited), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Series A Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Series A Notes register the transfer of such Series A Notes into the name of
the person withdrawing the tender and (iv) specify the name in which any such
Series A Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Issuers, whose
determination shall be final and binding on all parties. Any Series A Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Series B Notes will be issued with respect thereto
unless the Series A Notes so withdrawn are validly retendered. Any Series A
Notes which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Series A Notes may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or exchange Series B Notes for, any Series
A Notes, and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Series A Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Issuers, might materially impair
the ability of the Issuers to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Issuers or any of their Subsidiaries; or
(b) any law, rule, regulation or interpretation by the staff of the
Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Issuers, might materially impair the ability of the Issuers
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Issuers; or
(c) any governmental approval has not been obtained, which approval the
Issuers shall, in their reasonable discretion, deem necessary for the
consummation of the Exchange Offer and contemplated hereby.
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If the Issuers determine in their reasonable judgment that any of the
conditions are not satisfied, the Issuers may (i) refuse to accept any Series
A Notes and return all tendered Series A Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Series A Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders
to withdraw such Series A Notes (see "--Withdrawal of Tenders") or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Series A Notes which have not been withdrawn.
EXCHANGE AGENT
Bank of Montreal Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
Bank of Montreal Trust Company
88 Pine Street, 19th Floor
New York, New York 10005
Attn: Reorganization Department
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Issuers and their affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The Series B Notes will be recorded at the same carrying value as the Series
A Notes, which is face value, as reflected in the Issuers' accounting records
on the date of exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by the Issuers. The expenses related to the issuance of the
Notes and of the Exchange Offer will be amortized over the term of the
Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Series A Notes that are not exchanged for Series B Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Series A
Notes may be resold only (i) to the Issuers (upon redemption thereof or
otherwise), (ii) so long as the Series A Notes are eligible for resale
pursuant to Rule 144A under the Securities Act, to a person inside the United
States whom the seller reasonably believes is a qualified institutional buyer
within the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A, in accordance with Rule 144 under the Securities Act, or pursuant
to another exemption from the registration requirements of the Securities Act
(and based upon an opinion of counsel reasonably acceptable to the Issuers),
(iii) outside the United States to a
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foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act, (iv) to certain institutional "accredited investors" within
the meaning of Rule 501(a) under the Securities Act, in a minimum principal
amount of $250,000, or (v) pursuant to an effective registration statement
under the Securities Act, in each case in accordance with any applicable
securities laws of any state of the United States.
RESALE OF THE SERIES B NOTES
With respect to resales of Series B Notes, based on no-action letters issued
by the staff of the Commission to third parties, the Issuers believe that a
holder or other person who receives Series B Notes, whether or not such person
is the holder (other than a person that is an "affiliate" of the Issuers
within the meaning of Rule 405 under the Securities Act), who receives Series
B Notes in exchange for Series A Notes in the ordinary course of business and
who is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the
distribution of the Series B Notes, will be allowed to resell the Series B
Notes to the public without further registration under the Securities Act and
without delivering to the purchasers of the Series B Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if
any holder acquires Series B Notes in the Exchange Offer for the purpose of
distributing or participating in a distribution of the Series B Notes, such
holder cannot rely on the position of the staff of the Commission enunciated
in such no-action letters, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available. Further, each Participating Broker-Dealer that receives Series B
Notes for its own account in exchange for Series A Notes, where such Series A
Notes were acquired by such Participating Broker-Dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Series B Notes. See
"Plan of Distribution."
As contemplated by these no-action letters and the Exchange and Registration
Rights Agreement, each holder accepting the Exchange Offer is required to
represent to the Issuers in the Letter of Transmittal that (i) the Series B
Notes are to be acquired by the holder or the person receiving such Series B
Notes, whether or not such person is the holder, in the ordinary course of
business, (ii) the holder or any such other person (other than a broker-dealer
referred to in the next sentence) is not engaging and does not intend to
engage, in the distribution of the Series B Notes, (iii) the holder or any
such other person has no arrangement or understanding with any person to
participate in the distribution of the Series B Notes, (iv) neither the holder
nor any such other person is an "affiliate" of the Issuers within the meaning
of Rule 405 under the Securities Act, and (v) the holder or any such other
person acknowledges that if such holder or other person participates in the
Exchange Offer for
the purpose of distributing the Series B Notes it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the Series B Notes and cannot rely on those no-
action letters. As indicated above, each Participating Broker-Dealer that
receives a Series B Note for its own account in exchange for Series A Notes
must acknowledge that it will deliver a prospectus in connection with any
resale of such Series B Notes. For a description of the procedures for such
resales by Participating Broker-Dealers, see "Plan of Distribution."
BOOK-ENTRY; DELIVERY AND FORM
The Series A Notes were offered and sold in connection with the Series A
Notes Offering thereof solely to "qualified institutional buyers," as defined
in Rule 144A under the Securities Act ("QIBs"), pursuant to Rule 144A and in
offshore transactions to persons other than "U.S. persons", as defined in
Regulation S under the Securities Act ("Non-U.S. Persons"), in reliance on
Regulation S.
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THE GLOBAL NOTES
Except as described below, the Series B Notes initially will be represented
by permanent global certificates in definitive, fully registered form (the
"Global Notes"). The Global Notes will be deposited on the Issue Date with, or
on behalf of, The Depository Trust Company ("DTC") and registered in the name
of Cede & Co., as nominee of DTC, or will remain in the custody of the Trustee
pursuant to the FAST Balance Certificate Agreement between DTC and the
Trustee.
All interests in the Global Notes, including those held through Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear"), or Cedel Bank, societe anonyme ("Cedel"), may
be subject to the procedures and requirements of DTC. Those interests held
through Euroclear or Cedel may also be subject to the procedures and
requirements of such systems.
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of an interest in another Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in the other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such
an interest.
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time.
Neither the Issuers nor the Initial Purchaser takes any responsibility for
these operations or procedures, and investors are urged to contact the
relevant system or its participants directly to discuss these matters.
DTC has advised the Issuers that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking
organization" within the meaning of the New York Banking Law, (iii) a member
of the Federal Reserve System, (iv) a "clearing corporation" within the
meaning of the Uniform Commercial Code, as amended, and (v) a "clearing
agency" registered pursuant to Section 17A of the Exchange Act. DTC was
created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of its Participants, thereby eliminating the need for physical
transfer and delivery of certificates. DTC's Participants include securities
brokers and dealers (including the Initial Purchaser), banks and trust
companies, clearing corporations and certain other organizations. Indirect
access to DTC's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Investors who are not Participants
may beneficially own securities held by or on behalf of DTC only through
Participants or Indirect Participants.
The Issuers expect that pursuant to procedures established by DTC (i) upon
deposit of each Global Note, DTC will credit the accounts of Participants
designated by the Initial Purchaser with an interest in the Global Note and
(ii) ownership of the Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the interests of Participants) and the records of Participants and the
Indirect Participants (with respect to the interests of persons other than
Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only
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on behalf of its Participants, who in turn act on behalf of persons who hold
interests through Participants, the ability of a person having an interest in
Notes represented by a Global Note to pledge or transfer such interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a
Global Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
the giving of any direction, instruction or approval to the Trustee
thereunder. Accordingly, each holder owning a beneficial interest in a Global
Note must rely on the procedures of DTC and, if such holder is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such holder owns its interest, to exercise any rights of a
holder of Notes under the Indenture or such Global Note. The Issuers
understand that under existing industry practice, in the event that the
Issuers request any action of holders of Notes, or a holder that is an owner
of a beneficial interest in a Global Note desires to take any action that DTC,
as the holder of such Global Note, is entitled to take, DTC would authorize
the Participants to take such action and the Participants would authorize
holders owning through such Participants to take such action or would
otherwise act upon the instruction of such holders. Neither the Issuers nor
the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of Notes by DTC, or for
maintaining, supervising or reviewing any records of DTC relating to such
Notes.
Payments with respect to the principal of, and premium, if any, Liquidated
Damages, if any, and interest on, any Notes represented by a Global Note
registered in the name of DTC or its nominee on the applicable record date
will be payable by the Trustee to or at the direction of DTC or its nominee in
its capacity as the registered holder of the Global Note representing such
Notes under the Indenture. Under the terms of the Indenture, the Issuers and
the Trustee may treat the persons in whose names the Notes, including the
Global Notes, are registered as the owners thereof for the purpose of
receiving payment thereon and for any and all other purposes whatsoever.
Accordingly, neither the Issuers nor the Trustee have or will have any
responsibility or liability for the payment of such amounts to owners of
beneficial interests in a Global Note (including principal, premium, if any,
Liquidated Damages, if any, and interest). Payments by the Participants and
the Indirect Participants to the owners of beneficial interests in a Global
Note will be governed by standing instructions and customary industry practice
and will be the responsibility of the Participants or the Indirect
Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes, cross-market transfers between the Participants in DTC, on the one
hand, and Euroclear or Cedel participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as
the case may be, by its respective depositary; however, such cross-market
transactions will require delivery of instructions to Euroclear or Cedel, as
the case may be, by the counterparts in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Notes in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Cedel
participants may not deliver instructions directly to the depositaries for
Euroclear or Cedel.
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Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant
in DTC will be credited, and any such crediting will be reported to the
relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. Cash received in Euroclear
or Cedel as a result of sales of interest in a Global Security by or through a
Euroclear or Cedel participant to a Participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or Cedel cash account only as of the business day for Euroclear or
Cedel following DTC's settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued
at any time. Neither the Issuers nor the Trustee will have any responsibility
for the performance by DTC, Euroclear or Cedel or their respective
participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
CERTIFICATED NOTES
If (i) the Issuers notify the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation, (ii) the Issuers, at
their option, notify the Trustee in writing that it elects to cause the
issuance of Notes in definitive form under the Indenture or (iii) upon the
occurrence of certain other events as provided in the Indenture, then, upon
surrender by DTC of the Global Notes, Certificated Notes will be issued to
each person that DTC identifies as the beneficial owner of the Notes
represented by the Global Notes. Upon any such issuance, the Trustee is
required to register such Certificated Notes in the name of such person or
persons (or the nominee of any thereof) and cause the same to be delivered
thereto.
Neither the Issuers nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners
of the related Notes and each such person may conclusively rely on, and shall
be protected in relying on, instructions from DTC for all purposes (including
with respect to the registration and delivery, and the respective principal
amounts, of the Notes to be issued).
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Series B Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series B Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used in connection with resales of Series B Notes received in exchange for
Series A Notes only by Participating Broker-Dealers ("Eligible Participating
Broker-Dealers") who acquired such Series A Notes as a result of market-making
activities or other trading activities and not by Participating Broker-Dealers
who acquired such Series A Notes directly from the Issuers. The Issuers have
agreed that for a period of 90 days after the Expiration Date, they will make
this Prospectus, as amended or supplemented, available to any Eligible
Participating Broker-Dealer for use in connection with any such resale. In
addition, until , 1998, all dealers effecting transactions in the Series B
Notes may be required to deliver a prospectus.
The Issuers will not receive any proceeds from any sales of the Series B
Notes by Participating Broker-Dealers. Series B Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Series B Notes or
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a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such Participating Broker-Dealer and/or
the purchasers of any such Series B Notes. Any Participating Broker-Dealer
that resells the Series B Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Series B Notes may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Series B Notes and any commission or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a Participating Broker-Dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Issuers will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Eligible Participating Broker-Dealer that requests such
documents in the Letter of Transmittal. The Issuers have agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the Holders of the Notes) other than commissions or concessions of any
Participating Broker-Dealer and will indemnify the Holders of the Notes
(including any Participating Broker-Dealers) against certain liabilities
including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Series B Notes offered hereby will
be passed upon for the Issuers by Cooperman Levitt Winikoff Lester & Newman,
P.C., New York, New York. Robert L. Winikoff, a member of the Executive
Committee of Mediacom, is a member of Cooperman Levitt Winikoff Lester &
Newman, P.C.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1997 and
1996 and the consolidated statements of operations and accumulated deficit and
cash flows for the year ended December 31, 1997 and for the period from March
12, 1996 (the commencement of operations) to December 31, 1996 and the
statements of operations and cash flows for the period from January 1, 1996
through March 11, 1996 of Mediacom LLC and the Subsidiaries included in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
The consolidated balance sheets of the Cablevision Systems as of December
31, 1997 and 1996 and the related consolidated statements of operations,
partners' capital/(deficiency) and cash flows for the year ended December 31,
1997 and for the periods January 1, 1996 to August 12, 1996, and August 13,
1996 to December 31, 1996 and the consolidated balance sheets of the
Cablevision Systems as of December 31, 1996 and 1995 and the related
consolidated statements of operations, partners' capital/(deficiency) and cash
flows for the periods January 1, 1996 to August 12, 1996, and August 13, 1996
to December 31, 1996 and for the years ended December 31, 1995 and 1994, have
been included in this Prospectus and in the Registration Statement in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm
as experts in accounting and auditing. The reports of KPMG Peat Marwick LLP
include an explanatory paragraph relating to a change in cost basis of the
consolidated financial information as a result of a redemption of certain
limited and general partnership interests effective August 13, 1996.
128
The combined statements of operations and partnership's investment and cash
flows of the Lower Delaware System (as defined in Note 1 to the combined
statements of operations and partnership's investment and cash flows) for the
period from January 1, 1997 to June 23, 1997 and for the year ended December
31, 1996, have been included herein, in reliance upon the report, dated April
30, 1998, of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
The statements of operations and partners' capital and cash flows of Saguaro
Cable TV Investors Limited Partnership for the period from January 1, 1996 to
December 31, 1996 included in this Prospectus and elsewhere in the
Registration Statement, have been audited by Gustafson, Crandall &
Christensen, Inc., independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
The statements of operations and cash flows of Benchmark Acquisition Fund II
Limited Partnership for the year ended December 31, 1995 included in this
Prospectus and elsewhere in the Registration Statement, have been audited by
Keller Bruner & Company, L.L.C., independent public accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.
129
ADDITIONAL AVAILABLE INFORMATION
The Issuers have filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act with respect to the Series
B Notes offered hereby. This Prospectus does not contain all the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission, and to which
reference is hereby made. Statements contained in this Prospectus as to the
contents of any contract, agreement or any other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made
to such exhibit to the Registration Statement for a more complete description
of the matter involved, and each such statement shall be deemed qualified in
its entirety by such reference.
The Registration Statement can be inspected and copied at the Public
Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20459, and at the Commission's regional offices at Seven
World Trade Center, New York, New York 10048, and Citicorp Center, 600 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of the
Registration Statement can be obtained from the Public Reference Section of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20459,
at prescribed rates. The Issuers are filing the Registration Statement with
the Commission electronically. The Commission maintains a web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The
address of that web site is http://www.sec.gov.
As a result of the Exchange Offer, the Issuers will be subject to the
information reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). So long as the Issuers are subject to such
periodic reporting requirements under the Exchange Act, they will continue to
furnish the information required thereby to the Commission. The Issuers will
be required to file periodic reports with the Commission pursuant to the
Exchange Act during the Issuers' current fiscal year and thereafter so long as
the Notes are held by at least 300 registered holders. The Issuers do not
anticipate that, for periods following December 31, 1998, the Notes will be
held of record by more than 300 holders. Accordingly, after such date, the
Issuers do not expect to be required to comply with the periodic reporting
obligations imposed under the Exchange Act. However, under the Indenture
relating to the Notes, the Company has agreed that it will, to the extent such
filings are accepted by the Commission, and whether or not the Company has a
class of securities registered under the Exchange Act, file with the
Commission, and provide the Trustee and the holders of the Notes within 15
days after such filings with, annual reports containing the information
required to be contained in Form 10-K promulgated under the Exchange Act,
quarterly reports containing the information required to be contained in Form
10-Q promulgated under the Exchange Act, and from time to time such other
information as is required to be contained in Form 8-K promulgated under the
Exchange Act. If filing such reports with the Commission is not accepted by
the Commission or prohibited by the Exchange Act, the Company will also
provide copies of such reports, at its cost, to prospective purchasers of the
Notes promptly upon written request.
130
GLOSSARY
The following is a description of certain terms used in this Prospectus:
ADDRESSABILITY Addressable technology enables the cable
television operator to electronically control
from its central facilities the cable television
services delivered to the subscriber. This
technology facilitates pay-per-view services,
reduces service theft, and provides a cost-
effective method to upgrade and downgrade
programming services to subscribers.
BASIC PENETRATION Basic subscribers as a percentage of total number
of homes passed.
BASIC SERVICE TIER A package of over-the-air broadcast stations,
local access channels and certain satellite-
delivered cable television services (other than
premium services).
BASIC SUBSCRIBER A subscriber to a cable television system who
receives the Basic Service Tier and who is
usually charged a flat monthly rate for a number
of channels.
CPST Cable programming services other than programming
services provided on the Basic Service Tier or on
a per-channel or per-program basis. Also referred
to as expanded basic service.
CABLE MODEM A device similar to a telephone modem that sends
and receives signals over a cable television
network at speeds exceeding 100 times the
capacity of a telephone modem.
CONVERTER Electronic device that permits tuning of a cable
television signal to permit reception by
subscriber television sets and VCRs and provides
a means of access control for cable television
programming.
COST-OF-SERVICE A rate-setting methodology prescribed by the FCC
which may give a cable television operator the
ability to establish maximum rates for regulated
services in excess of the benchmark rate that
would otherwise be applicable.
DIGITAL COMPRESSION The conversion of the standard analog video
signal into a digital signal, and the compression
of that signal to facilitate multiple channel
transmissions through a single channel's
bandwidth.
DIRECT BROADCAST SATELLITE A service by which packages of television
(DBS) programming are transmitted via high-powered
satellites to individual homes, each served by a
small satellite dish.
EBITDA
Represents operating income (loss) before
depreciation and amortization.
131
FIBER-TO-THE-FEEDER (FTF)
This network architecture, using a combination of
fiber optic cable and coaxial cable transmission
lines, delivers signals deeper into the cable
plant than fiber backbone design. The FTF plant
transmits signals to small neighborhood nodes and
then from the nodes to the end user on a
combination of coaxial cable distribution/feeder
and customer drop lines. FTF design is ideal for
heavily populated areas.
FIBER BACKBONE The principal fiber optic trunk lines that
deliver signals to smaller concentrations of
customers along longer transmission lines than
FTF design. Fiber backbone design is ideal for
scattered pockets of concentrated customers
served from one headend facility.
FIBER OPTIC CABLE Cable made of glass fibers through which signals
are transmitted as pulses of light to the
distribution portion of the cable television
which in turn goes to the customer's home.
Capacity for a very large number of channels can
be more easily provided.
HEADEND A collection of hardware, typically including
satellite receivers, modulators, amplifiers and
video cassette playback machines within which
signals are processed and then combined for
distribution within the cable television network.
HIGH-SPEED DATA NETWORK Any network dedicated to the transmission of data
to residences and commercial establishments.
Includes Local Area Networks (LAN).
HOMES PASSED A home is deemed to be passed if it can be
connected to the distribution system without
further extension of the distribution network.
INTERNET The large, worldwide network of thousands of
smaller, interconnected computer networks.
Originally developed for use by the military and
for academic research purposes, the Internet is
now accessible by millions of users.
LAN Local Area Network. A communications network that
serves users within a confined geographical area,
consisting of servers, workstations, a network
operating system and a communications link.
LOCAL MULTIPOINT A proposed method of distribution for television
DISTRIBUTION SERVICE and information using microwave transmissions at
a higher frequency than MMDS.
MDU Multiple dwelling units such as condominiums,
apartment complexes, hospitals, hotels and other
commercial complexes.
MULTICHANNEL MULTIPOINT
DISTRIBUTION A one-way radio transmission of television
SERVICE (MMDS) channels over microwave frequencies from a fixed
station transmitting to multiple receiving
facilities located at fixed points.
132
MULTIPLE SYSTEM OPERATOR A cable television operator that owns or operates
(MSO) more than one cable television system.
MUST CARRY The provisions of the 1992 Act that require cable
television operators to carry local commercial
and noncommercial television broadcast stations
on their systems.
NON-METROPOLITAN MARKETS Markets consisting of small cities and their
surrounding areas, typically with populations of
500,000 or less, according to the metropolitan
areas measurement of the U.S. Census Bureau.
PAY-PER-VIEW Programming offered by a cable television
operator on a per-program basis which a
subscriber selects and for which a subscriber
pays a separate fee.
PREMIUM PENETRATION Premium service units as a percentage of the
total number of basic service subscribers. A
customer may purchase more than one premium
service, each of which is counted as a separate
premium service unit. This ratio may be greater
than 100% if the average customer subscribes to
more than one premium service unit.
PREMIUM SERVICE Individual cable programming service available
only for monthly subscriptions on a per-channel
basis.
PREMIUM UNITS The number of subscriptions to premium services
which are paid for on an individual basis.
REGIONAL CLUSTER Cable television systems grouped in specific
geographic regions and managed together to
achieve economies of scale and operating
efficiencies in such areas as system management,
marketing, administrative and technical service.
SYSTEM CASH FLOW Represents EBITDA before management fees.
TELEPHONE MODEM A device either inserted in a computer or
attached externally that encodes (modulates) or
decodes (demodulates) an analog telephone signal
to a digital signal to receive data.
UPGRADE
The upgrade of an existing cable television
system, usually undertaken to improve either its
technological performance or to expand the
system's channel or bandwidth capacity in order
to provide more programming and other services.
133
INDEX TO FINANCIAL STATEMENTS
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
Report of Independent Public Accountants................................. F-3
Consolidated Balance Sheets as of December 31, 1997 and 1996............. F-5
Consolidated Statements of Operations for the Year Ended December 31,
1997, for the Period from Commencement of Operations (March 12, 1996) to
December 31, 1996, for the Period from January 1, 1996 through March 11,
1996, and for the Year Ended December 31, 1995 ......................... F-6
Consolidated Statements of Changes in Members' Equity for the Year Ended
December 31, 1997 and for the Period from Commencement of Operations
(March 12, 1996) to December 31, 1996................................... F-7
Consolidated Statements of Cash Flows for the Year Ended December 31,
1997, for the Period from Commencement of Operations (March 12, 1996) to
December 31, 1996, for the Period from January 1, 1996 through March 11,
1996, and for the Year Ended December 31, 1995 ......................... F-8
Notes to Consolidated Financial Statements............................... F-9
Consolidated Balance Sheet as of March 31, 1998 (unaudited).............. F-20
Consolidated Statements of Operations for the Three Months Ended March
31, 1998 and 1997 (unaudited)........................................... F-21
Consolidated Statements of Changes in Members' Equity.................... F-22
Consolidated Statements of Cash Flows for the Three Months Ended March
31, 1998 and 1997 (unaudited)........................................... F-23
Notes to Unaudited Interim Consolidated Financial Statements............. F-24
MEDIACOM CAPITAL CORPORATION
FINANCIAL STATEMENT
CONTENTS
Report of Independent Public Accountants................................. F-30
Balance Sheet as of March 31, 1998....................................... F-31
Note to the Balance Sheet................................................ F-32
U.S. CABLE TELEVISION GROUP, L.P. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
Independent Auditors' Report............................................. F-33
Consolidated Balance Sheets as of December 31, 1997 and 1996............. F-34
Consolidated Statements of Operations and Partners' Capital/(Deficiency),
Year Ended December 31, 1997, Period from August 13, 1996 to December
31, 1996, and January 1, 1996 to August 12, 1996........................ F-35
Consolidated Statements of Cash Flows, Year Ended December 31, 1997,
Period from August 13, 1996 to December 31, 1996 and January 1, 1996 to
August 12, 1996 ........................................................ F-36
F-1
INDEX TO FINANCIAL STATEMENTS (CONT.)
U.S. CABLE TELEVISION GROUP, L.P. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
Notes to Consolidated Financial Statements............................... F-37
Independent Auditors' Report............................................. F-42
Consolidated Balance Sheets as of December 31, 1996 and 1995............. F-43
Consolidated Statements of Operations and Partners' Capital/(Deficiency),
Period from January 1, 1996 to August 12, 1996, and August 13, 1996 to
December 31, 1996, and Years Ended December 31, 1995 and 1994........... F-44
Consolidated Statements of Cash Flows, Period from January 1, 1996 to
August 12, 1996, and August 13, 1996 to December 31, 1996 and Years
Ended December 31, 1995 and 1994........................................ F-45
Notes to Consolidated Financial Statements............................... F-46
LOWER DELAWARE SYSTEM
COMBINED STATEMENTS OF OPERATIONS AND PARTNERSHIP'S
INVESTMENT AND CASH FLOWS
CONTENTS
Independent Auditors' Report............................................. F-53
Combined Statements of Operations and Partnership's Investment for the
Period from January 1, 1997 to June 23, 1997 and the Year Ended December
31, 1996................................................................ F-54
Combined Statements of Cash Flows for the Period from January 1, 1997 to
June 23, 1997 and the Year Ended December 31, 1996 ..................... F-55
Notes to Combined Statements of Operations and Partnership's Investment
and Cash Flows.......................................................... F-56
SAGUARO CABLE TV INVESTORS
LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
CONTENTS
Independent Auditor's Report............................................. F-60
Balance Sheet as of December 26, 1996.................................... F-61
Statement of Operations and Partners' Capital, Period from January 1,
1996 to December 26, 1996............................................... F-62
Statement of Cash Flows, Period from January 1, 1996 to December 26, 1996
........................................................................ F-63
Notes to Financial Statements............................................ F-65
F-2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mediacom LLC:
We have audited the accompanying consolidated balance sheets of Mediacom LLC
(a New York limited liability company) and subsidiaries as of December 31,
1997 and 1996, and the related consolidated statements of operations, changes
in members' equity and cash flows for the year ended December 31, 1997 and for
the period from commencement of operations (March 12, 1996) to December 31,
1996 and the statements of operations and cash flows for the period January 1,
1996 through March 11, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Mediacom LLC
and its subsidiaries as of December 31, 1997 and 1996, and the results of
their operations, members' equity and cash flows for the year ended December
31, 1997 and for the period from commencement of operations (March 12, 1996)
to December 31, 1996 and the statements of operations and cash flows for the
period January 1, 1996 through March 11, 1996 in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Stamford, Connecticut
April 4, 1998
F-3
INDEPENDENT AUDITORS' REPORT
To the Partners
Benchmark Acquisition Fund II Limited Partnership
Sterling, Virginia
We have audited the accompanying statements of operations and cash flows of
Benchmark Acquisition Fund II Limited Partnership (the Partnership) for the
year ended December 31, 1995. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of
Benchmark Acquisition Fund II Limited Partnership for the year ended December
31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 3 to the financial statements, in 1996 the Partnership
sold substantially all of its assets to an unrelated entity.
Keller Bruner & Company, L.L.C.
Bethesda, Maryland
February 28, 1996, except Note 3,
as to which the date is March 12, 1996
F-4
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
1997 1996
-------- -------
ASSETS
Cash and cash equivalents.................................. $ 1,027 $ 396
Subscriber accounts receivable, net of allowance for
doubtful accounts of $56 in 1997 and $25 in 1996.......... 618 267
Prepaid expenses and other assets.......................... 1,358 1,323
Investment in cable television systems:
Inventory................................................ 1,032 327
Property, plant and equipment, at cost................... 51,735 18,993
Less- accumulated depreciation........................... (5,737) (1,056)
-------- -------
Property, plant and equipment, net..................... 45,998 17,937
Intangible assets, net of accumulated amortization of
$3,429 in 1997 and $923 in 1996......................... 47,859 24,307
-------- -------
Total investment in cable television systems........... 94,889 42,571
Other assets, net of accumulated amortization of $627 in
1997 and $178 in 1996................................... 4,899 2,003
-------- -------
Total assets........................................... $102,791 $46,560
======== =======
LIABILITIES AND MEMBERS' EQUITY
LIABILITIES
Senior bank debt........................................... $ 69,575 $37,600
Seller note................................................ 3,193 2,929
Accounts payable and accrued expenses...................... 4,874 1,354
Subscriber advances........................................ 603 105
Management fees payable.................................... 105 35
-------- -------
Total liabilities...................................... 78,350 42,023
MEMBERS' EQUITY
Capital contributions.................................... 30,990 6,490
Accumulated deficit...................................... (6,549) (1,953)
-------- -------
Total members' equity.................................. 24,441 4,537
-------- -------
Total liabilities and members' equity.................. $102,791 $46,560
======== =======
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
F-5
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997,
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(MARCH 12, 1996) TO DECEMBER 31, 1996, FOR THE PERIOD FROM JANUARY 1, 1996
THROUGH MARCH 11, 1996 AND FOR THE YEAR ENDED DECEMBER 31, 1995
(ALL DOLLAR AMOUNTS IN 000'S)
THE COMPANY PREDECESSOR
--------------------------- ----------------------------
MARCH 12, 1996
TO JANUARY 1, 1996
DECEMBER 31, DECEMBER 31, THROUGH DECEMBER 31,
1997 1996 MARCH 11, 1996 1995
------------ -------------- --------------- ------------
Revenues................ $17,634 $ 5,411 $1,038 $ 5,171
------- ------- ------ -------
Costs and expenses:
Service costs......... 5,547 1,511 297 1,536
Selling, general and
administrative
expenses............. 2,696 931 222 1,059
Management fee
expense.............. 882 270 52 261
Depreciation and
amortization......... 7,636 2,157 527 3,945
------- ------- ------ -------
Operating income
(loss)................. 873 542 (60) (1,630)
Interest expense, net... 4,829 1,528 201 935
Other expenses.......... 640 967 -- --
------- ------- ------ -------
Net loss................ $(4,596) $(1,953) $ (261) $(2,565)
======= ======= ====== =======
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
FOR THE PERIOD FROM COMMENCEMENT OF OPERATIONS
(MARCH 12, 1996) TO DECEMBER 31, 1996
(ALL DOLLAR AMOUNTS IN 000'S)
Balance, Commencement of Operations (March 12, 1996)................... $ 5,490
Capital Contributions................................................ 1,000
Net Loss............................................................. (1,953)
-------
Balance, December 31, 1996............................................. 4,537
Capital Contributions................................................ 24,500
Net Loss............................................................. (4,596)
-------
Balance, December 31, 1997............................................. $24,441
=======
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-7
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997,
FOR THE PERIOD FROM COMMENCEMENT
(MARCH 12, 1996) TO DECEMBER 31, 1996,
THE PERIOD FROM JANUARY 1, 1996 THROUGH MARCH 11, 1996
AND FOR THE YEAR ENDED DECEMBER 31, 1995
(ALL DOLLAR AMOUNTS IN 000'S)
THE COMPANY PREDECESSOR
--------------------------- ----------------------------
MARCH 12, 1996 JANUARY 1, 1996
TO THROUGH
DECEMBER 31, DECEMBER 31, MARCH 11, DECEMBER 31,
1997 1996 1996 1995
------------ -------------- --------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................................... $ (4,596) $ (1,953) (261) $(2,565)
Adjustments to reconcile net loss to net cash flows from operating
activities:
Accretion of interest on seller note............................ 264 129 -- --
Depreciation and amortization................................... 7,636 2,157 527 3,945
(Increase) decrease in subscriber accounts receivable........... (351) (267) (40) 31
(Increase) decrease in prepaid expenses and other assets........ (34) (1,323) -- 31
Increase (decrease) in accounts payable and accrued expenses.... 3,520 1,354 -- (2)
Increase (decrease) in subscriber advances...................... 498 105 -- (23)
Increase in management fees payable............................. 70 35 -- --
Increase in due to related entities............................. -- -- -- 61
-------- -------- ---- -------
Net cash flows from operating activities...................... 7,007 237 226 1,478
-------- -------- ---- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures.............................................. (4,699) (671) (86) (261)
Acquisitions of cable television systems.......................... (54,842) (44,539) -- --
Other, net........................................................ (467) (47) -- --
-------- -------- ---- -------
Net cash flows used in investing activities................... (60,008) (45,257) (86) (261)
-------- -------- ---- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
New borrowings.................................................... 72,225 39,200 -- --
Repayment of debt................................................. (40,250) (1,600) -- (1,077)
Increase in seller note........................................... -- 2,800 -- --
Capital contributions............................................. 24,500 6,490 -- --
Financing costs................................................... (2,843) (1,474) -- --
-------- -------- ---- -------
Net cash flows from financing activities...................... 53,632 45,416 -- (1,077)
-------- -------- ---- -------
Net increase in cash and cash equivalents..................... 631 396 140 140
CASH AND CASH EQUIVALENTS, beginning of period...................... 396 -- 266 126
-------- -------- ---- -------
CASH AND CASH EQUIVALENTS, end of period............................ $ 1,027 $ 396 $406 $ 266
======== ======== ==== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest......................... $ 4,485 $ 1,190 $201 $ 935
======== ======== ==== =======
The accompanying notes to consolidated financial statements are an integral
part of these statements.
F-8
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
(1) THE LIMITED LIABILITY COMPANY:
Organization
Mediacom LLC ("Mediacom" and collectively with its subsidiaries, the
"Company"), a New York limited liability company, was formed on July 17, 1995
and initially conducted its affairs pursuant to an operating agreement dated
March 12, 1996 (the "1996 Operating Agreement"). On March 31 and June 16,
1997, the 1996 Operating Agreement was amended and restated upon the admission
of new members to Mediacom (the "1997 Operating Agreement"). On January 20,
1998, the 1997 Operating Agreement was amended and restated upon the admission
of additional members to Mediacom (the "1998 Operating Agreement"). As of
December 31, 1997, the Company had acquired and was operating cable television
systems in California, Delaware and Arizona (see Note 3).
Capitalization
The Company was initially capitalized on March 12, 1996, with equity
contributions of $5,445 from Mediacom's members and $45 from Mediacom
Management Corporation ("Mediacom Management"). On June 28, 1996, Mediacom
received additional equity contributions of $1,000 from an existing member.
On June 22 and September 18, 1997, Mediacom received additional equity
contributions of $19,500 and $5,000, respectively, from its members. On
January 22, 1998, in connection with the acquisition of the Cablevision
Systems (see Note 13), Mediacom received additional equity contributions of
$94,000 from its members.
Allocation of Losses, Profits and Distributions
For 1996, net losses were allocated 98% to the Commisso Members as defined
in the operating agreements (the "Managing Member") and the balance to the
other members ratably in accordance with their respective membership units.
For 1997, pursuant to the 1997 Operating Agreement, net losses were allocated
99% to the Managing Member and the balance to the other members ratably in
accordance with their respective membership units.
Profits are allocated first to the members to the extent of their deficit
capital account; second, to the members to the extent of their preferred
capital; third, to the members (including the Managing Member) until they
receive an 8% preferred return on their preferred capital (the "Preferred
Return"); fourth, to the Managing Member until the Managing Member receives an
amount equal to 25% of the amount provided to deliver the Preferred Return to
all members; the balance, 80% to the members (including the Managing Member)
in proportion to their respective membership units and 20% to the Managing
Member. The 1997 Operating Agreement increased the Preferred Return from 8% to
12%.
Distributions are made first to the members (including the Managing Member)
in proportion to their respective membership units until they receive amounts
equal to their preferred capital; second, to the members (including the
Managing Member) in proportion to their percentage interests until all members
receive the Preferred Return; third, to the Managing Member until the Managing
Member receives 25% of the amount provided to deliver the Preferred Return;
the balance, 80% to the members (including the Managing Member) in proportion
to their percentage interests and 20% to the Managing Member.
F-9
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
Redemption Rights
Except as set forth below, no member has the right to have its membership
interests redeemed or its capital contributions returned prior to dissolution
of Mediacom. Pursuant to the 1998 Operating Agreement, each member has the
right to require Mediacom to redeem its membership interests at any time if
the holding of such interests exceeds the amount permitted, or is otherwise
prohibited or becomes unduly burdensome, by any law to which such member is
subject, or, in the case of any member which is a Small Business Investment
Company as defined in and subject to regulation under the Small Business
Investment Act of 1958, as amended, upon a change in the Company's principal
business activities to an activity not eligible for investment by a Small
Business Investment Company or a change in the reported use of proceeds of a
member's investment in Mediacom. If Mediacom is unable to redeem for cash any
or all of such membership interests at such time, Mediacom will issue as
payment for such interests a junior subordinated promissory note with a five-
year maturity date and deferred interest which accrues and compounds at an
annual rate of 5% over prime.
In addition, in connection with the Company's acquisition of the Cablevision
Systems on January 23, 1998 (see Note 13), the Federal Communications
Commission (the "FCC") issued a transactional forbearance from its cross-
ownership restrictions, effective for a period of one year, permitting a
certain existing member (the "Transactional Member") to purchase additional
units of membership interest in Mediacom. If at the end of such one-year
period, the Transactional Member's membership interest in Mediacom remains
above the limitations imposed by the FCC's cross-ownership restrictions,
Mediacom will be required to repurchase such number of the Transactional
Member's units of membership interest which exceed the permissible ownership
level. If such repurchase were to occur on January 23, 1999 (i.e., upon
expiration of the transactional forbearance), and assuming no changes in the
number of outstanding membership units of Mediacom and no changes in such
cross-ownership rules, the repurchase price for such excess membership
interests would be approximately $7,500.
Duration and Dissolution
Mediacom will be dissolved upon the first to occur of the following: (i)
December 31, 2020; (ii) certain events of bankruptcy involving the Managing
Member or the occurrence of any other event terminating the continued
membership of the Managing Member, unless within one hundred eighty days after
such event the Company is continued by the vote or written consent of no less
than two-thirds of the remaining membership interests; or (iii) the entry of a
decree of judicial dissolution.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Preparation of Consolidated Financial Statements
The consolidated financial statements include the accounts of Mediacom and
its subsidiaries. All significant intercompany transactions and balances have
been eliminated. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The financial statements for the period from January 1, 1996, through March
11, 1996, and the year ended December 31, 1995, reflecting the results of
operations and statement of cash flows, are referred to as the "Predecessor"
financial statements. The Predecessor is Benchmark Acquisition
F-10
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
Fund II Limited Partnership which owned the assets comprising the cable
television system serving at the time of its acquisition by the Company 10,300
subscribers in Ridgecrest, California (the "Ridgecrest System"). See Note 3.
Accordingly, the accompanying financial statements of the Predecessor and the
Company are not comparable in all material respects since those financial
statements report results of operations and cash flows of these two separate
entities.
Revenue Recognition
Revenues are recognized in the period in which the related services are
provided to the Company's subscribers.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents.
Concentration of Credit Risk
The Company's accounts receivable is comprised of amounts due from
subscribers in varying regions throughout the United States. Concentration of
credit risk with respect to these receivables are limited due to the large
number of customers comprising the Company's customer base and their
geographic dispersion.
Property, Plant and Equipment
Property, plant and equipment is recorded at purchased and capitalized cost.
Repairs and maintenance are charged to operations, and replacements, renewals
and additions are capitalized. The Company capitalized a portion of salaries
and overhead related to the installation of property, plant and equipment of
approximately $681 and $107 in 1997 and 1996, respectively.
Intangible Assets
Intangible assets include franchising costs, goodwill, subscriber lists and
covenants not to compete. Amortization of intangible assets is calculated on a
straight-line basis over the following lives:
Franchising costs.................................................. 15 years
Goodwill........................................................... 15 years
Subscriber lists................................................... 5 years
Covenants not to compete........................................... 3-7 years
F-11
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
The following table summarizes the net asset amount for each intangible
asset category as of December 31, 1997 and December 31, 1996.
GROSS ASSET NET ASSET
1997 VALUE AMORTIZATION VALUE
- ---- ----------- ------------ ---------
Franchising costs............................ $22,181 $1,732 $20,449
Goodwill..................................... 5,640 232 5,408
Subscriber lists............................. 18,573 1,085 17,488
Covenants not to compete..................... 4,842 328 4,514
------- ------ -------
Total intangible assets.................... $51,236 $3,377 $47,859
======= ====== =======
GROSS ASSET NET ASSET
1996 VALUE AMORTIZATION VALUE
- ---- ----------- ------------ ---------
Franchising costs............................ $17,330 $ 526 $16,804
Goodwill..................................... 1,330 67 1,263
Subscriber lists............................. 5,095 274 4,821
Covenants not to compete..................... 1,537 118 1,419
------- ------ -------
Total intangible assets.................... $25,292 $ 985 $24,307
======= ====== =======
Impairment of Long-Lived Assets
The Company follows the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires that
long-lived assets and certain identifiable intangibles to be held and used by
any entity, be reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.
There has been no impairment of long-lived assets of the Company under SFAS
121.
Other Assets
Other assets include organizational and financing costs. Organizational
costs are being amortized on a straight-line basis over 5 years. Financing
costs incurred to raise debt and equity capital are deferred and amortized on
a straight-line basis over the expected term of such financings. Included in
"Other assets" are financing costs of $3,963 and $1,388 as of December 31,
1997 and 1996, respectively.
Income Taxes
Since Mediacom is a limited liability company and the Predecessor is a
limited partnership, they are not subject to federal or state income taxes,
and no provision for income taxes relating to their statements of operations
have been reflected in the accompanying financial statements. The members of
Mediacom and the limited partners of the Predecessor are required to report
their share of income or loss in their respective income tax returns.
(3) ACQUISITIONS:
The undernoted acquisitions (the "Acquired Systems") were accounted for as
purchases with the acquired assets and liabilities recorded at their fair
values. Accordingly, the results of operations of the
Acquired Systems have been included with those of the Company since the date
of acquisition.
F-12
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
1997
On June 24, 1997, Mediacom Delaware LLC ("Mediacom Delaware"), a directly
owned subsidiary of Mediacom, acquired the assets of a cable television system
serving approximately 29,300 subscribers in lower Delaware and southwestern
Maryland for a purchase price of $42,900. The purchase price has been
preliminarily allocated as follows: $21,450 to property, plant and equipment,
$14,200 to franchise costs and $7,250 to subscriber lists. Additionally, $275
of direct acquisition costs has been allocated to other assets.
On September 19, 1997, Mediacom California LLC ("Mediacom California"), a
directly owned subsidiary of Mediacom, acquired the assets of a cable
television system serving approximately 9,600 subscribers in Sun City,
California for a purchase price of $11,500. The purchase price has been
preliminarily allocated as follows: $4,600 to property, plant and equipment,
$4,500 to franchise costs and $2,400 to subscriber lists. Additionally, $167
of direct acquisition costs has been allocated to other assets.
1996
On March 12, 1996, Mediacom California acquired the assets of the Ridgecrest
System serving approximately 10,300 subscribers in Ridgecrest, California and
surrounding communities for a purchase price of $18,750. The purchase price
has been allocated as follows: $5,303 to property, plant and equipment,
$12,117 to franchise costs and $1,330 to goodwill. Additionally, $285 of
direct acquisition costs has been allocated to other assets.
On June 28, 1996, Mediacom California acquired the assets of a cable
television system serving approximately 6,600 subscribers in Kern Valley,
California and surrounding communities (the "Kern Valley System") for a
purchase price of $8,250 in cash plus a senior subordinated note payable to
the seller of $2,800 (see Note 8). The purchase price has been allocated as
follows: $5,537 to property, plant and equipment, $1,768 to franchise costs,
$2,640 to subscriber lists and $1,105 to covenant not to compete.
Additionally, $17 of direct acquisition costs has been allocated to other
assets.
On December 27, 1996, Mediacom California acquired the assets of a cable
television system serving approximately 2,000 subscribers in Valley Center,
California and surrounding communities for a purchase price of $2,515. The
purchase price has been allocated as follows: $2,030 to property, plant and
equipment, $160 to franchise costs, $250 to subscriber lists and $75 to
covenant not to compete. Additionally, $23 of direct acquisition costs has
been allocated to other assets.
On December 27, 1996, Mediacom Arizona LLC ("Mediacom Arizona"), a directly
owned subsidiary of Mediacom, acquired the assets of cable television systems
serving approximately 8,000 subscribers in Nogales and Ajo, Arizona and
surrounding communities for a purchase price of $11,420. The purchase price
has been allocated as follows: $5,590 to property, plant and equipment, $3,285
to franchise costs, $2,195 to subscriber lists and $350 to covenant not to
compete. Additionally, $137 of direct acquisition costs has been allocated to
other assets.
On December 10, 1996, Mediacom California acquired an Internet service
provider serving approximately 2,200 subscribers in Ridgecrest, California and
surrounding communities for an initial purchase price of $342. The purchase
price has been allocated as follows: $325 to property, plant and equipment,
$10 to subscriber lists and $7 to covenant not to compete.
F-13
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
(4) PRO FORMA RESULTS:
Summarized below are the pro forma unaudited results of operations for the
years ended December 31, 1997 and 1996, assuming the purchase of the Acquired
Systems had been consummated as of January 1, 1996. Adjustments have been made
to: (i) operating expenses; (ii) depreciation and amortization reflecting the
fair value of the assets acquired; (iii) interest expense; (iv) management
fees; and (v) other expenses. The pro forma results may not be indicative of
the results that would have occurred if the combination had been in effect on
the dates indicated or which may be obtained in the future.
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
Revenue.................................. $ 24,119 $23,017
Operating loss........................... (3,598) (1,914)
Net loss................................. $(10,297) $(9,688)
(5) RECENT ACCOUNTING PRONOUNCEMENTS:
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" and SFAS No. 131,"Disclosure about Segments of an Enterprise and
Related Information", and in 1998, issued SFAS No. 132 "Employer's Disclosure
about Pension and Other Post Retirement Benefits" and SFAS No. 133 "Accounting
for Derivative Instruments and Hedging Activities". The adoption of these
standards are not expected to impact the Company's results of operations,
financial position or cash flows.
(6) PROPERTY, PLANT AND EQUIPMENT:
As of December 31, 1997 and 1996, property, plant and equipment consisted
of:
1997 1996
------- -------
Land........................................................ $ 108 $ 108
Buildings and leasehold improvements........................ 337 250
Cable systems, equipment and subscriber devices............. 49,071 17,614
Vehicles.................................................... 1,135 378
Furniture, fixtures and office equipment.................... 1,084 643
------- -------
$51,735 $18,993
======= =======
Depreciation is calculated on a straight-line basis over the following
useful lives:
Buildings........................................... 45 years
Leasehold improvements.............................. Life of respective lease
Cable systems and equipment......................... 5 to 10 years
Subscriber devices.................................. 5 years
Vehicles............................................ 5 years
Furniture, fixtures and office equipment............ 5 to 10 years
F-14
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
(7) SENIOR BANK DEBT:
On December 27, 1996, Mediacom's subsidiaries entered into an amended and
restated credit agreement, providing for a $15,000 reducing revolving credit
and a $25,000 term loan. On June 24, 1997, Mediacom California, Mediacom
Delaware and Mediacom Arizona (collectively, the "Western Group") entered into
a second amended and restated credit agreement (the "Western Credit
Facility"), providing for a $40,000 reducing revolving credit and $60,000 in
term loans. On March 24, 1998, the Western Credit Facility was amended,
providing for a $70,000 reducing revolving credit (the "Revolver") and a
$30,000 term loan ("Term Loan"). Under the terms of the Western Credit
Facility, the Western Group may borrow up to $70,000 under the Revolver,
subject to certain limitations. Beginning on September 30, 1998, the Western
Credit Facility provides for quarterly reductions, ranging from 0.21% to 8.29%
of the Revolver, with a final reduction on September 30, 2005. Beginning on
September 30, 1998, the Term Loan will be repaid in 29 consecutive quarterly
installments, ranging from 0.42% to 11.67% of the Term Loan, with the final
installment on September 30, 2005. The Western Credit Facility also provides
mandatory reductions of the Revolver and mandatory prepayments of the Term
Loan from excess cash flow as defined, beginning December 31, 1999.
The Western Credit Facility provides for a commitment fee of 1/2% per annum
on the unused portion of the Revolver and such fees are reflected in "Other
expenses" in the accompanying consolidated statements of operations. Under the
Western Credit Facility, the Company has the option of paying interest at
either the Base Rate or the Eurodollar Rate, as defined below, plus a margin
which is based on the attainment of certain financial ratios. The effective
interest rate at December 31, 1997 was 8.33% before giving effect to the
interest rate exchange agreements described below. The applicable margins for
the respective borrowing rate options have the following ranges:
INTEREST RATE OPTION MARGIN RATE
-------------------- --------------
Base Rate.................................................... 0.375% to 1.75%
Eurodollar Rate.............................................. 1.375% to 2.75%
The Western Credit Facility contains covenants, including, but not limited
to, insurance requirements, limitations on mergers and acquisitions,
consolidations and sales of certain assets, restrictions on certain
transactions with affiliates, the maintenance of certain financial ratios,
such as, the leverage ratio, the interest coverage ratio and the fixed charge
coverage ratio, limitations on liens, the incurrence of additional
indebtedness and certain restricted payments, and restrictions on the ability
to engage in any business. The Western Group is in compliance with all
financial ratios as of December 31, 1997. The Western Credit Facility is
secured by Mediacom's pledge of all its ownership interests in the Western
Group and a first priority lien on all the tangible and intangible assets of
the Western Group, other than real property. The indebtedness under the
Western Credit Facility is guaranteed by Mediacom on a limited recourse basis
to the extent of its ownership interests in the Western Group. At December 31,
1998, the Company had $30,375 of unused commitments under the Western Credit
Facility, of which approximately $3,400 could have been borrowed by the
Western Group for purposes of distributing such borrowed proceeds to Mediacom
under the most restrictive covenants of the Western Credit Facility.
F-15
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
The stated maturities of all debt outstanding under the Western Credit
Facility, as amended, as of December 31, 1997 are as follows:
1998................................................................. $ 250
1999................................................................. 2,000
2000................................................................. 2,300
2001................................................................. 3,600
2002................................................................. 4,000
Thereafter........................................................... 57,425
-------
$69,575
=======
The Western Group has entered into interest rate exchange agreements (the
"Swaps") with various banks pursuant to which the interest rate on $62,000 is
fixed at a weighted average swap rate of 6.19%, plus the average applicable
margin over the Eurodollar Rate option under the Western Credit Facility.
Under the terms of the Swaps, which expire from 1998 through 2002, the Company
is exposed to credit loss in the event of nonperformance by the other parties
to the Swaps. However, the Company does not anticipate nonperformance by the
counterparties.
(8) SELLER NOTE:
In connection with the acquisition of the Kern Valley System, the Western
Group issued to the seller an unsecured senior subordinated note (the "Seller
Note") in the amount of $2,800, with a final maturity of June 28, 2006.
Interest is deferred throughout the term of the note and is payable at
maturity or upon prepayment. For the five-year period ending June 28, 2001,
the annual interest rate is 9.0%. After the initial five-year period, the
annual interest rate increases to 15.0%, with an interest clawback for the
first five years. After the initial seven-year period, the interest rate
increases to 18.0%, with an interest clawback for the first seven years. The
Company intends to prepay the Seller Note plus accrued interest on or before
June 28, 2001, subject to prior approval by the parties to the Western Credit
Facility, which the Company believes it will obtain. The Company expects to
repay the Seller Note with cash flow generated from operations and future
borrowings. There are no penalties associated with prepayment of this note.
The Seller Note agreement contains a debt incurrence covenant limiting the
ability of the Western Group to incur additional indebtedness. The Seller Note
is subordinated and junior in right of payment to all senior obligations, as
defined in Western Credit Facility.
(9) RELATED PARTY TRANSACTIONS:
In accordance with the operating agreements and separate management
agreements with each of Mediacom's subsidiaries, Mediacom Management is paid
compensation for management services performed for the Company. Under such
agreements, Mediacom Management, wholly-owned by the Managing Member, is
entitled to receive annual management fees calculated as follows: (i) 5.0% of
the first $50,000 of annual gross operating revenues of the Company; (ii) 4.5%
of such revenues in excess thereof up to $75,000; and (iii) 4.0% of such
revenues in excess of $75,000. The Company incurred management fees of
approximately $882 and $270 in 1997 and 1996, respectively.
For the period from January 1, 1996 through March 11, 1996 and for the year
ended December 31, 1995, the Predecessor had an agreement with a related party
for the management and operation
F-16
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
of the Ridgecrest System. The Predecessor paid a monthly management fee of 5%
of the Predecessor's gross revenues, as defined in a certain management
agreement. The Predecessor also reimbursed this related party for various
expenses including marketing, engineering and accounting paid on its behalf.
The Predecessor incurred management fees of approximately $52 and $261 and
reimbursed expenses to this related party of approximately $0 and $41 for the
period from January 1, 1996 through March 11, 1996 and for the year ended
December 31, 1995, respectively.
Pursuant to the operating agreements of Mediacom, Mediacom Management is
also entitled to receive a fee of 1.0% of the purchase price of acquisitions
made by the Company until the Company's pro forma consolidated annual
operating revenues equal $75,000 and 0.5% of such purchase price thereafter.
The Company incurred acquisition fees of $544 in 1997 and $453 in 1996,
respectively. The acquisition fees are included in "Other expenses" in the
statement of operations.
In addition, the operating agreements of the Company provide for the
reimbursement of reasonable out-of-pocket expenses of Mediacom Management
incurred in connection with the operation of the business of the Company and
acting for or on behalf of the Company in connection with any potential
acquisitions. In 1997 and 1996, the Company reimbursed Mediacom Management $59
and $29, respectively, for such services. Any such amounts incurred in
connection with completed acquisitions by the Company were capitalized and are
included in "Intangible assets" in the balance sheet.
(10) EMPLOYEE BENEFIT PLANS:
Substantially all employees of the Company are eligible to participate in a
deferred arrangement pursuant to IRC Section 401(k) (the "Plan"). Under such
arrangement, eligible employees may contribute up to 15% of their current pre-
tax compensation to the Plan. The Plan permits, but does not require, matching
contributions and non-matching (profit sharing) contributions to be made by
the Company up to a maximum dollar amount or maximum percentage of participant
contributions, as determined annually by the Company. The Company presently
matches 50% on the first 6% of employee contributions. The Company's
contributions under the Plan totaled approximately $14 and $10 during 1997 and
1996, respectively.
(11) COMMITMENTS AND CONTINGENCIES:
Under various lease and rental agreements for offices, warehouses and
computer terminals, the Company had rental expense of approximately $138 and
$22 for 1997 and 1996, respectively. Future minimum annual rental payments are
as follows:
1998.................................................................... $163
1999.................................................................... 143
2000.................................................................... 139
2001.................................................................... 140
2002.................................................................... 140
In addition, the Company rents utility poles in its operations generally
under short-term arrangements, but the Company expects these arrangements to
recur. Total rental expense for utility poles was approximately $102 and $24
in 1997 and 1996, respectively.
F-17
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
On August 29, 1997, a bank issued an irrevocable letter of credit on behalf
of Mediacom in favor of the sellers of the Cablevision Systems to secure
Mediacom's performance under the asset purchase agreement for the Cablevision
Systems. Such letter of credit was terminated upon the consummation of the
purchase of the Cablevision Systems on January 23, 1998 (see Note 13).
Legal Proceedings
Management is not aware of any legal proceedings currently that will have a
material adverse impact on the Company's financial statements.
Regulation in the Cable Television Industry
The cable television industry is subject to extensive regulation by federal,
local and, in some instances, state governmental agencies. The Cable
Television Consumer Protection and Competition Act of 1992 and the Cable
Communication Policy Act of 1984 (collectively, the "Cable Acts"), both of
which amended the Communications Act of 1934 (as amended, the "Communications
Act"), established a national policy to guide the development and regulation
of cable television systems. The Communications Act was recently amended by
the Telecommunications Act of 1996 (the "1996 Telecom Act"). Principal
responsibility for implementing the policies of the Cable Acts and the 1996
Telecom Act has been allocated between the FCC and state or local regulatory
authorities.
Federal Law and Regulation
The Cable Acts and the FCC's rules implementing such acts generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established, among other things: (i) rate regulations; (ii)
mandatory carriage and retransmission consent requirements that require a
cable television system under certain circumstances to carry a local broadcast
station or to obtain consent to carry a local or distant broadcast station;
(iii) rules for franchise renewals and transfers; and (iv) other requirements
covering a variety of operational areas such as equal employment opportunity,
technical standards and customer service requirements.
The 1996 Telecom Act deregulates rates for cable programming services tiers
("CPST") commencing in March 1999 and, for certain small cable operators,
immediately eliminates rate regulation of CPST, and, in certain limited
circumstances, basic services. The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Company is currently unable to predict the ultimate effect of the
Cable Acts or the 1996 Telecom Act on its financial statements.
The FCC and Congress continue to be concerned that rates for regulated
programming services are rising at a rate exceeding inflation. It is therefore
possible that the FCC will further restrict the ability of cable television
operators to implement rate increases and/or Congress will enact legislation
which would, for example, delay or suspend the scheduled March 1999
termination of CPST rate regulation.
State and Local Regulation
Cable television systems generally operate pursuant to non-exclusive
franchises, permits or licenses granted by a municipality or other state or
local governmental entity. The terms and conditions
F-18
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, 1997 AND 1996
(ALL DOLLAR AMOUNTS IN 000'S)
of franchises vary materially from jurisdiction to jurisdiction. A number of
states subject cable television systems to the jurisdiction of centralized
state governmental agencies. To date, other than Delaware, no state in which
the Company currently operates has enacted state level regulation. The Company
cannot predict whether any of the states in which it currently operates will
engage in such regulation in the future.
(12) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
Debt
The fair value of the Company's debt is estimated based on the current rates
offered to the Company for debt of the same remaining maturities. The fair
value of the senior bank debt and the Seller Note approximates the carrying
value.
Interest Rate Exchange Agreements
The fair value of the Swaps is the estimated amount that the Company would
receive or pay to terminate the Swaps, taking into account current interest
rates and the current creditworthiness of the Swap counterparties. The Company
would have paid $410 at December 31, 1997 to terminate the Swaps, inclusive of
accrued interest.
(13) SUBSEQUENT EVENTS:
On January 9, 1998, Mediacom California acquired the assets of a cable
television system serving approximately 17,200 subscribers in Clearlake,
California and surrounding communities (the "Clearlake System") for a purchase
price of $21,400. The acquisition of the Clearlake System and related closing
costs and adjustments were financed with cash on hand and related borrowings
under the Western Credit Facility.
On January 23, 1998, Mediacom Southeast LLC ("Mediacom Southeast"), a
directly owned subsidiary of Mediacom, entered into a $225,000 credit
agreement (the "Southeast Credit Facility"), providing for a $165,000 reducing
revolving credit expiring June 30, 2006 and a $60,000 term loan maturing June
30, 2006.
On January 23, 1998, Mediacom Southeast acquired the assets of cable
television systems serving approximately 260,100 subscribers in various
regions of the United States (the "Cablevision Systems") for a purchase price
of approximately $308,700. The acquisition of the Cablevision Systems and
related closing costs and adjustments were financed with: (i) $211,000 of
borrowings under the Southeast Credit Facility; (ii) the proceeds of $20,000
aggregate principal amount of term notes (the "Holding Company Notes") issued
by Mediacom; and (iii) $94,000 of equity capital contributed to Mediacom by
its members.
On April 1, 1998, Mediacom and Mediacom Capital Corporation, a New York
corporation wholly-owned by Mediacom, jointly issued $200,000 aggregate
principal amount of 8.5% Senior Notes due on April 15, 2008 (the "Offering").
The net proceeds of the Offering at closing were used to repay outstanding
bank debt under the Western Credit Facility and the Southeast Credit Facility
in the aggregate principal amount of $173,500 and to repay in full the
outstanding Holding Company Notes. Interest on the Senior Notes will be
payable semi-annually on April 15 and October 15 of each year, commencing on
October 15, 1998.
F-19
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(ALL DOLLAR AMOUNTS IN 000'S)
MARCH 31,
1998
----------
(UNAUDITED)
ASSETS
Cash and cash equivalents......................................... $ 1,495
Subscriber accounts receivable, net of allowance for doubtful
accounts of $373 and $56......................................... 4,074
Prepaid expenses and other assets................................. 2,639
Investment in cable television systems:
Inventory....................................................... 1,293
Property, plant and equipment, at cost.......................... 190,519
Less-accumulated depreciation................................... (11,397)
--------
Property, plant and equipment, net............................ 179,122
Intangible assets, net.......................................... 242,482
--------
Total investment in cable television systems.................. 422,897
Other assets, net............................................... 13,858
--------
Total assets.................................................. $444,963
========
LIABILITIES AND MEMBERS' EQUITY
LIABILITIES
Debt.............................................................. $314,760
Accounts payable and accrued expenses............................. 20,598
Subscriber advances............................................... 614
Management fees payable........................................... 525
--------
Total liabilities............................................. 336,497
MEMBERS' EQUITY
Capital contributions........................................... 124,990
Accumulated deficit............................................. (16,524)
--------
Total members' equity......................................... 108,466
--------
Total liabilities and members' equity......................... $444,963
========
See accompanying notes to consolidated financial statements.
F-20
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(ALL DOLLAR AMOUNTS IN 000'S)
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
----------------
1998 1997
------- -------
Revenues..................................................... $25,943 $ 2,894
------- -------
Costs and expenses:
Service costs.............................................. 9,822 890
Selling, general and administrative expenses............... 5,303 434
Management fee expense..................................... 1,207 145
Depreciation and amortization.............................. 11,229 1,607
------- -------
Operating income (loss)...................................... (1,618) (182)
Interest expense, net........................................ 5,017 889
Other expenses............................................... 3,340 3
------- -------
Net loss..................................................... $(9,975) $(1,074)
======= =======
See accompanying notes to consolidated financial statements.
F-21
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
(ALL DOLLAR AMOUNTS IN 000'S)
Balance, commencement of operations (March 12, 1996).................. $ 5,490
Capital contributions............................................... 1,000
Net loss............................................................ (1,953)
--------
Balance, December 31, 1996............................................ 4,537
Capital contributions............................................... 24,500
Net loss............................................................ (4,596)
--------
Balance, December 31, 1997............................................ 24,441
Capital contributions............................................... 94,000
Net loss (unaudited)................................................ (9,975)
--------
Balance, March 31, 1998............................................... $108,466
========
See accompanying notes to consolidated financial statements.
F-22
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL DOLLAR AMOUNTS IN 000'S)
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
-----------------
1998 1997
-------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (9,975) $(1,074)
Adjustments to reconcile net loss to net cash flows from
operating activities:
Accretion of interest on seller note.................... 68 62
Depreciation and amortization........................... 11,229 1,607
(Increase) decrease in subscriber accounts receivable... (3,778) 49
(Increase) decrease in prepaid expenses and other as-
sets................................................... (1,281) (5)
Increase (decrease) in accounts payable and accrued ex-
penses................................................. 11,921 (96)
Increase (decrease) in subscriber advances.............. 11 --
Increase (decrease) in management fees payable.......... 420 13
-------- -------
Net cash flows from operating activities.............. 8,615 556
-------- -------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures...................................... (4,486) (276)
Acquisitions of cable television systems.................. (331,059) --
Other, net................................................ (54) (137)
-------- -------
Net cash flows used in investing activities........... (335,599) (413)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
New borrowings............................................ 253,599 300
Repayment of debt......................................... (11,675) (200)
Capital contributions..................................... 94,000 --
Financing costs........................................... (8,472) --
-------- -------
Net cash flows from financing activities.............. 327,452 100
-------- -------
Net increase in cash and cash equivalents............. 468 243
CASH AND CASH EQUIVALENTS, beginning of period.............. 1,027 396
-------- -------
CASH AND CASH EQUIVALENTS, end of period.................... $ 1,495 $ 639
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest................... $ 4,690 $ 800
======== =======
See accompanying notes to consolidated financial statements.
F-23
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(ALL DOLLAR AMOUNTS IN 000'S)
(UNAUDITED)
(1) STATEMENT OF ACCOUNTING PRESENTATION AND OTHER INFORMATION
Mediacom LLC ("Mediacom" and collectively with its subsidiaries, the
"Company"), a New York limited liability company, was formed in July 1995
principally to acquire and operate cable television systems. As of March 31,
1998, the Company had acquired and was operating cable television systems in
fourteen states principally Alabama, California, Florida, Kentucky, Missouri
and North Carolina (see Note 2).
The Company was initially capitalized in March 1996, with equity
contributions of $5,445 from Mediacom's members and $45 from Mediacom
Management Corporation ("Mediacom Management"). In June 1996, Mediacom
received additional equity contributions of $1,000 from a member. In June and
September 1997, Mediacom received additional equity contributions of $19,500
and $5,000, respectively, from its members. In January 1998, in connection
with the acquisition of the Cablevision Systems (see Note 2), Mediacom
received additional equity contributions of $94,000 from its members.
Mediacom Capital Corporation ("Mediacom Capital"), a New York corporation
wholly-owned by Mediacom, was organized in March 1998 for the sole purpose of
acting as co-issuer with Mediacom of $200,000 aggregate principal amount of
8.5% Senior Notes due 2008 (the "Senior Notes"), which were issued on April 1,
1998 (see Note 3). Mediacom Capital has nominal assets and does not conduct
operations of its own. The Senior Notes are joint and several obligations of
Mediacom and Mediacom Capital, although Mediacom received all the net proceeds
of the offering of the Senior Notes.
The consolidated financial statements include the accounts of Mediacom and
its subsidiaries and have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted.
The consolidated financial statements as of March 31, 1998 and 1997 are
unaudited; however, in the opinion of management, such statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for the periods presented. The interim
financial statements should be read in conjunction with the audited financial
statements and notes thereto included in the Company's Consolidated Financial
Statements for the fiscal year ended December 31, 1997, which are available
upon request of Mediacom at its principal executive office. The results of
operations for the interim periods are not necessarily indicative of the
results that might be expected for future interim periods or for the full year
ended December 31, 1998.
(2) ACQUISITIONS
The Company has completed the undernoted acquisitions (the "Acquired
Systems") in 1998 and 1997. Such acquisitions were accounted for as purchases
with the acquired assets and liabilities recorded at their fair values.
Accordingly, the results of operations of the Acquired Systems have been
included with those of the Company since the date of acquisition.
1998
On January 9, 1998, Mediacom California LLC ("Mediacom California"), a
directly owned subsidiary of Mediacom, acquired the assets of a cable
television system serving approximately 17,200 subscribers in Clearlake,
California and surrounding communities (the "Clearlake System") for a
F-24
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN 000'S)
(UNAUDITED)
purchase price of $21,400. The purchase price has been preliminarily allocated
as follows: approximately $8,560 to property, plant and equipment, $8,515 to
franchise costs and $4,325 to subscriber lists. Additionally, approximately
$100 of direct acquisition costs has been allocated to other assets. During
the three months ended March 31, 1998, the Company recorded acquisition
reserves related to this acquisition in the amount of approximately $370 and
are included in intangible assets and accrued expenses. The acquisition of the
Clearlake System was financed with borrowings under the Company's bank credit
facilities (see Note 3).
On January 23, 1998, Mediacom Southeast LLC ("Mediacom Southeast"), a
directly owned subsidiary of Mediacom, acquired the assets of cable television
systems serving approximately 260,100 subscribers in various regions of the
United States (the "Cablevision Systems") for a purchase price of
approximately $308,700. The purchase price has been preliminarily allocated as
follows: approximately $123,500 to property, plant and equipment,
approximately $120,200 to franchise costs and approximately $65,000 to
subscriber lists. Additionally, approximately $800,000 of direct acquisition
costs has been allocated to other costs. During the three months ended March
31, 1998, the Company recorded acquisition reserves related to this
acquisition in the amount of approximately $3,750 and are included in
intangible assets and accrued expenses. The acquisition of the Cablevision
Systems and related closing costs and adjustments were financed with equity
contributions, borrowings under the Company's bank credit facilities, and
other bank debt (see Notes 1 and 3).
1997
On June 24, 1997, Mediacom Delaware LLC ("Mediacom Delaware"), a directly
owned subsidiary of Mediacom, acquired the assets of a cable television system
serving approximately 29,300 subscribers in lower Delaware and southwestern
Maryland for a purchase price of $42,900. The purchase price has been
preliminarily allocated as follows: $21,450 to property, plant and equipment,
$14,200 to franchise costs and $7,250 to subscriber lists. Additionally, $275
of direct acquisition costs has been allocated to other assets.
On September 19, 1997, Mediacom California LLC ("Mediacom California"), a
directly owned subsidiary of Mediacom, acquired the assets of a cable
television system serving approximately 9,600 subscribers in Sun City,
California for a purchase price of $11,500. The purchase price has been
preliminarily allocated as follows: $4,600 to property, plant and equipment,
$4,500 to franchise costs and $2,400 to subscriber lists. Additionally, $167
of direct acquisition costs has been allocated to other assets.
F-25
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN 000'S)
(UNAUDITED)
The Company has reported the operating results of the Acquired Systems from
the date of their respective acquisition. Unaudited pro forma operating
results of the Company assuming the acquisitions of the Acquired Systems had
been consummated on January 1, 1997 are as follows:
PRO FORMA RESULTS
FOR THE
THREE MONTHS
ENDED MARCH 31,
------------------
1998 1997
-------- --------
Revenues................................................... $ 31,679 $ 29,239
-------- --------
Operating expenses and costs:
Service costs............................................ 12,033 11,119
Selling, general and administrative expenses............. 5,988 5,266
Management fee expense................................... 1,465 1,352
Depreciation and amortization............................ 13,577 12,809
-------- --------
Operating loss............................................. $ (1,364) $ (1,307)
======== ========
The pro forma financial information presented above has been prepared for
comparative purposes only and does not purport to be indicative of the
operating results which actually would have resulted had the acquisitions of
the Acquired Systems been consummated on January 1, 1997.
(3) DEBT
As of March 31, 1998, debt consisted of:
MARCH 31,
1998
---------
Mediacom:
Holding Company Notes (a)............................................ $ 20,000
8 1/2% Senior Notes (b).............................................. --
Subsidiaries:
Bank Credit Facilities (c)........................................... 291,500
Seller Note (d)...................................................... 3,260
--------
$314,760
========
(a) On January 23, 1998, Mediacom issued two notes (the "Holding Company
Notes") to a bank in the aggregate principal amount of $20,000 to finance in
part the acquisition of the Cablevision Systems. On April 1, 1998, the Holding
Company Notes were repaid in full from the net proceeds of the Offering (as
defined below). The Holding Company Notes had an average interest rate of 8.4%
at March 31, 1998.
(b) On April 1, 1998, Mediacom and Mediacom Capital jointly issued (the
"Offering") $200,000 aggregate principal amount of 8.5% Senior Notes due on
April 15, 2008. The Senior Notes are unsecured obligations of the Company, and
the indenture agreement for the Senior Notes stipulates,
F-26
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN 000'S)
(UNAUDITED)
among other things, restrictions on incurrence of indebtedness, distributions,
mergers and asset sales and has cross-default provisions related to other debt
of the Company. Interest accrues at 8.5% per annum, beginning from the date of
issuance and is payable semi-annually on April 15 and October 15 of each year,
commencing on October 15, 1998. The Senior Notes may be redeemed at the option
of Mediacom, in whole or part, at any time after April 15, 2003, at redemption
prices decreasing from 104.25% of their principal amount to 100% in 2006, plus
accrued and unpaid interest.
(c) On January 23, 1998, Mediacom Southeast entered into an eight and one
half year, $225,000 reducing revolver and term loan agreement (the "Southeast
Credit Facility"). On June 24, 1997, Mediacom California, Mediacom Delaware
and Mediacom Arizona LLC, a directly owned subsidiary of Mediacom,
(collectively, the "Western Group") entered into an eight and one half year,
$100,000 reducing revolver and term loan agreement (the "Western Credit
Facility" and, together with the Southeast Credit Facility, the "Bank Credit
Facilities"). At March 31, 1998, the aggregate bank commitments under the Bank
Credit Facilities were $324,950. The Bank Credit Facilities are non- recourse
to Mediacom and have no cross-default provisions relating directly to each
other. The reducing revolving credit lines under the Bank Credit Facilities
make available a maximum commitment amount for a period of up to eight and one
half years and is subject to quarterly reductions, beginning September 30,
1998, ranging from 0.21% to 12.42% of the original commitment amount of the
reducing revolver. The term loans under the Bank Credit Facilities are repaid
in consecutive installments beginning September 30, 1998, ranging from 0.42%
to 12.92% of the original term loan amount. The Bank Credit Facilities require
mandatory reductions of the reducing revolvers and mandatory prepayments of
the term loans from excess cash flow, as defined, beginning December 31, 1999.
The Bank Credit Facilities provide for interest at varying rates based upon
various borrowing options and the attainment of certain financial ratios and
for commitment fees of 3/8% to 1/2% per annum on the unused portion of
available credit under the reducing revolver credit lines. The effective
interest rate at March 31, 1998, for outstanding debt under the Bank Credit
Facilities was 8.0% after giving effect to the interest rate swap agreements
discussed below.
The Bank Credit Facilities contain covenants on the subsidiaries, including,
but not limited to, limitations on mergers and acquisitions, consolidations
and sales of certain assets, liens, the incurrence of additional indebtedness
and certain restrictive payments, and restrictions on certain transactions
with affiliates, and require the maintenance of certain financial ratios, such
as, the leverage ratio, the interest coverage ratio, the fixed charge coverage
ratio and the pro forma debt service coverage ratio. The Company is in
compliance with all financial ratios as of March 31, 1998.
The Bank Credit Facilities are secured by Mediacom's pledge of all its
ownership interests in the subsidiaries and a first priority lien on all the
tangible and intangible assets of the subsidiaries, other than real property.
The indebtedness under the Bank Credit Facilities is guaranteed by Mediacom on
a limited recourse basis to the extent of its ownership interests in the
subsidiaries. At March 31, 1998, the Company had $33,450 of unused commitments
under the Bank Credit Facilities, of which approximately $10,600 could have
been borrowed by the subsidiaries for purposes of distributing such borrowed
proceeds to Mediacom under the most restrictive covenants of the Bank Credit
Facilities. As of the same date, after giving pro forma effect to the Offering
and the use of net proceeds therefrom, the Company would have had $206,950 of
unused commitments under the Bank Credit Facilities, of which approximately
$184,000 could have been borrowed by the subsidiaries for purposes of
distributing such borrowed proceeds to Mediacom under the most restrictive
covenants of the Bank Credit Facilities.
F-27
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN 000'S)
(UNAUDITED)
The stated maturities of all debt outstanding under the Bank Credit
Facilities as of March 31, 1998 are as follows:
1998................................................................ $ 250
1999................................................................ 2,000
2000................................................................ 4,350
2001................................................................ 14,800
2002................................................................ 19,100
Thereafter.......................................................... 251,000
--------
$291,500
========
The Western Group has entered into interest rate exchange agreements (the
"Swaps") with various banks pursuant to which the interest rate on $62,000 is
fixed at a weighted average swap rate of 6.19%, plus the average applicable
margin over the Eurodollar Rate option under the Bank Credit Facilities. Under
the terms of the Swaps, which expire from 1998 through 2002, the Company is
exposed to credit loss in the event of nonperformance by the other parties to
the Swaps. However, the Company does not anticipate nonperformance by the
counterparties.
(d) Seller Note
In connection with the acquisition of a cable television system in 1996, the
Western Group issued to the seller an unsecured senior subordinated note (the
"Seller Note") in the amount of $2,800, with a final maturity of June 28,
2006. Interest is deferred throughout the term of the Seller Note and is
payable at maturity or upon prepayment. For the five-year period ending June
28, 2001, the annual interest rate is 9.0%. After the initial five-year
period, the annual interest rate increases to 15.0%, with an interest clawback
for the first five years. After the initial seven-year period, the interest
rate increases to 18.0%, with an interest clawback for the first seven years.
There are no penalties associated with prepayment of this note.
The Seller Note agreement contains a debt incurrence covenant limiting the
ability of the Western Group to incur additional indebtedness. The Seller Note
is subordinated and junior in right of payment to all senior obligations of
the Western Group, as defined in the Western Credit Facility.
(4) COMMITMENTS AND CONTINGENCIES
On August 29, 1997, a bank issued a $15,000 irrevocable letter of credit on
behalf of Mediacom in favor of the sellers of the Cablevision Systems to
secure Mediacom's performance under the asset purchase agreement for the
Cablevision Systems. Such letter of credit was terminated upon the
consummation of the purchase of the Cablevision Systems on January 23, 1998
(see Note 2).
Pursuant to the Cable Television Consumer and Competition Act of 1992, the
Federal Communications Commission ("FCC") has adopted comprehensive
regulations governing rates charged to subscribers for basic cable and cable
programming services. These rates must be set using a benchmark formula.
Alternatively, a cable operator can attempt to establish higher rates through
a cost-of-service showing. The FCC has also adopted regulations that permit
qualifying small cable operators to justify their regulated rates using a
simplified cost-of-service formula. The Company qualifies as a small cable
operator and approximately 82% of its basic subscribers are governed by
F-28
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN 000'S)
(UNAUDITED)
such rules. Once rates for basic cable and cable programming services have
been established pursuant to one of these methodologies, the rate level can
subsequently be adjusted only to reflect changes in the number of regulated
channels, inflation, and increases in certain external costs, such as
franchise and other governmental fees, copyright and retransmission consent
fees, taxes, programming costs and franchise-related obligations. FCC
regulations also govern the rates which can be charged for the lease of
customer premises equipment and for installation services.
As a result of such legislation and FCC regulations, the Company's basic
service and cable programming service rates and its equipment and installation
charges (the "Regulated Services") are subject to the jurisdiction of local
franchising authorities and the FCC. The Company believes that it has complied
in all material respects with the rate regulation provisions of the federal
law. However, the Company's rates for Regulated Services are subject to review
by the FCC if a complaint has been filed, or by the appropriate franchise
authority if it is certified by the FCC to regulate basic rates. If, as a
result of the review process, the Company cannot substantiate the rates
charged by its cable television systems for Regulated Services, the Company
could be required to reduce its rates for Regulated Services to the
appropriate level and refund the excess portion of rates received for up to
one year prior to the implementation.
The Company's agreements with franchise authorities require the payment of
fees of up to 5% of annual system revenues. Such franchises are generally
nonexclusive and are granted by local governmental authorities for a specified
term of years, generally for periods of up to fifteen years.
(5) SUBSEQUENT EVENT
On April 1, 1998, Mediacom and Mediacom Capital jointly issued $200,000
aggregate principal amount of 8.5% Senior Notes due on April 15, 2008 (see
Note 3). The net proceeds of the Offering were used at closing to repay
outstanding bank debt under the reducing revolvers of the Bank Credit
Facilities in the aggregate principal amount of $173,500 and to repay in full
the outstanding Holding Company Notes. Interest on the Senior Notes will be
payable semi-annually on April 15 and October 15 of each year, commencing on
October 15, 1998.
F-29
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
Mediacom Capital Corporation:
We have audited the accompanying balance sheet of Mediacom Capital
Corporation as of March 31, 1998. This financial statement is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheet. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Mediacom Capital Corporation as
of March 31, 1998, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Stamford, Connecticut
April 4, 1998
F-30
MEDIACOM CAPITAL CORPORATION
BALANCE SHEET
MARCH 31, 1998
ASSETS
Note receivable--from affiliate for issuance of common stock.............. $100
----
Total assets............................................................ $100
====
LIABILITIES AND OWNER'S EQUITY
Owner's equity
Common stock, par value $0.10; 200 shares authorized; 100 shares issued
and outstanding........................................................ $ 10
Additional paid-in capital.............................................. 90
----
Total owner's equity.................................................. $100
----
Total liabilities and owner's equity.................................. $100
====
F-31
MEDIACOM CAPITAL CORPORATION
NOTE TO THE BALANCE SHEET
----------------
Mediacom Capital Corporation (the "Company"), a New York corporation, is a
wholly owned subsidiary of Mediacom LLC and was organized on March 9, 1998 for
the sole purpose of acting as co-issuer with Mediacom LLC, of $200 million
aggregate principle amount of the 8 1/2% Senior Notes due 2008. The Company
has no operations.
F-32
INDEPENDENT AUDITORS' REPORT
The Board of Directors
U.S. Cable Television Group, L.P.
We have audited the accompanying consolidated balance sheets of U.S. Cable
Television Group, L.P. and subsidiaries (a wholly-owned subsidiary of
Cablevision Systems Corporation) as of December 31, 1997 and 1996, and the
related consolidated statements of operations and partners' capital
(deficiency) and cash flows for the year ended December 31, 1997, and for the
periods from January 1, 1996 to August 12, 1996, and August 13, 1996 to
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of U.S. Cable
Television Group, L.P. and subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for the year ended
December 31, 1997, and the periods from January 1, 1996 to August 12, 1996,
and August 13, 1996 to December 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, effective
August 13, 1996, U.S. Cable Television Group L.P. redeemed certain limited and
general partnership interests in a business combination accounted for as a
purchase. As a result of the redemption, the consolidated financial
information for the period after the redemption is presented on a different
cost basis than that for the period before the redemption and therefore, is
not comparable.
KPMG Peat Marwick LLP
Jericho, New York
March 20, 1998
F-33
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS)
1997 1996
-------- --------
ASSETS
Cash and cash equivalents................................... $ 281 $ 49
Accounts receivable-subscribers (less allowance for doubtful
accounts of $218 and $122)................................. 1,082 995
Other receivables........................................... 502 383
Prepaid expenses and other assets........................... 632 477
Property, plant and equipment, net.......................... 84,363 93,543
Excess costs over fair value of net assets acquired (less
accumulated amortization of $29,158 and $7,952)............ 119,363 140,487
Deferred financing costs (less accumulated amortization of
$1,062 and $292)........................................... 1,771 1,997
-------- --------
$207,994 $237,931
======== ========
LIABILITIES AND PARTNER'S CAPITAL
Accounts payable............................................ $ 11,605 $ 10,246
Accrued expenses:
Franchise fees............................................ 1,087 1,089
Payroll and related benefits.............................. 4,463 4,728
Interest.................................................. 879 947
Other..................................................... 7,174 3,688
Accounts payable-affiliates................................. 1,367 500
Bank debt................................................... 154,960 159,460
-------- --------
Total liabilities....................................... 181,535 180,658
Partners' capital........................................... 26,459 57,273
-------- --------
$207,994 $237,931
======== ========
See accompanying notes to consolidated financial statements.
F-34
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
PARTNERS' CAPITAL/(DEFICIENCY)
(DOLLARS IN THOUSANDS)
PERIOD FROM PERIOD FROM
YEAR ENDED AUGUST 13, 1996 TO JANUARY 1, 1996 TO
DECEMBER 31, 1997 DECEMBER 31, 1996 AUGUST 12, 1996
----------------- ------------------ ------------------
Revenues.............................................................. $ 89,016 $ 32,144 $ 49,685
Operating expenses:
Technical expenses.................................................. 38,513 15,111 23,467
Selling, general and administrative expenses........................ 22,099 6,677 11,021
Depreciation and amortization....................................... 46,116 17,842 21,034
-------- -------- ---------
Operating loss.................................................... (17,712) (7,486) (5,837)
Other (expense) income:
Interest expense.................................................... (12,727) (5,136) (10,922)
Interest income..................................................... 25 14 33
Other, net.......................................................... (400) (119) (69)
-------- -------- ---------
Net loss.............................................................. (30,814) (12,727) (16,795)
Partners' capital (deficiency):
Beginning of period................................................. 57,273 -- (92,795)
Capital contribution................................................ -- 70,000 --
-------- -------- ---------
End of period....................................................... $ 26,459 $ 57,273 $(109,590)
======== ======== =========
See accompanying notes to consolidated financial statements.
F-35
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
PERIOD FROM PERIOD FROM
YEAR ENDED AUGUST 13, 1996 TO JANUARY 1, 1996 TO
DECEMBER 31, 1997 DECEMBER 31, 1996 AUGUST 12, 1996
----------------- ------------------ ------------------
Cash flows from operating activities
Net loss............................................................ $ (30,814) $ (12,727) $ (16,795)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization..................................... 46,116 17,842 21,034
Amortization of deferred financing costs.......................... 770 292 477
(Gain) loss on disposal of equipment.............................. (116) 43 39
Changes in assets and liabilities, net of effects of acquisition:
Accounts receivable, net.......................................... (87) 634 (625)
Other receivables................................................. (119) 94 (129)
Prepaid expenses and other assets................................. (155) 131 (204)
Accounts payable and accrued expenses............................. 4,510 265 (2,318)
Accounts payable to affiliates.................................... 867 (576) 1,029
--------- --------- ---------
Net cash provided by operating activities............................. 20,972 5,998 2,508
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures................................................ (15,769) (5,317) (11,995)
Proceeds from sale of equipment..................................... 155 53 48
--------- --------- ---------
Net cash used in investing activities............................... (15,614) (5,264) (11,947)
--------- --------- ---------
Cash flows from financing activities:
Advance from V Cable................................................ -- -- 70,000
Cash paid for redemption of partners' interests..................... -- (4,010) --
Additions to excess costs........................................... (82) (98) --
Additions to deferred financing costs............................... (544) (2,289)
Proceeds from bank debt............................................. 10,300 159,810 --
Repayment of bank debt.............................................. (14,800) (350) --
Repayment of senior debt............................................ -- (153,538) (60,807)
--------- --------- ---------
Net cash (used in) provided by financing activities................. (5,126) (475) 9,193
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents.................. 232 259 (246)
Cash and cash equivalents at beginning of period...................... 49 (210) 36
--------- --------- ---------
Cash and cash equivalents at end of period............................ $ 281 $ 49 $ (210)
========= ========= =========
See accompanying notes to consolidated financial statements.
F-36
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1. THE COMPANY
U.S. Cable Television Group, L.P. (the "Company") was formed for the purpose
of acquiring, owning and operating cable television systems, which are
generally operated pursuant to non-exclusive franchises awarded by states or
local government authorities for specified periods of time. The Company
currently operates cable television systems serving portions of the
southeastern and midwestern United States. The Company's revenues are derived
principally from the provision of cable television services, which include
recurring monthly fees paid by subscribers.
Prior to the Redemption discussed in the next paragraph, the partnership
consisted of V Cable, Inc. ("V Cable"), a wholly-owned subsidiary of
Cablevision Systems Corporation ("CSC"), with an indirect 1% general
partnership interest and a 19% limited partnership interest, General Electric
Capital Corporation ("GECC"), with a 72% limited partnership interest and
various individuals and entities owning the remaining 8% partnership interest,
as general and/or limited partners (the "Predecessor Company"). Profits and
losses were allocated in accordance with the Amended and Restated Agreement of
Limited Partnership.
On March 18, 1996, V Cable advanced $70 million to the Company which was
considered a capital contribution coincident with the Redemption. On August
13, 1996, the Company redeemed the partnership interests not already owned by
V Cable ("the Redemption") for a payment of approximately $4 million to the
holders of 8% of the partnership interests and the repayment of the balance of
the debt owed to General Electric Capital Corporation ("GECC") of
approximately $154 million. The payment of $4 million and repayment of the
GECC debt was financed under a new $175 million credit facility (Note 4) . As
a result of the Redemption, which was accounted for as a purchase, the
consolidated financial information for the periods after the Redemption is
presented on a different cost basis than that for the period before the
Redemption and, therefore, is not comparable due to the change in ownership.
Subsequent to the Redemption, V Cable, through wholly-owned subsidiaries,
holds an indirect 1% general partnership interest and a direct 99% limited
partnership interest (the "Successor Company"). The partnership will terminate
December 1, 2030, unless earlier termination occurs as provided in the Amended
and Restated Agreement of Limited Partnership.
As a result of the capital contribution of $70,000 (discussed above), the
$4,010 Redemption price and $98 of miscellaneous transaction costs, the
Successor Company effectively paid $74,108 to acquire net liabilities of
$74,331, which resulted in excess costs over fair value of $148,439, as
follows:
Purchase price and transaction costs.............................. $ 74,108
---------
Net liabilities acquired:
Cash, receivables and prepaids.................................. 2,504
Property, plant and equipment................................... 98,212
Accounts payables and accrued expenses.......................... (20,433)
Accounts payable-affiliate...................................... (1,076)
Senior debt..................................................... (153,538)
---------
(74,331)
---------
Excess costs over fair value of net liabilities acquired........ $ 148,439
=========
F-37
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
For purposes of the consolidated financial statements for the year ended
December 31, 1997, and for the period from August 13, 1996 to December 31,
1996, this excess cost is being amortized over a 7 year period.
On August 29, 1997, the Company and CSC entered into an agreement with
Mediacom LLC ("Mediacom") to sell to Mediacom substantially all of the assets
and cable systems owned by the Company. The transaction was consummated on
January 23, 1998, for a sales price of approximately $311 million (the
"Mediacom Sale").
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenues as cable television services are provided to
subscribers.
Long-Lived Assets
Property, plant and equipment, including construction materials, are
recorded at cost, which includes all direct costs and certain indirect costs
associated with the construction of cable television transmission and
distribution systems and the costs of new subscriber installations. Property,
plant and equipment are being depreciated over their estimated useful lives
using the straight-line method. Leasehold improvements are amortized over the
shorter of their useful lives or the terms of the related leases.
With respect to the Predecessor Company, franchise costs were amortized on
the straight-line basis over the average term of the franchises (approximately
4-12 years) and excess costs over fair value of net assets acquired were
amortized over a 15 year period on the straight-line basis. As mentioned in
note 1, the Successor Company is amortizing excess costs over fair value of
net assets acquired over 7 years.
The Company implemented the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," effective January 1, 1996. The Company
reviews its long-lived assets (property, plant and equipment, and related
intangible assets that arose from business combinations accounted for under
the purchase method) for impairment whenever events or circumstances indicate
that the carrying amount of an asset may not be recoverable. If the sum of the
expected cash flows, undiscounted and without interest, is less than the
carrying amount of the asset, an impairment loss is recognized as the amount
by which the carrying amount of the asset exceeds its fair value. The adoption
of Statement No. 121 had no impact on the Company's financial position or
results of operations.
Deferred Financing Costs
Costs incurred to obtain debt are deferred and amortized on the straight-
line basis over the term of the related debt.
F-38
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
Income Taxes
The Company operates as a limited partnership; accordingly, its taxable
income or loss is includable in the tax returns of the partners, and
therefore, no provision for income taxes has been made on the books of the
Company. ECC Holding Corporation ("ECC"), one of the Company's subsidiaries,
is a corporate entity and as such is subject to federal and state income
taxes. Income tax amounts in these consolidated financial statements pertain
to ECC.
ECC accounts for income taxes under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", which requires
the liability method of accounting for deferred income taxes and permits the
recognition of deferred tax assets, subject to an ongoing assessment of
realizability.
Cash Flows
For purposes of the statement of cash flows, the Company considers short-
term investments with a maturity at date of purchase of three months or less
to be cash equivalents. The Company paid cash interest of approximately
$12,026 for the year ended December 31, 1997, $13,610 for the period from
January 1, 1996 to August 12, 1996, and $4,189 for the period from August 13,
1996 to December 31, 1996, respectively.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and estimated useful lives at December 31,
1997 and 1996, are as follows:
ESTIMATED
1997 1996 USEFUL LIVES
-------- -------- -------------
Cable television transmission and
distribution systems:
Customer equipment......................... $ 5,175 $ 6,810 5 years
Headends................................... 7,539 6,338 9 years
Infrastructure............................. 94,920 81,502 10 years
Program, service and test equipment........ 2,824 2,141 4--7 years
Microwave equipment........................ 95 78 4--7 years
Construction in progress (including
materials and supplies)................... 699 521
-------- --------
111,252 97,390
Furniture and fixtures....................... 722 591 5 years
Transportation............................... 3,782 2,886 4 years
Land and land improvements................... 863 1,074 30 years
Leasehold improvements....................... 1,612 1,305 Term of Lease
-------- --------
118,231 103,246
Less accumulated depreciation................ (33,868) (9,703)
-------- --------
$ 84,363 $ 93,543
======== ========
F-39
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 4. DEBT
Bank Debt
In August 1996, the Successor Company repaid the balance of the debt owed to
GECC of approximately $154,000. The repayment of the GECC debt was financed
under a new $175,000 credit facility. The credit facility is with a group of
banks led by the Bank of New York, as agent, and consists of a three year
$175,000 revolving credit facility maturing on August 13, 1999. The revolving
credit facility is payable in full upon maturity. As of December 31, 1997 and
1996, the Company had outstanding borrowings under its revolving credit
facility of $154,960 and $159,460, inclusive of overdraft amounts of $1,900
and $0, respectively, leaving unrestricted and undrawn funds available
amounting to $21,940 and $15,540. Amounts outstanding under the facility bear
interest at varying rates based upon the bank's LIBOR rate, as defined in the
loan agreement. The weighted average interest rate was 7.1% and 7.6% on
December 31, 1997 and 1996, respectively. The Company is also obligated to pay
fees of .375% per annum on the unused loan commitment. Substantially all of
the general and limited partnership interests in the Company have been pledged
in support of the borrowings under the credit agreement. The credit facility
contains various restrictive covenants, with which the Company was in
compliance at December 31, 1997.
In January 1998, all amounts outstanding under the bank debt were repaid
from the proceeds from the Mediacom Sale.
Junior Subordinated Note
In August 1996, the Predecessor Company's Junior Term Loan and related
accrued interest was forgiven by GECC in the amount of $35,560.
NOTE 5. INCOME TAXES
ECC has a net operating loss carryforward for federal income tax purposes of
approximately $65,500 expiring in varying amounts through 2012.
The tax effects of temporary differences which give rise to significant
deferred tax assets or liabilities and the corresponding valuation allowance
at December 31, 1997 and 1996, are as follows:
DEFERRED ASSETS 1997 1996
--------------- ------- -------
Depreciation and amortization.............................. $ 7,132 $ 7,132
Allowance for doubtful accounts............................ 51 51
Benefits of tax loss carry forward......................... 27,510 26,166
------- -------
Net deferred tax assets.................................... 34,693 33,349
Valuation allowance........................................ (34,693) (33,349)
------- -------
-- --
======= =======
ECC has provided a valuation allowance for the total amount of the net
deferred tax assets since realization of these assets is not assured.
NOTE 6. OPERATING LEASES
The Company leases certain office and transmission facilities under terms of
operating leases expiring at various dates through 2008. The leases generally
provide for fixed annual rental payments
F-40
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
plus real estate taxes and certain other costs. Rent expense for the year
ended December 31, 1997, and the periods from January 1, 1996 to August 12,
1996, and from August 13, 1996 to December 31, 1996, amounted to approximately
$778, $505, and $303, respectively.
The Company rents space on utility poles for its operations. Pole rental
expense for the year ended December 31, 1997, and for the periods from January
1, 1996 to August 12, 1996, and from August 13, 1996 to December 31, 1996,
amounted to approximately $1,440, $912, and $547, respectively.
In connection with the Mediacom sale, the Company was relieved of all of its
future obligations under its operating leases.
NOTE 7. RELATED PARTY TRANSACTIONS
CSC has interests in several entities engaged in providing cable television
programming and other services to the cable television industry. During the
year ended December 31, 1997 and for the periods from January 1, 1996 to
August 12, 1996, and from August 13, 1996 to December 31, 1996, the Company
was charged approximately $742, $510 and $268, respectively, by these entities
for such services. At December 31, 1997 and 1996, the Company owed
approximately $65 and $60, respectively, to these companies for such
programming services which is included in accounts payable-affiliates in the
accompanying consolidated balance sheet.
CSC provides the Company with general and administrative services. For the
year ended December 31, 1997 and for the periods from January 1, 1996 to
August 12, 1996, and from August 13, 1996 to December 31, 1996, these charges
totaled approximately $3,059, $2,274 and $1,712, respectively. Amounts owed to
CSC at December 31, 1997 and 1996, for such expenses were approximately $1,109
and $408, respectively, and is included in accounts payable-affiliates in the
accompanying consolidated balance sheet.
NOTE 8. BENEFIT PLAN
During 1989, the Company adopted a 401 (k) savings plan (the "Plan").
Employee participation is voluntary. Under the provisions of the Plan,
employees may defer up to 15% of their annual compensation (as defined). The
Company currently contributes 50% of the contributions made by participating
employees subject to a limit of 6% of the employee's compensation. The Company
may make additional contributions at its discretion. For the year ended
December 31, 1997, and for the periods from January 1, 1996 to August 12,
1996, and from August 13, 1996 to December 31, 1996, expense relating to this
Plan amounted to $165, $189 and $138, respectively.
The Company does not provide postretirement benefits for any of its
employees.
NOTE 9. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and Cash Equivalents, Accounts Receivable-Subscribers, Other
Receivables, Accounts Payable, Accrued Expenses, and Accounts Payable-
Affiliates
Carrying amounts approximate fair value due to the short maturity of these
instruments.
Bank Debt
The carrying amounts of the Company's long term debt instruments approximate
fair value as the underlying variable interest rates are adjusted for market
rate fluctuations.
F-41
INDEPENDENT AUDITORS' REPORT
The Board of Directors
U.S. Cable Television Group, L.P.
We have audited the accompanying consolidated balance sheets of U.S. Cable
Television Group, L.P. and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations and partners' capital
(deficiency) and cash flows for the periods from January 1, 1996 to August 12,
1996 and August 13, 1996 to December 31, 1996, and for each of the years in
the two year period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of U.S. Cable Television
Group, L.P. and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for the periods from January 1, 1996
to August 12, 1996 and August 13, 1996 to December 31, 1996, and for each of
the years in the two year period ended December 31, 1995 in conformity with
generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements, effective
August 13, 1996, U.S. Cable Television Group L.P. redeemed certain limited and
general partnership interests in a business combination accounted for as a
purchase. As a result of the redemption, the consolidated financial
information for the period after the redemption is presented on a different
cost basis than that for the period before the redemption, and therefore, is
not comparable.
KPMG Peat Marwick LLP
Jericho, New York
April 1, 1997, except as to Note 11,
which is as of January 23, 1998
F-42
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
1996 1995
-------- --------
ASSETS
------
Cash and cash equivalents................................... $ 49 $ 36
Accounts receivable--subscribers (less allowance for doubt-
ful accounts
of $122 and $202).......................................... 995 1,004
Other receivables........................................... 383 348
Accounts receivable from affiliates......................... -- 75
Prepaid expenses and other assets........................... 477 404
Property, plant and equipment, net.......................... 93,543 101,439
Deferred franchise costs (less accumulated amortization of
$92,787)................................................... -- 13,738
Excess cost over fair value of net assets acquired (less ac-
cumulated
amortization of $7,952 and $22,272)........................ 140,487 61,197
Deferred financing and other costs (less accumulated amorti-
zation
of $292 and $4,452)........................................ 1,997 1,620
-------- --------
$237,931 $179,861
======== ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
----------------------------------------------
Accounts payable............................................ $ 10,246 $ 4,170
Accrued expenses:
Franchise fees............................................ 1,089 995
Payroll and related benefits.............................. 4,728 3,796
Programming costs......................................... -- 7,216
Interest.................................................. 947 --
Other..................................................... 3,688 7,442
Accounts payable to affiliates.............................. 500 --
Bank debt................................................... 159,460 --
Senior debt................................................. -- 214,392
Junior subordinated note.................................... -- 34,645
-------- --------
Total liabilities....................................... 180,658 272,656
Partners' capital (deficiency).............................. 57,273 (92,795)
-------- --------
$237,931 $179,861
======== ========
See accompanying notes to consolidated financial statements.
F-43
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
PARTNERS' CAPITAL (DEFICIENCY)
(SEE NOTE 1)
(DOLLARS IN THOUSANDS)
PERIOD FROM PERIOD FROM
AUGUST 13, JANUARY 1,
1996 TO 1996 TO YEAR ENDED DECEMBER 31,
DECEMBER 31, AUGUST 12, ------------------------
1996 1996 1995 1994
------------ ----------- ----------- -----------
Revenue..................... $ 32,144 $ 49,685 $ 76,568 $ 71,960
Operating expenses:
Technical expenses........ 15,111 23,467 34,895 29,674
Selling, general and
administrative expenses.. 6,677 11,021 19,875 20,776
Depreciation and amortiza-
tion..................... 17,842 21,034 36,329 41,861
-------- --------- ----------- -----------
Operating loss............ (7,486) (5,837) (14,531) (20,351)
Other (expense) income:
Interest expense.......... (5,136) (10,922) (26,157) (24,195)
Interest income........... 14 33 70 236
Other, net................ (119) (69) (241) (1,280)
-------- --------- ----------- -----------
Net loss.................... (12,727) (16,795) (40,859) (45,590)
Partners' capital (deficien-
cy):
Beginning of period....... -- (92,795) (51,936) (6,346)
Capital contribution...... 70,000 -- -- --
-------- --------- ----------- -----------
End of year................. $ 57,273 $(109,590) $ (92,795) $ (51,936)
======== ========= =========== ===========
See accompanying notes to consolidated financial statements.
F-44
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(SEE NOTE 1)
(DOLLARS IN THOUSANDS)
PERIOD FROM PERIOD FROM
AUGUST 13, JANUARY 1,
1996 TO 1996 TO YEAR ENDED DECEMBER 31,
DECEMBER 31, AUGUST 12, -------------------------
1996 1996 1995 1994
------------ ----------- -------------------------
Cash flows from operating
activities:
Net loss................. $ (12,727) $(16,795) $ (40,859) $ (45,590)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Depreciation and
amortization.......... 17,842 21,034 36,329 41,861
Amortization of
deferred financing
costs................. 292 477 746 752
Loss on disposal of
equipment............. 43 39 104 192
Interest on senior
subordinated
debentures............ -- -- 10,022 9,038
Interest on junior
subordinated
debentures............ -- -- 3,970 3,516
Changes in assets and li-
abilities, net of ef-
fects of acquisition:
Accounts receivables,
net................... 634 (625) (546) (47)
Other receivables...... 94 (129) (225) (54)
Prepaid expenses and
other assets.......... 131 (204) (3) 80
Accounts payable and
accrued expenses...... 265 (2,318) 3,193 2,995
Accounts payable to
affiliates............ (576) 1,029 (744) 575
--------- -------- ----------- -----------
Net cash provided by
operating activities.... 5,998 2,508 11,987 13,318
--------- -------- ----------- -----------
Cash flows used in
investing activities:
Capital expenditures..... (5,317) (11,995) (20,502) (21,359)
Proceeds from sale of
equipment............... 53 48 430 --
--------- -------- ----------- -----------
Net cash used in
investing activities.... (5,264) (11,947) (20,072) (21,359)
--------- -------- ----------- -----------
Cash flows from financing
activities:
Advance from V Cable..... -- 70,000 -- --
Cash paid for redemption
of partners' interests.. (4,010) -- -- --
Additions to excess
costs................... (98) -- -- --
Additions to deferred
financing costs......... (2,289) -- -- --
Proceeds from bank debt.. 159,810 -- 8,000 --
Repayment of bank debt... (350) -- -- --
Repayment of senior
debt.................... (153,538) (60,807) -- --
Repayment of note
payable................. -- -- -- (35)
--------- -------- ----------- -----------
Net cash used in
financing activities.... (475) 9,193 8,000 (35)
Net increase in cash and
cash equivalents.......... 259 (246) (85) (8,076)
Cash and cash equivalents
at beginning of period.... (210) 36 121 8,197
--------- -------- ----------- -----------
Cash and cash equivalents
at end of period.......... $ 49 $ (210) $ 36 $ 121
========= ======== =========== ===========
See accompanying notes to consolidated financial statements.
F-45
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1. THE COMPANY
U.S. Cable Television Group, L.P. (the "Company") was formed for the purpose
of acquiring, owning and operating cable television systems, which are
generally operated pursuant to non-exclusive franchises awarded by states or
local government authorities for specified periods of time. The Company
currently operates cable television systems serving portions of the
southeastern and midwestern United States. The Company's revenues are derived
principally from the provision of cable television services, which include
recurring monthly fees paid by subscribers.
Prior to the Redemption discussed in the next paragraph, the partnership
consisted of V Cable, Inc. ("V Cable"), a wholly-owned subsidiary of
Cablevision Systems Corporation ("CSC"), with an indirect 1% general
partnership interest and a 19% limited partnership interest, General Electric
Capital Corporation ("GECC"), with a 72% limited partnership interest and
various individuals and entities owning the remaining 8% partnership interest,
as general and/or limited partners (the "Predecessor Company"). Profits and
losses were allocated in accordance with the Amended and Restated Agreement of
Limited Partnership.
On March 18, 1996, V Cable advanced $70 million to the Company which was
considered a capital contribution coincident with the Redemption. On August
13, 1996, the Company redeemed the partnership interests not already owned by
V Cable ("the Redemption") for a payment of approximately $4 million to the
holders of 8% of the partnership interests and the repayment of the balance of
the debt owed to General Electric Capital Corporation ("GECC") of
approximately $154 million. The payment of $4 million and repayment of the
GECC debt was financed under a new $175 million credit facility (Note 4). As a
result of the Redemption, which was accounted for as a purchase, the
consolidated financial information for the periods after the Redemption is
presented on a different cost basis than that for the period before the
Redemption and, therefore, is not comparable due to the change in ownership.
Subsequent to the Redemption, V Cable, through wholly-owned subsidiaries,
holds an indirect 1% general partnership interest and a direct 99% limited
partnership interest (the "Successor Company"). The partnership will terminate
December 1, 2030, unless earlier termination occurs as provided in the Amended
and Restated Agreement of Limited Partnership.
As a result of the capital contribution of $70,000 (discussed above), the
$4,010 Redemption price and $98 of miscellaneous transaction costs, the
Successor Company effectively paid $74,108 to acquire net liabilities of
$74,331, which resulted in excess costs over fair value of $148,439, as
follows:
Purchase price and transaction costs........................... $ 74,108
--------
Net liabilities acquired:
Cash, receivables and prepaids............................... 2,504
Property, plant and equipment................................ 98,212
Accounts payables and accrued expenses....................... (20,433)
Accounts payable--affiliate.................................. (1,076)
Senior debt.................................................. (153,538)
--------
(74,331)
--------
Excess costs over fair value of net liabilities acquired....... $148,439
========
For purposes of the consolidated financial statements for the period from
August 13, 1996 to December 31, 1996, this excess cost amount is being
amortized over a 7 year period.
F-46
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenues as cable television services are provided to
subscribers.
Long-Lived Assets
Property, plant and equipment, including construction materials, are
recorded at cost, which includes all direct costs and certain indirect costs
associated with the construction of cable television transmission and
distribution systems and the costs of new subscriber installations. Property,
plant and equipment are being depreciated over their estimated useful lives
using the straight-line method. Leasehold improvements are amortized over the
shorter of their useful lives or the terms of the related leases.
With respect to the Predecessor Company, franchise costs were amortized on
the straight-line basis over the average term of the franchises (approximately
4-12 years) and excess costs over fair value of net assets acquired were
amortized over a 15 year period on the straight-line basis. As mentioned in
note 1, the Successor Company is amortizing excess costs over fair value of
net assets acquired over 7 years.
The Company implemented the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," effective January 1, 1996. The Company
reviews its long-lived assets (property, plant and equipment, and related
intangible assets that arose from business combinations accounted for under
the purchase method) for impairment whenever events or circumstances indicate
that the carrying amount of an asset may not be recoverable. If the sum of the
expected cash flows, undiscounted and without interest, is less than the
carrying amount of the asset, an impairment loss is recognized as the amount
by which the carrying amount of the asset exceeds its fair value. The adoption
of Statement No. 121 had no impact on the Company's financial position or
results of operations.
Deferred Financing and Other Costs
Costs incurred to obtain debt are deferred and amortized on the straight-
line basis over the term of the related debt. Other costs consist of
organization costs in 1995 which were amortized over a five year period on the
straight line basis.
Income Taxes
The Company operates as a limited partnership; accordingly, its taxable
income or loss is includable in the tax returns of the partners, and
therefore, no provision for income taxes has been made on the books of the
Company. ECC Holdings Corporation ("ECC"), one of the Company's subsidiaries,
is a corporate entity and as such is subject to federal and state income
taxes. Income tax amounts in these consolidated financial statements pertain
to ECC.
F-47
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ECC accounts for income taxes under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", which requires
the liability method of accounting for deferred income taxes and permits the
recognition of deferred tax assets, subject to an ongoing assessment of
realizability.
Cash Flows
For purposes of the statement of cash flows, the Company considers short-
term investments with a maturity at date of purchase of three months or less
to be cash equivalents. The Company paid cash interest of approximately
$13,610 for the period from January 1, 1996 to August 12, 1996, $4,189 for the
period from August 13, 1996 to December 31, 1996 and $8,761 and $12,900 for
the years ended December 31, 1995 and 1994, respectively.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment and estimated useful lives at December 31,
1996 and 1995 are as follows:
ESTIMATED
1996 1995 USEFUL LIVES
-------- -------- -------------
Cable television transmission and distribu-
tion systems:
Converters................................ $ 6,810 $ 18,609 5 years
Headends.................................. 6,338 27,363 9 years
Distribution systems...................... 81,502 171,570 10 years
Program, service, microwave and test equip-
ment....................................... 2,219 4,396 4-7 years
Construction in progress (including materi-
als and
supplies).................................. 521 675
-------- --------
97,390 222,613
Furniture and fixtures...................... 591 4,429 5 years
Vehicles.................................... 2,886 7,411 4 years
Building and improvements................... 1,074 2,895 30 years
Leasehold improvements...................... 1,305 -- Term of Lease
Land........................................ -- 852
-------- --------
103,246 238,200
Less accumulated depreciation............... (9,703) (136,761)
-------- --------
$ 93,543 $101,439
======== ========
F-48
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 4. DEBT
Bank Debt
As discussed in Note 1, on August 13, 1996, the Successor Company paid GECC
approximately $154,000 in exchange for GECC's limited partnership interests in
the Company and in satisfaction of the outstanding balance of all indebtedness
due GECC. The repayment of the GECC debt was financed under a new $175,000
credit facility. The credit facility is with a group of banks led by the Bank
of New York, as agent, and consists of a three year $175,000 revolving credit
facility maturing on August 13, 1999. The revolving credit facility is payable
in full upon maturity. As of December 31, 1996, the Company has outstanding
borrowings under its revolving credit facility of $159,460, leaving
unrestricted and undrawn funds available amounting to $15,540. Amounts
outstanding under the facility bear interest at varying rates based upon the
bank's LIBOR rate, as defined in the loan agreement. The weighted average
interest rate was 7.6% on December 31, 1996. The Company is also obligated to
pay fees of .375% per annum on the unused loan commitment.
Substantially all of the general and limited partnership interests in the
Company have been pledged in support of the borrowings under the credit
agreement. The credit facility contains various restrictive covenants, with
which the Company was in compliance at December 31, 1996.
Senior Debt and Junior Subordinated Note
At December 31, 1995, the credit agreement between the Predecessor Company
and GECC (the "Credit Agreement") was composed of a Senior Loan Agreement and
a Junior Loan Agreement. Under the Senior Loan Agreement, GECC had provided a
$30,000 revolving line of credit (the "Revolving Line"), a $104,443 term loan
(the "Series A Term Loan") with interest payable currently and, a $92,302 term
loan (the "Series B Term Loan") with payment of interest deferred until
December 31, 2001. Under the Junior Loan Agreement, GECC had provided a
$24,039 term loan (the "Junior Term Loan") with payment of interest deferred
until December 31, 2001. The senior loan agreement and junior loan agreement
are collectively referred to as the "Loan Agreements".
At December 31, 1995, the Predecessor Company's outstanding debt to GECC,
which was all due on December 31, 2001, was comprised of the following:
Senior Debt
Revolving line of credit, with interest at varying rates...... $ 8,000
Series A Term Loan, with interest at 10.12%................... 104,443
Series B Term Loan, with interest at 10.62%................... 101,949
--------
Total Senior Debt........................................... 214,392
Junior Subordinated Note, with interest at 12.55%............... 34,645
--------
Total debt.................................................. $249,037
========
F-49
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 5. INCOME TAXES
ECC has a net operating loss carryforward for federal income tax purposes of
approximately $21,708 expiring in varying amounts through 2011.
The tax effects of temporary differences which give rise to significant
deferred tax assets or liabilities and the corresponding valuation allowance
at December 31, 1996 and 1995 are as follows:
Deferred Assets
1996 1995
-------- --------
Depreciation and amortization........................ $ 7,132 $ (9,572)
Allowance for doubtful accounts...................... 51 85
Benefits of tax loss carry forwards.................. 9,117 24,783
-------- --------
Net deferred tax assets.............................. 16,300 15,296
Valuation allowance.................................. (16,300) (15,296)
-------- --------
$ -- $ --
======== ========
ECC has provided a valuation allowance for the total amount of the net
deferred tax assets since realization of these assets is not assured due
principally to a history of operating losses. The amount of the valuation
allowance increased by $1,004 during the year ended December 31, 1996.
NOTE 6. OPERATING LEASES
The Company leases certain office and transmission facilities under terms of
operating leases expiring at various dates through 2008. The leases generally
provide for fixed annual rental payments plus real estate taxes and certain
other costs. Rent expense for the periods from January 1, 1996 to August 12,
1996 and from August 13, 1996 to December 31, 1996 amounted to approximately
$505 and $303, respectively, and for the years ended December 31, 1995 and
1994 amounted to $705 and $635, respectively.
The Company rents space on utility poles for its operations. The Company's
pole rental agreements are for varying terms, and management anticipates
renewals as they expire. Pole rental expense for the periods from January 1,
1996 to August 12, 1996 and from August 13, 1996 to December 31, 1996 amounted
to approximately $912 and $547, respectively, and for the years ended December
31, 1995 and 1994 amounted to $1,312 and $1,199, respectively.
The minimum future annual rental payments for all operating leases,
including pole rentals from January 1, 1997 through December 31, 2008, at
rates presently in force at December 31, 1996, are approximately: 1997,
$1,902; 1998, $1,764; 1999, $1,735; 2000, $1,657; 2001, $1,599; and thereafter
$2,945.
NOTE 7. RELATED PARTY TRANSACTIONS
CSC has interests in several entities engaged in providing cable television
programming and other services to the cable television industry. For the
periods from January 1, 1996 to August 12, 1996 and
F-50
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 7. RELATED PARTY TRANSACTIONS (CONTINUED)
from August 13, 1996 to December 31, 1996, the Company was charged
approximately $510 and $268, respectively, and for the years ended December
31, 1995 and 1994 the Company was charged approximately $568 and $407,
respectively, by these entities for such services. At December 31, 1996 and
1995, the Company owed approximately $60 and $107 to these companies for such
programming services which is included in accounts payable-affiliates in the
accompanying consolidated balance sheets.
CSC provides the Company with general and administrative services. For the
periods from January 1, 1996 to August 12, 1996 and from August 13, 1996 to
December 31, 1996, the Company was charged $2,274 and $1,712, respectively,
and for the years ended December 31, 1995 and 1994 these charges totaled
approximately $3,530 and $3,300. Amounts owed to CSC at December 31, 1996 and
1995 for such expenses were approximately $408 and $365 and is included in
accounts payable-affiliates in the accompanying consolidated balance sheet.
NOTE 8. BENEFIT PLAN
During 1989, the Company adopted a 401K savings plan (the "Plan"). Employee
participation is voluntary. Under the provisions of the Plan, employees may
defer up to 15% of their annual compensation (as defined). The Company
currently contributes 50% of the contributions made by participating employees
subject to a contribution cap of 6% of the employee's compensation. The
Company may make additional contributions at its discretion. Expense relating
to this Plan amounted to $327, $321 and $295 in 1996, 1995 and 1994,
respectively.
The Company does not provide postretirement benefits for any of its
employees.
NOTE 9. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and Cash Equivalents, Accounts Receivable--Subscribers, Other
Receivables, Prepaid Expenses and Other Assets, Accounts Payable, Accrued
Expenses, and Accounts Payable to Affiliates
The carrying amount approximates fair value due to the short maturity of
these instruments.
Bank Debt
The fair value of the company's long term debt instruments approximates its
book value since the interest rate is LIBOR-based and accordingly is adjusted
for market rate fluctuations.
Senior and Junior Debt
At December 31, 1995, the carrying amount of the Senior and Junior Debt
approximated fair value.
F-51
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 10. COMMITMENTS
CSC and its cable television affiliates (including the Company) have an
affiliation agreement with a program supplier whereby CSC and its cable
television affiliates are obligated to make Base Rate Annual Payments, as
defined and subject to certain adjustments pursuant to the agreement, through
2004. The Company would be contingently liable for its proportionate share of
Base Rate Annual Payments, based on subscriber usage, of approximately; $1,276
in 1997; $1,320 in 1998 and $1,366 in 1999. For the years 2000 through 2004,
such payments would increase by percentage increases in the Consumer Price
Index, or five percent, whichever is less, over the prior year's Base Annual
Payment.
NOTE 11. SUBSEQUENT EVENT
On August 29, 1997, CSC and certain of its wholly-owned subsidiaries entered
into an agreement with Mediacom LLC ("Mediacom") to sell to Mediacom cable
systems owned by the Company. The transaction was consummated on January 23,
1998 for a sales price of approximately $311 million.
F-52
INDEPENDENT AUDITORS' REPORT
The Partners
American Cable TV Investors 5, Ltd.:
We have audited the accompanying combined statements of operations and
partnership's investment and cash flows of the Lower Delaware System (as
defined in Note 1 to the combined statements of operations and partnership's
investment and cash flows) for the period from January 1, 1997 to June 23,
1997 and for the year ended December 31, 1996. These combined financial
statements are the responsibility of the Lower Delaware System's management.
Our responsibility is to express an opinion on these combined financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the results of operations and the cash flows
of the Lower Delaware System for the period from January 1, 1997 to June 23,
1997 and for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
April 30, 1998
F-53
LOWER DELAWARE SYSTEM
(DEFINED IN NOTE 1)
COMBINED STATEMENTS OF OPERATIONS AND PARTNERSHIP'S INVESTMENT
PERIOD FROM
JANUARY 1, 1997 TO YEAR ENDED
JUNE 23, 1997 DECEMBER 31, 1996
------------------ -----------------
AMOUNTS IN THOUSANDS
Revenue................................... $ 4,303 8,742
Operating costs and expenses:
Operating (note 4)...................... 1,425 2,712
Selling, general and administrative
(note 4)............................... 1,090 2,091
Depreciation............................ 984 2,109
Amortization............................ 1,609 3,328
------- ------
5,108 10,240
------- ------
Operating loss........................ (805) (1,498)
Other income (expense), net............... 17 (6)
------- ------
Net loss.............................. (788) (1,504)
Partnership's Investment:
Beginning of period..................... 21,766 24,855
Change in Partnership's investment...... (1,296) (1,585)
------- ------
End of period........................... $19,682 21,766
======= ======
See accompanying notes to the combined financial statements.
F-54
LOWER DELAWARE SYSTEM
(DEFINED IN NOTE 1)
COMBINED STATEMENTS OF CASH FLOWS
PERIOD FROM
JANUARY 1, 1997 TO YEAR ENDED
JUNE 23, 1997 DECEMBER 31, 1996
------------------ -----------------
AMOUNTS IN THOUSANDS
Cash flows from operating activities:
Net loss................................ $ (788) (1,504)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization......... 2,593 5,437
Other non-cash credits................ -- 6
Changes in operating assets and
liabilities:
Change in receivables............... 305 (422)
Change in other assets.............. 37 (24)
Change in accounts payable and other
accrued liabilities................ 175 187
------ ------
Net cash provided by operating
activities....................... 2,322 3,680
------ ------
Cash flows from investing activities:
Capital expended for property and
equipment.............................. (525) (2,865)
Other investing activities, net......... -- 7
------ ------
Net cash used in investing
activities....................... (525) (2,858)
------ ------
Cash flows from financing activities:
Change in partnership's investment...... (1,296) (1,585)
------ ------
Net cash used in financing
activities....................... (1,296) (1,585)
------ ------
Net change in cash................ 501 (763)
Cash at beginning of period....... 538 1,301
------ ------
Cash at end of period............. $1,039 538
====== ======
See accompanying notes to combined financial statements.
F-55
LOWER DELAWARE SYSTEM
(DEFINED IN NOTE 1)
NOTES TO COMBINED STATEMENTS OF OPERATIONS AND PARTNERSHIP'S INVESTMENT AND
CASH FLOWS
FOR THE PERIOD FROM JANUARY 1, 1997 TO JUNE 23, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
(1) BASIS OF PRESENTATION
The combined statements of operations and partnership's investment and cash
flows include the accounts of two cable television systems wholly-owned by
American Cable TV Investors 5, Ltd. (the "Partnership" or "ACT 5") serving
subscribers in Maryland and Delaware. Such systems are collectively referred
to herein as the "Lower Delaware System." ACT 5's managing agent is TCI
Cablevision Associates, Inc., an indirect subsidiary of Tele-Communications,
Inc. ("TCI"). All significant inter-entity accounts and transactions have been
eliminated in combination.
As described in note 4, certain costs of TCI are charged to the Lower
Delaware System. Although such allocations are not necessarily indicative of
the costs that would have been incurred by the Lower Delaware System on a
stand alone basis, management believes that the resulting allocated amounts
are reasonable. In addition, depreciation and amortization expenses are based
on historical costs which may not be indicative of future periods.
Sale of Systems
Effective June 24, 1997, ACT 5 sold the Lower Delaware System to Mediacom
LLC, an unaffiliated third party for an adjusted cash sales price of
$42,191,000.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Equipment
Property and equipment is stated at cost, including acquisition costs
allocated to tangible assets acquired. Construction costs, including interest
during construction and applicable overhead, are capitalized. During 1997 and
1996, interest capitalized was not significant.
Depreciation is computed on a straight-line basis using estimated useful
lives of 3 to 15 years for cable distribution systems and 3 to 40 years for
support equipment and buildings.
Repairs and maintenance are charged to operations, and renewals and
additions are capitalized. At the time of ordinary retirements, sales or other
dispositions of property, the original cost and cost of removal of such
property are charged to accumulated depreciation, and salvage, if any, is
credited thereto.
Franchise Costs
Franchise costs include the difference between the cost of acquiring cable
television systems and amounts assigned to their tangible assets. Such amounts
are amortized using the straight-line method over the remaining terms of
franchise agreements at the time of acquisition, which terms did not exceed 15
years.
Impairment of Long-Lived Assets
The Lower Delaware System periodically reviews the carrying amounts of
property and equipment and its identifiable intangible assets to determine
whether current events or circumstances warrant adjustments to such carrying
amounts. If an impairment adjustment is deemed necessary, such loss is
F-56
LOWER DELAWARE SYSTEM
(DEFINED IN NOTE 1)
NOTES TO COMBINED STATEMENTS OF OPERATIONS AND
PARTNERSHIP'S INVESTMENT AND CASH FLOWS--(CONTINUED)
FOR THE PERIOD FROM JANUARY 1, 1997 TO JUNE 23, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
measured by the amount that the carrying value of such assets exceeds their
fair value. Considerable management judgment is necessary to estimate the fair
value of assets, accordingly, actual results could vary significantly from
such estimates. Assets to be disposed of are carried at the lower of their
carrying amount or fair value less costs to sell.
Statements of Cash Flows
Transactions effected through the Partnership's Investment account have been
considered constructive cash receipts and payments for purposes of the
combined statements of cash flows.
Revenue Recognition
Revenue for customer fees, equipment rental, advertising, pay-per-view
programming and revenue sharing agreements is recognized in the period that
services are delivered. Installation revenue is recognized in the period the
installation services are provided to the extent of direct selling costs. Any
remaining amount is deferred and recognized over the estimated average period
that subscribers are expected to remain connected to the system.
Estimates
The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
(3) INCOME TAXES
No provision has been made for income tax expense or benefit in the
accompanying combined financial statements as the earnings or losses of ACT 5
are reported in the respective income tax returns of the individual partners.
(4) TRANSACTIONS WITH RELATED PARTIES
The Lower Delaware System incurs amounts due to related parties, which
represent non-interest-bearing payables to ACT 5, consisting of the net effect
of cash advances and certain intercompany expense allocations.
The Lower Delaware System purchases substantially all of its programming
services from affiliates of TCI. The charges, which generally approximate such
TCI affiliates' cost and are based upon the number of subscribers served by
the system, aggregated $913,000 and $1,701,000 for the period from January 1,
1997 to June 23, 1997 and for the year ended December 31, 1996, respectively,
and are included in operating expenses in the accompanying combined statements
of operations and Partnership's investment.
Certain subsidiaries of TCI provide administrative services to the Lower
Delaware System and have assumed managerial responsibility of the Lower
Delaware System's cable television system
F-57
LOWER DELAWARE SYSTEM
(DEFINED IN NOTE 1)
NOTES TO COMBINED STATEMENTS OF OPERATIONS AND
PARTNERSHIP'S INVESTMENT AND CASH FLOWS--(CONTINUED)
FOR THE PERIOD FROM JANUARY 1, 1997 TO JUNE 23, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
operations and construction. As compensation for these services, the Lower
Delaware System pays a monthly management fee based on total revenue. The
Lower Delaware System also reimburses for direct out-of-pocket and indirect
expenses allocable to the Lower Delaware System and for certain personnel
employed on a full or part-time basis to perform accounting, marketing,
technical or other services. Charges for such services were approximately
$388,000 and $669,000 for the period from January 1, 1997 to June 23, 1997 and
for the year ended December 31, 1996, respectively, and are included in
selling, general and administrative expenses in the accompanying combined
statements of operations and Partnership's investment.
(5) COMMITMENTS AND CONTINGENCIES
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act"). In 1993 and
1994, the Federal Communications Commission ("FCC") adopted certain rate
regulations required by the 1992 Cable Act and imposed a moratorium on certain
rate increases. As a result of such actions, the Lower Delaware System's basic
and tier service rates and its equipment and installation charges (the
"Regulated Services") are subject to the jurisdiction of local franchising
authorities and the FCC. Basic and tier service rates are evaluated against
competitive benchmark rates as published by the FCC, and equipment and
installation charges are based on actual costs. Any rates for Regulated
Services that exceeded the benchmarks were reduced as required by the 1993 and
1994 rate regulations. The rate regulations do not apply to the relatively few
systems which are subject to "effective competition" or to services offered on
an individual service basis, such as premium movie and pay-per-view services.
The Lower Delaware System believes that they have complied in all material
respects with the provisions of the 1992 Cable Act, including its rate setting
provisions. However, the Lower Delaware System's rates for Regulated Services
are subject to review by the FCC, if a complaint has been filed, or by the
appropriate franchise authority, if such authority has been certified by the
FCC to regulate rates. If, as a result of the review process, a system cannot
substantiate its rates, it could be required to retroactively reduce its rates
to the appropriate benchmark and refund the excess portion of rates received.
Any refunds of the excess portion of tier service rates would be retroactive
to the date of complaint. Any refunds of the excess portion of all other
Regulated Service rates would be retroactive to one year prior to the
implementation of the rate reductions.
The Lower Delaware System leases business offices, has entered into pole
rental agreements and uses certain equipment under lease arrangements. Rental
expense under these arrangements was $55,000 and $87,000 for the period from
January 1, 1997 to June 23, 1997 and the year ended December 31, 1996,
respectively.
It is expected that in the normal course of business, leases that expire
will be renewed or replaced by leases on other properties; thus, it is
anticipated that future minimum lease commitments will not be less than the
amount shown in 1997, on an annualized basis.
As of June 23, 1997, management of the Lower Delaware System had not yet
assessed the cost associated with its year 2000 readiness efforts to ensure
that its computer systems and related
F-58
LOWER DELAWARE SYSTEM
(DEFINED IN NOTE 1)
NOTES TO COMBINED STATEMENTS OF OPERATIONS AND
PARTNERSHIP'S INVESTMENT AND CASH FLOWS--(CONTINUED)
FOR THE PERIOD FROM JANUARY 1, 1997 TO JUNE 23, 1997
AND THE YEAR ENDED DECEMBER 31, 1996
software properly recognize the year 2000 and continue to process business
information, and the related potential impact on the Lower Delaware System's
results of operations. Amounts expended through June 23, 1997 were not
material, although there can be no assurance that costs ultimately required to
be paid to ensure the Lower Delaware System's year 2000 readiness will not
have an adverse effect on the Lower Delaware System's financial position.
Additionally, there can be no assurance that the systems of the Lower Delaware
System's suppliers will be converted in time or that any such failure to
convert by such third parties will not have an adverse effect on the Lower
Delaware System's financial position.
F-59
INDEPENDENT AUDITOR'S REPORT
February 10, 1997
To the Partners
Saguaro Cable TV Investors Limited Partnership
(A Limited Partnership)
Castle Rock, Colorado
We have audited the accompanying Balance Sheet of Saguaro Cable TV Investors
Limited Partnership (A Limited Partnership) as of December 26, 1996, and the
related Statements of Operations and Partners' Capital and Cash Flows for the
period from January 1, 1996 to December 26, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Saguaro Cable TV Investors
Limited Partnership (A Limited Partnership) as of December 26, 1996, and the
results of its operations and its cash flows for the period ended December 26,
1996 in conformity with generally accepted accounting principles.
Gustafson, Crandall & Christensen,
Inc.
Certified Public Accountants
Colorado Springs, Colorado
F-60
SAGUARO CABLE TV INVESTORS LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
BALANCE SHEET
DECEMBER 26, 1996
ASSETS
Cash............................................................... $ 684,743
Accounts receivable, net of allowance for doubtful account of
$3,710 (Note E)................................................... 81,092
Inventory.......................................................... 62,636
Prepaid expenses................................................... 15,569
Property and equipment (Notes B and E)............................. 1,728,642
Other assets (Notes C and E)....................................... 3,968,407
----------
Total Assets................................................... $6,541,089
==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable................................................. $ 76,647
Accrued expenses................................................. 394,679
Due to management firm (Note D).................................. 23,154
Subscriber deposits.............................................. 82,551
Notes payable (Note E)........................................... 5,312,500
----------
Total Liabilities.............................................. 5,889,531
Partners' capital (Note F)......................................... 651,558
----------
Total Liabilities and Partners' Capital........................ $6,541,089
==========
See notes to financial statements.
F-61
SAGUARO CABLE TV INVESTORS LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
AND PARTNERS' CAPITAL
PERIOD FROM JANUARY 1, 1996 TO DECEMBER 26, 1996
Operating revenues.................................................. $2,935,512
Cost of services sold............................................... 704,250
----------
Gross profit...................................................... 2,231,262
General and administrative expenses................................. 740,605
Depreciation and amortization....................................... 951,968
----------
Net operating profit.............................................. 538,689
Other expenses:
Interest.......................................................... 525,105
Other expenses (Note D)........................................... 149,764
----------
Net [loss].......................................................... [136,180]
Partners' capital -- Beginning of period............................ 787,738
----------
Partners' capital -- End of period.................................. $ 651,558
==========
See notes to financial statements.
F-62
SAGUARO CABLE TV INVESTORS LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS
PERIOD FROM JANUARY 1, 1996 TO DECEMBER 26, 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers..................................... $ 2,906,666
Cash paid to suppliers and employees............................. [1,568,362]
Interest received................................................ 14,105
Interest paid.................................................... [440,544]
-----------
Net cash provided by operating activities...................... 911,865
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of investments.......................................... 650,000
Purchase of investments.......................................... [500,000]
Purchase of property and equipment............................... [301,105]
-----------
Net cash [used by] investing activities........................ [151,105]
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable......................................... [450,000]
-----------
NET INCREASE IN CASH............................................... 310,760
CASH -- Beginning of period........................................ 373,983
-----------
CASH -- End of period.............................................. $ 684,743
===========
See notes to financial statements.
F-63
SAGUARO CABLE TV INVESTORS LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
STATEMENT OF CASH FLOWS
PERIOD FROM JANUARY 1, 1996 TO DECEMBER 26, 1996
RECONCILIATION OF NET [LOSS] TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Net [loss]....................................................... $ [136,180]
Adjustments to reconcile net [loss] to net cash provided by
operating activities:
Depreciation................................................... 607,920
Amortization................................................... 344,048
Increase in accrued expenses................................... 134,891
Decrease in prepaid expenses................................... 30,022
Increase in accounts payable................................... 28,774
[Decrease] in due to management firm........................... [1,339]
[Decrease] in subscriber deposits.............................. [2,081]
[Increase] in accounts receivable.............................. [3,881]
[Increase] in other assets..................................... [90,309]
----------
Total adjustments............................................ 1,048,045
----------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......................... $ 911,865
==========
See notes to financial statements.
F-64
SAGUARO CABLE TV INVESTORS LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM JANUARY 1, 1996 TO DECEMBER 26, 1996
A. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES:
(1) Organization:
Saguaro Cable TV Investors Limited Partnership (A Limited Partnership) (the
Company) was formed in the State of Colorado on May 26, 1989. The purpose of
the Company is to own and operate cable television systems. The Company
currently operates cable television systems in Ajo, Nogales and Rio Rico,
Arizona. The Company sold its asset on December 27, 1996 for $11,535,000.
(2) Revenue Recognition:
Subscriber service fees are recognized as service is provided. Credit risk
is managed by disconnecting service to cable customers who are delinquent.
(3) Property and Equipment:
Property and equipment is recorded at cost plus related acquisition costs.
Depreciation is recorded using the straight-line method over the estimated
useful lives as follows:
Cable plant.................................................... 7 years
Headend........................................................ 7-10 years
Drops.......................................................... 7 years
Tools, vehicles and equipment.................................. 5-7 years
Buildings...................................................... 7-40 years
Converters..................................................... 5 years
Expenditures for maintenance and repairs are charged to expense as incurred,
whereas, expenditures which appreciably extend the useful life of the asset
are added to the cost of the asset.
(4) Amortization:
The franchise rights include the difference between the cost of acquiring
cable television systems and amounts allocated to their tangible assets. Such
amounts are amortized on a straight-line basis over 40 years.
The covenant not to compete is amortized by the straight-line method over
its contractual life of five years.
Acquisition costs and loan fees and related costs are amortized by the
straight-line method over 5 to 40 years.
The cost of the subscriber lists and records is being amortized by the
straight-line method over the estimated useful life of five years.
Organizational expenses are stated at cost and are being amortized by the
straight-line method over five years.
F-65
SAGUARO CABLE TV INVESTORS LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PERIOD FROM JANUARY 1, 1996 TO DECEMBER 26, 1996
(5) The Company periodically reviews the carrying amount of its long-lived
assets to determine whether current events or circumstances warrant
adjustment to such carrying amounts. Measurement of any impairment would
include a comparison of estimated future operating cash flow anticipated
to be generated during the remaining life of the assets with their
carrying value. An impairment loss would be recognized as the amount by
which the carrying value of the assets exceed their fair value.
(6) Interest:
The Company incurred interest costs of $525,105 in 1996. None of the
interest costs were capitalized as a part of property and equipment.
(7) Income Taxes:
No provision has been made for Federal and state income taxes on the
earnings or losses of the partnership because these taxes are the personal
responsibility of the partners.
(8) Consideration of Credit Risk:
The Company maintains its cash in bank deposit accounts at high credit
quality financial institutions. The balances, at times, may exceed federally
insured limits. At December 26, 1996 the Company exceeded the insured limit by
approximately $553,071.
(9) Use of Estimates:
The preparation of financial statements in accordance with generally
accepted account principles requires management to make estimates and
assumptions that affect the reporting amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
B. PROPERTY AND EQUIPMENT:
The property and equipment consist of the following:
Cable plant.................................................... $ 2,834,535
Headend........................................................ 796,373
Drops.......................................................... 637,969
Tools, vehicles and equipment.................................. 314,392
Land and buildings............................................. 238,376
Converters..................................................... 175,607
------------
4,997,252
[Less] accumulated depreciation................................ [3,268,610]
------------
$ 1,728,642
============
F-66
SAGUARO CABLE TV INVESTORS LIMITED PARTNERSHIP
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PERIOD FROM JANUARY 1, 1996 TO DECEMBER 26, 1996
C. OTHER ASSETS:
The other assets consist of the following:
Franchise rights................................................ $ 4,317,144
Covenant not to compete......................................... 1,000,000
Acquisition costs and loan fees................................. 579,910
Subscriber lists and records.................................... 517,000
Deferred costs.................................................. 55,309
Organizational expenses......................................... 7,534
-----------
6,476,897
[Less] accumulated amortization................................. [2,508,490]
-----------
$ 3,968,407
===========
D RELATED PARTY TRANSACTIONS:
The Company has entered into a management agreement with Arizona and
Southwest Cable, Inc., the Company's general partner. The agreement calls for
the overall general management of the cable operations. A management fee of 5%
of the gross operating revenues, plus reasonable out-of-pocket expenses, is to
be paid to the management firm.
A total of $146,520 in 1996 of management fees is included in the Statements
of Operations and Partners' Capital.
The amount due the management firm at December 26, 1996 represents unpaid
management fees, costs and advances.
E. NOTES PAYABLE:
The Company has drawn $3,812,500 at December 26, 1996 against a $6,400,000
line of credit from a bank.
Principal and interest payments are due in varying amounts from through
December 27, 1996 when the remaining balance was paid. Interest on the note is
at a variable rate based on the prime rate (9.75% at December 26, 1996) and
the Company's ability to meet various operating ratios.
The note was collateralized by the accounts receivable and all personal
property and assets (tangible and intangible) of the Company.
The Company also has a $1,500,000 note due to the previous owner of the
Nogales system. The interest rate on the note is 10.0%. The interest is
payable quarterly with the outstanding principal balance paid on December 27,
1996. This note was collateralized by the Nogales system subject to a
subordination agreement with the bank on the line of credit.
G. SUBSEQUENT EVENTS:
On December 27, 1996, the system was sold for $11,535,000. The sale results
in a gain of $4,902,599. With the sale of the system, the notes payable were
paid in full.
Distributions to the partners of $5,300,000 have been paid subsequent to the
end of the period.
F-67
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES IT
CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Summary................................................................... 1
Risk Factors.............................................................. 13
Use of Proceeds........................................................... 21
Capitalization............................................................ 21
Selected Historical and Pro Forma Consolidated Financial and Operating
Data..................................................................... 22
Unaudited Pro Forma Consolidated
Financial Data........................................................... 25
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 35
Business.................................................................. 45
Legislation and Regulation................................................ 65
Management................................................................ 74
Certain Relationships and Related Transactions............................ 78
Membership Interests of Certain Beneficial Owners and Management.......... 80
Description of the Operating Agreement.................................... 81
Description of the Notes.................................................. 84
Description of Other Indebtedness......................................... 111
Federal Tax Consequences.................................................. 113
The Exchange Offer........................................................ 116
Book-Entry; Delivery and Form............................................. 124
Plan of Distribution...................................................... 127
Legal Matters............................................................. 128
Experts................................................................... 128
Additional Available Information.......................................... 130
Glossary.................................................................. 131
Index to Financial Statements............................................. F-1
- -------------------------------------------------------------------------------
UNTIL , 1998 ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PROSPECTUS
$200,000,000
MEDIACOM LLC
MEDIACOM CAPITAL CORPORATION
OFFER TO EXCHANGE SERIES B 8 1/2% SENIOR
NOTES DUE 2008 FOR ALL OUTSTANDING
8 1/2% SENIOR NOTES DUE 2008
, 1998
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrants maintain insurance in the amount of $5,000,000 for the
benefit of their directors and officers, insuring such persons against certain
liabilities, including liabilities arising under the securities laws.
Section 420 of the New York Limited Liability Company Law (the "New York
Act") empowers a limited liability company to indemnify and hold harmless, and
advance expenses to, any member, manager or other person, or any testator or
intestate of such member, manager or other person, from and against any and
all claims and demands whatsoever; provided, however, that no indemnification
may be made to or on behalf of any member, manager or other person if a
judgment or other final adjudication adverse to such member, manager or other
person establishes (a) that his or her acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated or (b) that he or she personally gained in fact
a financial profit or other advantage to which he or she was not legally
entitled.
Section 15.2 of Mediacom's Third Amended and Restated Operating Agreement
(the "Operating Agreement") provides as follows:
The Company shall, to the fullest extent permitted by the New York Act,
indemnify and hold harmless each Member or any of their respective
shareholders, members, partners, officers, directors, employees or control
persons (as such term is defined in the Securities Act) of such Members and
any of the members of the Executive Committee (collectively, the
"Indemnified Persons") against all claims, liabilities and expenses of
whatever nature relating to activities undertaken in connection with the
Company, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and counsel,
accountants' and experts' and other fees, costs and expenses reasonably
incurred in connection with the investigation, defense or disposition
(including by settlement) of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative body in which such
Indemnified Person may be or may have been involved, as a party or
otherwise, or with which such Indemnified Person may be or may have been
threatened, while acting as such Indemnified Person, provided that no
indemnity shall be payable hereunder against any liability incurred by such
Indemnified Person by reason of such Indemnified Person's gross negligence,
fraud or willful violation of the law or the Operating Agreement or with
respect to any matter as to which such Indemnified Person shall have been
adjudicated not to have acted in good faith.
Article 7, Section 722 of the New York Business Corporation Law (the
"Business Corporation Law") empowers a corporation to indemnify any person,
made, or threatened to be made, a party to an action or proceeding (other than
one by or in the right of the corporation to procure a judgment in its favor),
whether civil or criminal, including an action by or in the right of any other
corporation of any type or kind, domestic or foreign, or any partnership,
joint venture, trust, employee benefit plan or other enterprise, which any
director or officer of the corporation served in any capacity at the request
of the corporation, by reason of the fact that he, his testator or intestate,
was a director or officer of the corporation, or served such other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity, against judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees actually and
necessarily incurred as a result of such action or proceeding, or any appeal
therein, if such director or officer acted, in good faith, for a purpose which
he reasonably believed to be in, or, in the case of service for any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise, not opposed to, the best interests of the corporation and,
in criminal actions or proceedings, in addition, had no reasonable cause to
believe that his conduct was unlawful.
II-1
Section 722 also empowers a corporation to indemnify any person made, or
threatened to be made, a party to an action by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he,
his testator or intestate, is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director or
officer of any other corporation of any type or kind, domestic or foreign, of
any partnership, joint venture, trust, employee benefit plan or other
enterprise, against amounts paid in settlement and reasonable expenses,
including attorneys' fees, actually and necessarily incurred by him in
connection with the defense or settlement of such action, or in connection
with an appeal therein, if such director or officer acted, in good faith, for
a purpose which he reasonably believed to be in, or, in the case of service
for any other corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise, not opposed to, the best interests of the
corporation, except that no indemnification under this paragraph shall be made
in respect of (1) a threatened action, or a pending action which is settled or
otherwise disposed of, or (2) any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation, unless and
only to the extent that the court in which the action was brought, or, if no
action was brought, any court of competent jurisdiction, determines upon
application that, in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such portion of the settlement
amount and expenses as the court deems proper.
Section 7 of the Mediacom Capital's Certificate of Incorporation provides as
follows:
The corporation shall, to the fullest extent permitted by Article 7 of
the Business Corporation Law, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under
said Article from and against any and all of the expenses, liabilities, or
other matters referred to in or covered by said Article, and the
indemnification provided for herein shall not be deemed exclusive of any
other rights to which any person may be entitled under any By-Law,
resolution of shareholders, resolution of directors, agreement, or
otherwise, as permitted by said Article, as to action in any capacity in
which he served at the request of the corporation.
Article VII of Mediacom Capital's By-Laws provides as follows:
The Corporation shall indemnify any person to the full extent permitted,
and in the manner provided, by the New York Business Corporation Law, as
the same now exists or may hereafter be amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The following exhibits are filed as part of this Registration Statement:
EXHIBIT
NUMBER EXHIBIT DESCRIPTIONS
------- --------------------
2.1 Asset Purchase and Sale Agreement, dated as of May 23, 1996, by and
between Mediacom California LLC and Booth American Company
2.2 Asset Purchase Agreement, dated as of August 29, 1996, between
Mediacom and Saguaro Cable TV Investors, L.P.
2.3 Asset Purchase Agreement, dated as of August 29, 1996, between
Mediacom California LLC and Valley Center Cablesystems, L.P.
2.4 Asset Purchase Agreement, dated as of December 24, 1996, by and
between Mediacom and American Cable TV Investors 5, Ltd.
2.5 Asset Purchase Agreement, dated May 22, 1997, between Mediacom
California LLC and CoxCom, Inc.
2.6 Asset Purchase Agreement, dated September 17, 1997, between Mediacom
California LLC and Jones Cable Income Fund 1-B/C Venture
II-2
EXHIBIT
NUMBER EXHIBIT DESCRIPTIONS
------- --------------------
2.7 Asset Purchase Agreement, dated August 29, 1997, among Mediacom, U.S.
Cable Television Group, L.P., ECC Holding Corporation, Missouri Cable
Partners, L.P. and Cablevision Systems Corporation
3.1(a) Articles of Organization of Mediacom filed July 17, 1995*
3.1(b) Certificate of Amendment of the Articles of Organization of Mediacom
filed December 8, 1995*
3.2 Third Amended and Restated Operating Agreement of Mediacom*
3.3 Certificate of Incorporation of Mediacom Capital filed March 9, 1998*
3.4 By-Laws of Mediacom Capital*
3.5 Certificate of Formation of Mediacom Arizona LLC filed September 5,
1996*
3.6 Operating Agreement of Mediacom Arizona LLC*
3.7 Certificate of Formation of Mediacom California LLC filed November 22,
1995*
3.8 Operating Agreement of Mediacom California LLC*
3.9 Certificate of Formation of Mediacom Delaware LLC filed December 27,
1996*
3.10 Operating Agreement of Mediacom Delaware LLC*
3.11 Certificate of Formation of Mediacom Southeast LLC filed August 21,
1997*
3.12 Operating Agreement of Mediacom Southeast LLC*
4.1(a) Indenture, dated as of April 1, 1998, between Mediacom, Mediacom
Capital and Bank of Montreal Trust Company, as Trustee*
4.1(b) Exchange and Registration Rights Agreement dated April 1, 1998 between
Mediacom, Mediacom Capital and the Initial Purchaser*
4.1(c) Purchase Agreement dated March 27, 1998 between Mediacom, Mediacom
Capital and the Initial Purchaser*
5.1 Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C. regarding
the validity of the Series B Notes, including consent
8.1 Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C. regarding
federal income tax matters, including consent
10.1 Management Agreement dated as of December 27, 1996 by and between
Mediacom Arizona LLC and Mediacom Management*
10.2 First Amended and Restated Management Agreement dated December 27,
1996 by and between Mediacom California LLC and Mediacom Management*
10.3 Management Agreement dated June 24, 1997 by and between Mediacom
Delaware LLC and Mediacom Management*
10.4 Management Agreement dated January 23, 1998 by and between Mediacom
Southeast LLC and Mediacom Management*
10.5(a) Second Amended and Restated Credit Agreement dated as of June 24, 1997
for the Western Credit Facility
10.5(b) Amendment No. 1 to the Western Credit Facility dated as of January 13,
1998*
10.5(c) Amendment No. 2 to the Western Credit Facility dated as of March 24,
1998*
10.6(a) Credit Agreement dated as of January 23, 1998 for the Southeast Credit
Facility
10.6(b) Amendment No. 1 to the Southeast Credit Facility dated as of March 24,
1998*
II-3
EXHIBIT
NUMBER EXHIBIT DESCRIPTIONS
------- --------------------
12.1 Schedule of Earnings to Fixed Charges*
21.1 Subsidiaries of Mediacom*
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Keller Bruner & Company, L.L.C.
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of Gustafson, Crandall & Christensen, Inc.
23.6 Consents of Cooperman Levitt Winikoff Lester & Newman, P.C. (included
in Exhibits 5.1 and 8.1)
24.1 Powers of Attorney (included as part of signature pages)*
25.1 Statement of Eligibility on Form T-1 of Trustee*
27.1 Financial Data Schedule*
99.1 Form of Letter of Transmittal with respect to the Exchange Offer*
- --------
* Previously filed.
(b) Financial Statement Schedules
None.
ITEM 22. UNDERTAKINGS.
Mediacom LLC and Mediacom Capital Corporation (the "Registrants") hereby
undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; (iii) to include any material information
with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
The undersigned Registrants hereby undertake as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the Registrants undertake that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
The Registrants undertake that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will, unless
in the opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by them is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Middletown, State of
New York, on August 10, 1998.
MEDIACOM LLC
/s/ Mark E. Stephan
By: _________________________________
MARK E. STEPHAN SENIOR VICE
PRESIDENT,CHIEF FINANCIAL OFFICER
AND TREASURER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
Manager, Chairman
* and Chief Executive August 10, 1998
- ------------------------------------- Officer (principal
ROCCO B. COMMISSO executive officer)
/s/ Mark E. Stephan Senior Vice
- ------------------------------------- President, Chief August 10, 1998
MARK E. STEPHAN Financial Officer
and Treasurer
(principal
financial officer
and principal
accounting officer)
/s/ Mark E. Stephan
* By: __________________________
MARK E. STEPHAN ATTORNEY-IN-FACT
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Middletown, State of
New York, on August 10, 1998.
MEDIACOM CAPITAL CORPORATION
/s/ Mark E. Stephan
By: _________________________________
MARK E. STEPHAN TREASURER AND
SECRETARY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
Chief Executive
* Officer, President August 10, 1998
- ------------------------------------- and Director
ROCCO B. COMMISSO (principal
executive officer)
/s/ Mark E. Stephan
- ------------------------------------- Treasurer and August 10, 1998
MARK E. STEPHAN Secretary
(principal
financial officer
and principal
accounting officer)
/s/ Mark E. Stephan
* By: __________________________
MARK E. STEPHAN ATTORNEY-IN-FACT
II-7
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTIONS
------- --------------------
2.1 Asset Purchase and Sale Agreement, dated as of May 23, 1996, by and
between Mediacom California LLC and Booth American Company
2.2 Asset Purchase Agreement, dated as of August 29, 1996, between
Mediacom and Saguaro Cable TV Investors, L.P.
2.3 Asset Purchase Agreement, dated as of August 29, 1996, between
Mediacom California LLC and Valley Center Cablesystems, L.P.
2.4 Asset Purchase Agreement, dated as of December 24, 1996, by and
between Mediacom and American Cable TV Investors 5, Ltd.
2.5 Asset Purchase Agreement, dated May 22, 1997, between Mediacom
California LLC and CoxCom, Inc.
2.6 Asset Purchase Agreement, dated September 17, 1997, between Mediacom
California LLC and Jones Cable Income Fund 1-B/C Venture
2.7 Asset Purchase Agreement, dated August 29, 1997, among Mediacom, U.S.
Cable Television Group, L.P., ECC Holding Corporation, Missouri Cable
Partners, L.P. and Cablevision Systems Corporation
3.1(a) Articles of Organization of Mediacom filed July 17, 1995*
3.1(b) Certificate of Amendment of the Articles of Organization of Mediacom
filed December 8, 1995*
3.2 Third Amended and Restated Operating Agreement of Mediacom*
3.3 Certificate of Incorporation of Mediacom Capital filed March 9, 1998*
3.4 By-Laws of Mediacom Capital*
3.5 Certificate of Formation of Mediacom Arizona LLC filed September 5,
1996*
3.6 Operating Agreement of Mediacom Arizona LLC*
3.7 Certificate of Formation of Mediacom California LLC filed November 22,
1995*
3.8 Operating Agreement of Mediacom California LLC*
3.9 Certificate of Formation of Mediacom Delaware LLC filed December 27,
1996*
3.10 Operating Agreement of Mediacom Delaware LLC*
3.11 Certificate of Formation of Mediacom Southeast LLC filed August 21,
1997*
3.12 Operating Agreement of Mediacom Southeast LLC*
4.1(a) Indenture, dated as of April 1, 1998, between Mediacom, Mediacom
Capital and Bank of Montreal Trust Company, as Trustee*
4.1(b) Exchange and Registration Rights Agreement dated April 1, 1998 between
Mediacom, Mediacom Capital and the Initial Purchaser*
4.1(c) Purchase Agreement dated March 27, 1998 between Mediacom, Mediacom
Capital and the Initial Purchaser*
5.1 Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C. regarding
the validity of the Series B Notes, including consent
8.1 Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C. regarding
federal income tax matters, including consent
10.1 Management Agreement dated as of December 27, 1996 by and between
Mediacom Arizona LLC and Mediacom Management*
1
EXHIBIT
NUMBER EXHIBIT DESCRIPTIONS
------- --------------------
10.2 First Amended and Restated Management Agreement dated December 27,
1996 by and between Mediacom California LLC and Mediacom Management*
10.3 Management Agreement dated June 24, 1997 by and between Mediacom
Delaware LLC and Mediacom Management*
10.4 Management Agreement dated January 23, 1998 by and between Mediacom
Southeast LLC and Mediacom Management*
10.5(a) Second Amended and Restated Credit Agreement dated as of June 24, 1997
for the Western Credit Facility
10.5(b) Amendment No. 1 to the Western Credit Facility dated as of January 13,
1998*
10.5(c) Amendment No. 2 to the Western Credit Facility dated as of March 24,
1998*
10.6(a) Credit Agreement dated as of January 23, 1998 for the Southeast Credit
Facility
10.6(b) Amendment No. 1 to the Southeast Credit Facility dated as of March 24,
1998*
12.1 Schedule of Earnings to Fixed Charges*
21.1 Subsidiaries of Mediacom*
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Keller Bruner & Company, L.L.C.
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of Gustafson, Crandall & Christensen, Inc.
23.6 Consents of Cooperman Levitt Winikoff Lester & Newman, P.C. (included
in Exhibits 5.1 and 8.1)
24.1 Powers of Attorney (included as part of signature pages)*
25.1 Statement of Eligibility on Form T-1 of Trustee*
27.1 Financial Data Schedule*
99.1 Form of Letter of Transmittal with respect to the Exchange Offer*
- --------
* Previously filed.
2
EXHIBIT 2.1
================================================================================
ASSET PURCHASE AND SALE AGREEMENT
BY AND BETWEEN
BOOTH AMERICAN COMPANY, Seller
AND
MEDIACOM CALIFORNIA LLC, Buyer
DATED AS OF MAY 23, 1996
================================================================================
TABLE OF CONTENTS
-----------------
ARTICLE I
DEFINITIONS........................................................... 1
ARTICLE II
SALE AND PURCHASE OF ASSETS........................................... 7
2.1 Sale and Purchase of Assets............................... 7
2.2 Assumption of Liabilities................................. 8
2.3 Payment of Purchase Price................................. 8
2.4 Purchase Price Adjustments................................ 9
2.5 Expenses; Sales and Transfer Taxes........................ 10
2.6 Brokerage................................................. 10
2.7 Allocation of Purchase Price.............................. 11
ARTICLE III
CLOSING DATE; CERTAIN TRANSACTIONS
TO BE EFFECTED AT CLOSING............................................. 11
3.1 Closing Date.............................................. 11
3.2 Certain Transactions to be Effected at Closing............ 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER.............................. 13
4.1 Organization and Qualification............................ 13
4.2 Business of Seller........................................ 13
4.3 Authority and Validity.................................... 13
4.4 Consents and Approvals: No Violation...................... 14
4.5 Title..................................................... 15
4.6 Real Property............................................. 15
4.7 Financial Statements; Operating Budget.................... 16
4.8 Legal Proceedings......................................... 17
4.9 Certain Employment and Employee Benefit Matters........... 17
4.10 Characteristics of the System............................. 18
4.11 Finders; Brokers and Advisors............................. 19
4.12 Tax Matters............................................... 19
4.13 Equipment................................................. 20
4.14 Governmental Permits; Contracts........................... 20
4.15 Insurance................................................. 21
4.16 Hazardous Substances and Environmental Matters............ 22
4.17 Accounts Receivable....................................... 22
4.18 System Compliance......................................... 23
4.19 Intangibles............................................... 25
4.20 No Other Consents......................................... 25
4.21 No Undisclosed Liabilities................................ 25
4.22 Liabilities to Subscribers................................ 25
4.23 Restoration............................................... 26
4.24 Condition and Transfer of Tangible Property............... 26
4.25 Inventory................................................. 26
4.26 Overbuilds................................................ 26
4.27 Certain Programming Arrangements and Relationships........ 26
4.28 Disclosure................................................ 27
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER............................... 27
5.1 Organization and Qualification............................ 27
5.2 Authority and Validity.................................... 27
5.3 No Breach or Violation.................................... 28
5.4 Litigation................................................ 29
5.5 Finders; Brokers and Advisors............................. 29
ARTICLE VI
ADDITIONAL COVENANTS.................................................. 29
6.1 Access to Premises and Records............................ 29
6.2 Continuity and Maintenance of Operations.................. 30
6.3 Employee Matters.......................................... 32
6.4 Consents.................................................. 33
6.5 HSR Notification.......................................... 34
6.6 Notification of Certain Matters........................... 34
6.7 Risk of Loss; Condemnation................................ 34
6.8 Adverse Changes........................................... 35
6.9 No Solicitation........................................... 35
6.10 Forms 394................................................. 36
6.11 Phase I Study............................................. 36
6.12 Monthly Financial Statements.............................. 37
6.13 Confidentiality........................................... 37
6.14 Covenant Not to Compete................................... 38
6.15 Public Announcements...................................... 38
6.16 Unauthorized Use of Channels.............................. 39
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.......................... 39
7.1 HSR Act................................................... 39
7.2 Governmental or Legal Action.............................. 39
7.3 Accuracy of Representations and Warranties................ 40
7.4 Performance of Agreements................................. 40
7.5 No Material Adverse Change................................ 40
7.6 Consents.................................................. 40
7.7 Transfer Documents........................................ 40
7.8 Opinions of Counsel....................................... 40
7.9 Mediacom Equity Investment................................ 40
7.10 Discharge of Liens........................................ 40
7.11 The System................................................ 40
7.12 Material Adverse Change................................... 41
7.13 Additional Documents and Acts............................. 41
7.14 Certificates.............................................. 41
7.15 CARS License Modification................................. 41
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER......................... 41
8.1 HSR Act................................................... 41
8.2 Governmental or Legal Actions............................. 42
8.3 Accuracy of Representations and Warranties................ 42
8.4 Performance of Agreements................................. 42
8.5 Opinions of Buyer's Counsel............................... 42
8.6 Additional Documents and Acts............................. 42
8.7 Certificates.............................................. 42
ARTICLE IX
INDEMNITY............................................................. 42
9.1 Seller's Indemnity........................................ 42
9.2 Buyer's Indemnity......................................... 44
9.3 Remedies Cumulative; Right to Offset...................... 45
ARTICLE X
LIABILITY IN THE EVENT OF A BREACH.................................... 45
10.1 Default by Buyer.......................................... 45
10.2 Default by Seller......................................... 46
ARTICLE XI
NOTICES............................................................... 46
ARTICLE XII
MISCELLANEOUS......................................................... 47
12.1 Entire Agreement.......................................... 47
12.2 Successors and Assigns.................................... 47
12.3 Arbitration............................................... 47
12.4 Captions.................................................. 48
12.5 Counterparts.............................................. 48
12.6 Governing Law............................................. 48
CONTENTS OF OMITTED EXHIBITS
- ----------------------------
Exhibit A Escrow Agreement
Exhibit B Senior Subordinated Loan Agreement
Exhibit C Subscription Agreement
Exhibit D Confidentiality and Non-Compete Agreements
Exhibit E Opinion of Honigman Miller Schwartz and Cohn
Exhibit F Opinion of Dow Lohnes & Albertson
Exhibit G Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C.
CONTENTS OF OMITTED SCHEDULES
- -----------------------------
Schedule 1.1 Franchise Areas
Schedule 2.1 Excluded Assets
Schedule 4.4 Consents and Approvals: No Violation
Schedule 4.5A Title Encumbrances
Schedule 4.6 Real Property
Schedule 4.8 Legal Proceedings
Schedule 4.9 Certain Employment and Employee Benefit Matters
Schedule 4.10 Characteristics of the System
Schedule 4.12 Tax Matters
Schedule 4.13 Equipment
Schedule 4.14 (i) Governmental Permits
Schedule 4.14 (ii) Contracts
Schedule 4.15 Insurance
Schedule 4.18 Exceptions to System Compliance
Schedule 4.19 Intangibles
Schedule 4.20 Consents
Schedule 4.21 No Undisclosed Liabilities
Schedule 4.26 Overbuilds
Schedule 4.27 Certain Programming Arrangements and Relationships
Schedule 6.12 Monthly Financial Statements
Registrants agree to furnish supplementally a copy of such Exhibits and
Schedules to the Commission upon request.
ASSET PURCHASE AND SALE AGREEMENT
This ASSET PURCHASE AND SALE AGREEMENT (the "Agreement") is made and entered
into this 23rd day of May, 1996, by and between BOOTH AMERICAN COMPANY, a
Michigan corporation ("Seller"), and MEDIACOM CALIFORNIA LLC, a Delaware limited
liability company ("Buyer").
R E C I T A L S:
1. Seller owns and operates a System (as hereinafter defined) in the
Cities of Kernville, Wofford Heights, Lake Isabella, Bodfish, Onyx, Weldon-
Kelso Valley, Belle Vista, Mt. Mesa-Squirrel Valley and South Lake of Kern
County, California.
2. Seller desires to sell, and Buyer desires to purchase, the assets,
property, interests, rights and privileges owned or used by Seller which
comprise the System and Buyer desires to purchase and assume the same on the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the promises and the respective
agreements hereinafter set forth, the parties agree as follows:
ARTICLE I
DEFINITIONS
"Accounts Receivable" shall mean, as of the Closing Date, Basic
-------------------
Subscriber and Bulk Subscriber accounts receivable of Seller, determined in
accordance with GAAP, representing amounts owed to Seller in connection with its
operation of the System in the ordinary course of business.
"Affiliate" shall mean, with respect to any Person, any other Person
---------
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"Assets" shall mean all properties, privileges, rights, interests and
------
claims, real and personal, tangible and intangible and mixed, of every type and
description that are owned, leased, used or held for use in the Business in
which Seller has any right, title or interest or in which Seller acquires any
right, title or interest on or before the Closing Date, including but not
limited
to Accounts Receivable, Governmental Permits, Intangibles, Contracts, Equipment,
and Real Property, but excluding any Excluded Assets and any Assets disposed of
by Seller as permitted by this Agreement.
"Basic Subscribers" shall mean accounts in a single residential
-----------------
household (excluding "second connections," as such term is commonly understood
in the cable television industry, any account duplication and any account which
has a disconnect request pending at or which has had service terminated as of
the applicable determination date) that are subscribing for at least the lowest
level of basic or limited basic cable television services provided by the
System. Notwithstanding anything herein to the contrary, "Basic Subscribers"
shall not include any subscriber (i) who has not paid all billed charges,
including deposit and installation charges (due in connection with such
subscriber's initially obtaining cable television service from the System), for
at least sixty days prior to the applicable determination date, (ii) whose
account as of the applicable determination date is more than sixty days past due
from the date on which any part of such account was first due, (iii) who has
been obtained as a subscriber by offers made, promotions conducted or discounts
given outside the ordinary course of business or (iv) who comes within the
definition of Basic Subscriber because its account (or any part thereof) has
been compromised or written off, other than in the ordinary course of business
consistent with past practices for reasons such as service interruptions and
waiver of late charges but not for the purpose of making a person qualify as a
Basic Subscriber.
"Bulk Subscriber" shall mean each bulk subscriber (as such term is
---------------
commonly understood in the cable television industry, such as trailer parks,
apartments, hotels, motels or other multiple dwelling units and commercial
subscribers) of the System.
"Bulk Units" shall mean with respect to each Bulk Subscriber, the
----------
number of units of each such Bulk Subscriber receiving at least the lowest level
of basic or limited basic cable television service provided by the System
(excluding "second connections", as such term is commonly understood in the
cable television industry, and any account duplication); provided, that Bulk
Units shall not include any units of any Bulk Subscriber if such Bulk Subscriber
(i) is a Basic Subscriber pursuant to the "Basic Subscriber" definition; (ii)
has given notice on or before the Closing Date of its intention to terminate
service completely or who has had its service terminated by Seller on or before
the Closing Date; or (iii) is or would be excluded from the definition of "Basic
Subscribers" pursuant to clauses (i) - (iv) thereof.
"Business" shall mean the cable television business conducted by
--------
Seller through the System in the Franchise Areas.
- 2 -
"Business Day" shall mean any day other than Saturday, Sunday or a day
------------
on which banking institutions in New York, New York are required or authorized
to be closed.
"Closing" shall mean the consummation of the transactions contemplated
-------
by this Agreement, as described in Article III.
"Closing Adjustments" shall have the meaning set forth in Section
-------------------
2.4A.
"Closing Date" shall have the meaning set forth in Section 3.1.
------------
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Communications Act" shall mean the Communications Act of 1934, as
------------------
amended, and the rules and regulations thereunder as from time to time in
effect.
"Confidential Parties" shall have the meaning set forth in Section
--------------------
6.14.
"Consents" shall mean any registration or filing with, consent or
--------
approval of, notice to, or action by any Person or Governmental Authority
required to permit the transfer of the Assets to Buyer or to permit Seller to
perform any of its other obligations under this Agreement, as set forth on
Schedule 4.20.
- --------------
"Contracts" shall mean all contracts, agreements and leases (other
---------
than those that are Governmental Permits or Excluded Assets), to which Seller is
a party and that pertain to the ownership, operation or maintenance of the
Assets or the Business. Each such Contract which involves payments by or to
Seller of $10,000 or more during any twelve-month period or which are not
terminable upon thirty (30) days or less notice by or to Seller without penalty
or premium are set forth on Schedule 4.14 (ii), provided, however, that all the
------------------ -------- -------
programming contracts of the System are set forth therein.
"Copyright Act" shall mean the Copyright Revision Act of 1976, as
-------------
amended.
"Cut-Off Date" shall mean the applicable determination date used by
------------
Seller to determine the number of Basic Subscribers in the applicable month,
which date normally occurs around the twenty-fifth (25th) day of the month.
"Encumbrance" shall mean any mortgage, lien, security interest,
-----------
security agreement, conditional sale or other title retention agreement, lease,
consignment or bailment given for security purposes, limitation, pledge, option,
charge, assessment,
- 3 -
restrictive agreement, restriction, encumbrance, adverse interest, trust,
constructive trust, attachment, claim, restriction on transfer or any exception
to or defect in title or other ownership interest (including but not limited to
reservations, rights of way, possibilities of reverter, encroachments,
easements, rights of entry, restrictive covenants, leases and licenses).
"Equipment" shall mean all electronic devices, trunk and distribution
---------
coaxial and optical fiber cable, amplifiers, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, subscribers' devices (including
converters, encoders, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution
systems), test equipment, vehicles and all other tangible personal property
owned, used or held for use by Seller in connection with the Business, and
including but not limited to the items described on Schedule 4.13.
--------------
"Escrow Agent" shall be The Chase Manhattan Bank (National
------------
Association).
"Escrow Agreement" shall mean the Escrow Agreement among Buyer, Seller
----------------
and Escrow Agent, substantially in the form annexed hereto as Exhibit A.
----------
"ERISA" shall mean The Employee Retirement Income Security Act of
-----
1974, as amended.
"Excluded Assets" shall have the meaning set forth in Section 2.1.
---------------
"FCC" shall mean the Federal Communications Commission.
---
"Forms 394" shall have the meaning set forth in Section 6.10.
---------
"Four Month Basic Subscribers Average" shall mean the number obtained
------------------------------------
by dividing (a) the sum of the number of Basic Subscribers as of the Cut-Off
Date for each of the four calendar months immediately preceding the Closing Date
by (b) four. If the Closing Date occurs on or after the Cut-Off Date of the
month in which the Closing occurs, the number calculated in (a) above shall be
determined by calculating the sum of (i) the number of Basic Subscribers as of
the Cut-Off Date for each of the three calendar months immediately preceding the
Closing Date and (ii) the number of Basic Subscribers as of the Cut-Off Date of
the month in which the Closing Date occurs.
"Franchise Area" shall mean that area in which Seller is authorized
--------------
under one or more Governmental Permits issued by the applicable franchising or
licensing authorities to provide cable television service to subscribers located
in such area through the
- 4 -
ownership and operation of the System, as set forth on Schedule 1.1.
------------
"GAAP" shall mean generally accepted accounting principles as in
----
effect in the United States of America.
"Governmental Authority" shall mean any of the following: (a) the
----------------------
United States of America; (b) any state, commonwealth, territory or possession
of the United States of America and any political subdivision thereof (including
counties, municipalities and the like); and (c) any agency, authority or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.
"Governmental Permits" shall mean all franchises, authorizations,
---------------------
permits, licenses, easements, registrations, leases, variances and similar
rights obtained from any Governmental Authority which authorize or are required
in connection with the operation of the Business, as set forth on Schedule
--------
4.14(i).
- ------
"HSR Act" shall have the meaning set forth in Section 6.5.
-------
"Information" shall have the meaning set forth in Section 6.13.
-----------
"Intangibles" shall mean all general intangibles, including but not
-----------
limited to subscriber lists, claims (excluding any claims relating to Excluded
Assets), patents, copyrights and goodwill, if any, owned, used or held for use
by Seller in connection with the Business, other than Contracts and Governmental
Permits.
"Legal Requirement" shall mean any statute, ordinance, code, law,
-----------------
rule, regulation, order or other requirement, standard or procedure enacted,
adopted or applied by any Governmental Authority, including but not limited to
judicial decisions applying common law or interpreting any other Legal
Requirement.
"Monthly Financial Statements" shall have the meaning set forth in
----------------------------
Section 6.12.
"1995 Financial Statements" shall have the meaning set forth in
-------------------------
Section 4.7A.
"Permitted Encumbrances" shall mean the following: (a) liens for
----------------------
taxes, assessments and governmental charges not yet due and payable; (b) zoning
laws and ordinances and similar Legal Requirements; (c) rights reserved to any
Governmental Authority to regulate the affected property; (d) as to leased Real
Property, interests of lessors and Encumbrances affecting the interests of the
lessors; (e) the Encumbrances imposed by the Governmental
- 5 -
Permits listed on Schedule 4.14(i); (f) the other Encumbrances listed on
---------------
Schedule 4.5A; and (g) other Encumbrances which do not, individually or in the
- -------------
aggregate, have a material adverse effect on the title, use, operation or value
of the System or any material Asset.
"Person" shall mean any natural person, corporation, partnership,
------
trust, unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
"Post-Closing Adjustments" shall have the meaning set forth in Section
------------------------
2.4B.
"Preliminary Title Reports" shall mean a commitment for an ALTA
-------------------------
1987/1992 owner's policy for title insurance with respect to the real estate
owned by Seller and its Affiliates which will be conveyed to Buyer pursuant to
the terms of this Agreement, committing such title company to insure good and
marketable title to said land, free and clear of all Encumbrances (other than
Permitted Encumbrances).
"Purchase Price" shall mean the sum to be paid by Buyer for the Assets
--------------
in the amount of Eleven Million Fifty Thousand Dollars ($11,050,000), as
adjusted in accordance with the terms hereof.
"Rate Regulation Rules" shall mean the FCC rules currently in effect
-----------------------
implementing the cable television rate regulation provisions of the
Communications Act.
"Real Property" shall mean all Assets consisting of interests in real
-------------
property (including but not limited to, to the extent applicable, improvements,
fixtures and appurtenances), including both fee and leasehold interests, as set
forth on Schedule 4.6.
-------------
"Required Consents" shall mean the Consents designated as such on
-----------------
Schedule 4.20 by an "R."
- -------------
"Senior Subordinated Loan Agreement" shall mean the Senior
----------------------------------
Subordinated Loan Agreement, dated the Closing Date, between Buyer and Seller,
in the form annexed hereto as Exhibit B.
----------
"Senior Subordinated Note" shall mean the Senior Subordinated Note,
--------------------------
dated the Closing Date, issued by Buyer to Seller in the original principal
amount of $2,800,000 in the form of Exhibit A to the Senior Subordinated Loan
---------
Agreement.
"Study" shall mean a Phase I environmental study of all the land
-----
leased by Seller and its Affiliates under the leases which will be transferred
to Buyer pursuant to this Agreement.
- 6 -
"Subscriber Adjustment" shall have the meaning set forth in Section
---------------------
2.4A.
"Subscription Agreement" shall mean the agreement whereby Seller shall
----------------------
invest $1,000,000 in Mediacom LLC in consideration for a ten percent (10%)
membership interest therein, in the form annexed hereto as Exhibit C.
----------
"System" shall mean the cable television reception and distribution
------
systems operated in the conduct of the Business, consisting of one or more
headends, subscriber drops and associated electronic and other equipment which
are, or are capable of being, operated as an independent system without
interconnection with other systems, and which provide cable television service
to the respective Franchise Area set forth on Schedule 1.1.
-------------
"Tax Return" shall mean any return, report, information return or
----------
other document (including any related or supporting information) filed or
required to be filed with any taxing authority in connection with the
determination, assessment, collection, administration or imposition of any
Taxes.
"Taxes" shall mean all taxes, charges, fees, liens, levies, charges,
-----
imposts, duties, withholdings or other assessments, including, without
limitation, income, withholding, capital, excise, employment, occupancy,
property, ad valorem, sales, transfer, recording, documentary, registration,
motor vehicle, franchise, use and gross receipts taxes, imposed by the United
States or any state, county, local or foreign government or any subdivision
thereof. Such term shall also include any interest, penalties, fines or
additions attributable to such assessments.
"Taxing Authority" shall mean any Federal, state, local or foreign
----------------
governmental body or political subdivision with the power to impose Taxes.
"Transaction Documents" shall mean this Agreement, the Senior
---------------------
Subordinated Loan Agreement, the Senior Subordinated Note, the Subscription
Agreement and each other instrument, document, certificate and agreement
required or contemplated to be executed and delivered hereunder and thereunder.
"WARN Act" shall mean the Worker Adjustment and Retraining
---------
Notification Act.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Sale and Purchase of Assets. Subject to the terms and conditions
---------------------------
hereof, on the Closing Date, Seller agrees to sell, transfer, convey, assign and
deliver to Buyer, and Buyer agrees to
- 7 -
purchase, good title, free and clear of Encumbrances (other than Permitted
Encumbrances), to the Assets, in consideration of the payment by Buyer to the
Seller of the Purchase Price. Notwithstanding the foregoing, the Assets shall
exclude the assets set forth on Schedule 2.1 (the "Excluded Assets").
------------
2.2 Assumption of Liabilities. Upon the terms and subject to the
-------------------------
conditions of this Agreement, from and after the Closing Date, Buyer shall
assume and pay, perform and discharge, and indemnify and hold Seller harmless
from and against, the following liabilities, obligations and commitments of
Seller relating to the System, contingent or otherwise, asserted or unasserted,
matured or unmatured, and no others:
A. Obligations to operate and maintain the System to Persons entitled
to receive such service from the System, to the extent so entitled, if at all,
under applicable franchises, ordinances, leases and agreements disclosed herein.
B. All of Seller's obligations and commitments arising on and after
the Closing Date under the Contracts and Governmental Permits, it being
understood that obligations for the period prior to the Closing Date shall be
the obligation of Seller and adjusted on and after the Closing Date pursuant to
Section 2.4.
Anything herein to the contrary notwithstanding, there is excluded
from the assumed obligations, and Seller hereby agrees to retain and discharge
and to indemnify and hold harmless Buyer from and against, any and all
liabilities of Seller not expressly assumed by Buyer pursuant to the terms
hereof, including, without limitation, all obligations pursuant to lease
agreements with respect to any of the Equipment, all obligations of Seller
arising prior to the Closing Date, obligations of Seller arising either before
or after the Closing Date with respect to matters either unrelated to the
System, or related to the System and not delivered or disclosed to Buyer in the
Transaction Documents, and indebtedness for money borrowed and obligations to
Seller's stockholders, partners, officers, directors, attorneys and accountants,
and obligations of Seller for Taxes.
2.3 Payment of Purchase Price. The Purchase Price to be paid for the
-------------------------
Assets shall, subject to the terms and conditions contained herein, be paid by
Buyer as follows:
A. On the Closing Date, the sum of Eight Million Two Hundred Fifty
Thousand Dollars ($8,250,000) plus or minus any amount as necessary to reflect
the Closing Adjustments pursuant to Section 2.4, shall be payable to Seller by
wire transfer in clearinghouse funds available and credited to the account of
Seller pursuant to the wire instructions to be delivered by Seller to Buyer no
later than three (3) Business Days prior to the Closing Date; and
- 8 -
B. On the Closing Date, there shall be delivered to Seller the Senior
Subordinated Note.
2.4 Purchase Price Adjustments. The Purchase Price to be paid pursuant
--------------------------
to Section 2.3A hereof shall be adjusted and the charges identified below
relating to the operation of the System shall be apportioned so that Seller and
Buyer shall bear responsibility and be entitled to benefit as set forth in this
Agreement. Operation of the System until 11:59 p.m. of the day immediately
preceding the Closing Date shall be for the account of Seller and thereafter for
the account of Buyer. All revenues (including, but not limited to, subscriber
prepayments) and all expenses of the System shall be prorated as of the Closing
Date and adjusted as provided herein.
A. At Closing. No later than fifteen (15) calendar days prior to the
----------
Closing Date, Seller shall deliver to Buyer Seller's certificate estimated as of
the Closing Date ("Closing Adjustments") setting forth the Four Month Basic
Subscribers Average, and the number of Bulk Units and all adjustments proposed
to be made at the Closing as of the Closing Date. The Closing Adjustments shall
include, without limitation, the Subscriber Adjustment, prepaid subscriptions,
rents, franchise fees, utilities, service contracts, vehicle and other lease
payments and other prepaid and periodic obligations with respect to the Assets
purchased hereunder. Prior to Closing, Seller shall provide Buyer or Buyer's
representative with copies of all books and records as Buyer may reasonably
request for purposes of verifying the Closing Adjustments and shall meet with
Buyer's accountants and other representatives, but without limiting Seller's
obligations hereunder to certify all the Closing Adjustments.
At the Closing, all adjustments will be made on the basis of
Seller's certificate, provided Buyer has not given notice to Seller that, in
Buyer's opinion, the proposed adjustments are materially incorrect. If Buyer
gives notice that in its opinion, the proposed adjustments are materially
incorrect, and if the parties have not been able to resolve the matter prior to
the Closing Date, any disputed amounts shall be paid by the party to be charged
with a disputed adjustment, into escrow, and shall be held by the Escrow Agent
in accordance with the Escrow Agreement until the matter is resolved.
The Purchase Price shall be reduced by an amount equal to the sum
of (a) $1,650 multiplied by the number by which the Four Month Basic Subscribers
Average is less than 6,430 and (b) $750 multiplied by the number by which the
number of Bulk Units is less than 390 at the Closing Date (the "Subscriber
Adjustment").
B. Post-Closing Adjustment. As soon as practicable following the
-----------------------
Closing Date, and in any event within one hundred twenty (120) days thereafter,
or at such other time as the parties
- 9 -
mutually agree, Buyer shall deliver to Seller Buyer's certificate setting forth
as of the Closing Date ("Post-Closing Adjustments") the Four Month Basic
Subscribers Average, the number of Bulk Units, and all Post-Closing Adjustments
for amounts due on account of Seller and charges and other obligations payable
on account of Seller. Buyer shall deliver to Seller or Seller's representatives
copies of all books and records as Seller may reasonably request for purposes of
verifying such adjustments. Buyer's certificate shall be final and conclusive
unless objected to by Seller in writing within thirty (30) days after delivery.
Seller and Buyer shall attempt jointly to reach agreement as to the amount of
the Closing Adjustments within sixty (60) days after receipt by Buyer of such
written objection by Seller, which agreement, if achieved, shall be binding upon
both parties to this Agreement and not subject to dispute or review. If Seller
and Buyer cannot reach agreement as to the amount of the Closing Adjustments
within such sixty (60) day period, Seller and Buyer agree to submit promptly any
disputed adjustment to Ernst & Young. All fees and expenses of Ernst & Young
pursuant to this Section shall be paid one-half by Buyer and one-half by Seller.
Any amounts due Buyer or Seller for Post-Closing Adjustments shall be paid by
the party owing such amount (or, to the extent disputed amounts are held by the
Escrow Agent, shall be paid by the Escrow Agent pursuant to joint written
instructions of Buyer and Seller in accordance with such final resolution) not
later than five (5) Business Days after such amounts shall have become final and
conclusive.
2.5 Expenses; Sales and Transfer Taxes. Whether or not the
----------------------------------
transactions contemplated by this Agreement shall be consummated, Seller and
Buyer shall pay their own expenses (including, without limitation, attorneys and
accountants fees and disbursements) incident to this Agreement and the
transactions contemplated hereby. Notwithstanding the foregoing, Seller shall
bear and pay all transfer, sales, purchase, use or similar taxes arising out of
the transactions contemplated by this Agreement and any filing or recording or
similar fees payable in connection with any instruments contained herein.
2.6 Brokerage. The parties acknowledge that Waller Capital
---------
Corporation acted as a broker in this transaction and will be compensated by
Seller pursuant to a separate agreement between Seller and Waller Capital
Corporation. Other than as set forth in the preceding sentence, each party
hereto represents and warrants to the other party hereto that it has not
incurred any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other like payment in connection with
this Agreement or the transactions contemplated hereby, and each party hereto
agrees to indemnify and hold the other party hereto harmless against and in
respect to any such obligation or liability based in an way on any agreement,
arrangement or understanding claimed to have been made by such party with any
third party.
- 10 -
2.7 Allocation of Purchase Price. The Purchase Price shall be
----------------------------
allocated among the assets as determined by Kane Reece Associates, Inc. prior to
the Closing. All fees and expenses of Kane Reece Associates, Inc. shall be paid
by Buyer.
ARTICLE III
CLOSING DATE;
CERTAIN TRANSACTIONS TO BE EFFECTED AT CLOSING
3.1 Closing Date.
------------
A. The Closing shall occur at 10:00 A.M. eastern standard time on
July 31, 1996, or such earlier or later date (the "Closing Date") established in
accordance with this Agreement, at the offices of Cooperman Levitt Winikoff
Lester & Newman, P.C., 800 Third Avenue, New York, New York 10022.
B. If at any time prior to the scheduled Closing Date, all of the
conditions contained in Articles VII and VIII have been met or waived, Buyer may
give notice to Seller of the Closing. Such notice shall state a date and time,
not less than ten Business Days from the date of such notice, for the Closing to
occur.
C. If on July 31, 1996, all of the conditions contained in Articles
VII and VIII have not been met or waived, then the Closing shall be deferred
until all such conditions have been met or waived but not to a date later than
September 15, 1996. Upon the last of the conditions being so met or waived,
Seller or Buyer may give notice to the other of the Closing, which notice shall
state a date and time, not less than ten business days from the date of such
notice, for the Closing to occur. The parties will use their best efforts to
close on, or as close as possible after, a Cut-Off Date.
3.2 Certain Transactions to be Effected at Closing.
----------------------------------------------
Subject in each case to the terms and conditions contained in this Agreement,
the following steps shall be taken concurrently at the Closing, except as
otherwise expressly stated:
A. Seller shall execute and/or deliver, or cause to be executed
and/or delivered, to Buyer the following:
(i) Seller's certificate setting forth the Four Month Basic
Subscribers Average and computation thereof, and the number of Bulk Units as of
the Closing Date;
(ii) The favorable opinions dated as of the Closing Date as set forth
in Section 7.8 hereof;
(iii) All such instruments and documents including instruments of
conveyance and do such other acts and things as
- 11 -
Buyer may reasonably request in order to convey good and marketable title to,
and possession of, the Assets, free and clear of any Encumbrances, excepting
only the Permitted Encumbrances, and otherwise effectuate the transactions
contemplated by this Agreement;
(iv) Seller's Certificate as to the fulfillment of the conditions set
forth in Sections 7.2, 7.3, 7.4, 7.5 and 7.10;
(v) A counterpart to the Escrow Agreement, if applicable;
(vi) A wire transfer to Mediacom LLC of one million dollars
($1,000,000) in consideration for a 10% membership interest in Mediacom LLC;
(vii) A counterpart to the Subscription Agreement;
(viii) A counterpart to the Senior Subordinated Loan Agreement;
(ix) Executed Confidentiality and Non-Compete Agreements from Ralph
H. Booth, II and John L. Booth, II;
(x) A certificate as of a recent date from the appropriate office of
the state of organization of Seller as to the good standing of Seller;
(xi) Resolutions of the Board of Directors of Seller duly authorizing
the execution, delivery and performance of this Agreement; and
(xii) Such further instruments and documents and do such other acts
and things as Buyer may reasonably request in order to effectuate the
transactions contemplated by this Agreement.
B. Buyer shall execute and/or deliver, or cause to be executed
and/or delivered, to Seller the following:
(i) By wire transfer, the cash portion of the Purchase Price after
adjustments, less any amount deposited into escrow pursuant to Section 2.4A;
(ii) The Senior Subordinated Note;
(iii) By wire transfer to the Escrow Agent, the amount, if any,
deposited into escrow pursuant to Section 2.4A;
(iv) A counterpart to the Escrow Agreement, if applicable;
(v) A counterpart to the Subscription Agreement;
- 12 -
(vi) A counterpart to the Senior Subordinated Loan Agreement;
(vii) The favorable opinion dated as of the Closing Date as set forth
in Section 8.5 hereof;
(viii) Buyer's certificate as to the fulfillment of the conditions set
forth in Sections 8.2, 8.3 and 8.4;
(ix) Resolutions of a manager of Buyer duly authorizing the
execution, delivery and performance of this Agreement and evidence of such
manager's authority to act on behalf of Buyer; and
(x) Such further instruments and documents and do such other acts
and things as Seller may reasonably request in order to effectuate the
transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer, which representations
and warranties, together with all other representations and warranties of Seller
in this Agreement, shall be true and correct as of the Closing Date as if
expressly restated on said date, and shall survive the Closing Date:
4.1 Organization and Qualification. Seller is a corporation, duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Michigan. Seller has all requisite power and authority to own, lease and use the
Assets as they are currently owned, leased and used and to conduct the Business
as it is currently conducted. Seller is duly qualified or licensed to do
business and is in good standing under the laws of each jurisdiction where the
Assets owned by Seller are located and the Business of Seller is conducted,
except any such jurisdiction where the failure to be so qualified or licensed
and in good standing would not have a material adverse effect on any of the
Assets, the System or the Business, on the validity, binding effect or
enforceability of this Agreement and each other Transaction Document to which
Seller is a party, or on the ability of Seller to perform its obligations under
this Agreement and each other Transaction Document to which it is a party.
4.2 Business of Seller. Seller has not conducted the Business
------------------
through, and none of the Assets are held or owned by, any subsidiary, Affiliate
or other entities.
4.3 Authority and Validity. Seller has full corporate power and
----------------------
authority to execute and deliver this Agreement and each other Transaction
Document to which it is a party and to consummate the transactions contemplated
by this Agreement and each other
-13-
Transaction Document to which it is a party. The execution and delivery of this
Agreement and each other Transaction Document to which Seller is a party and the
consummation by Seller of the transactions contemplated by this Agreement and
each other Transaction Document to which it is a party have been duly and
validly authorized by all necessary action on the part of Seller. This Agreement
has been, and each of the other Transaction Documents to which Seller is a party
will be on or prior to the Closing, duly and validly executed and delivered by
Seller, and this Agreement and each of the other Transaction Documents to which
Seller is a party constitute and will constitute on or prior to the Closing, a
valid and binding obligation of Seller, enforceable against Seller in accordance
with their respective terms.
4.4 Consents and Approvals: No Violation.
-------------------------------------
A. Except for (i) the Consents and (ii) filings, waivers, approvals,
actions, authorizations, qualifications and consents which, if not made or
obtained, would not, individually or in the aggregate, have a material adverse
effect on the Assets, the System, the Business, Seller's ability to perform its
obligations under this Agreement or the other Transaction Documents to which it
is a party or, to the best of Seller's knowledge, Buyer's ability to conduct the
Business after the Closing in substantially the same manner in which it is
currently conducted by Seller, no consent, waiver, approval, action or
authorization of, or filing, registration or qualification with, any
Governmental Authority is required to be made or obtained by Seller in
connection with the execution, delivery and performance of this Agreement or the
other Transaction Documents to which it is a party.
B. Except for the Consents and filings covered by the exceptions in
clauses (i) and (ii) of Section 4.4A and as set forth on Schedule 4.4, the
------------
execution, delivery and performance by Seller of this Agreement and each other
Transaction Document to which it is a party do not and will not: (i) violate or
conflict with any provision of Seller's articles of incorporation or by-laws;
(ii) violate any Legal Requirement; or (iii) (A) violate, conflict with, or
constitute a breach of or default under (without regard to requirements of
notice, passage of time or elections of any Person), (B) permit or result in the
termination, suspension or modification of, (C) result in the acceleration of
(or give any Person the right to accelerate) the performance of Seller under, or
(D) result in the creation or imposition of any Encumbrance under, any Contract
or any other instrument evidencing any of the Assets or any instrument or other
agreement to which Seller is a party or by which Seller or any of the Assets is
bound or affected, except such violations, conflicts, breaches, defaults,
terminations, suspensions, modifications, and accelerations referenced in
clauses (ii) and (iii) above which would not, individually or in the aggregate,
have a material adverse effect on the Assets, the System, the Business, or
Seller's ability to perform its
- 14 -
obligations under this Agreement or the other Transaction Documents to which it
is a party or, to the best of Seller's knowledge, Buyer's ability to conduct the
Business after the Closing in substantially the same manner in which it is
currently conducted by Seller.
4.5 Title.
-----
A. At Closing, Seller will transfer the Assets to Buyer, free and
clear of any Encumbrances, except Permitted Encumbrances. Except as set forth on
Schedule 4.5A, Seller has not signed any Uniform Commercial Code financing
- -------------
statement or any security agreement or mortgage or similar agreement authorizing
any Person to file any financing statement or claim any security interest or
lien with respect to any of the Assets. Except as set forth on Schedule 4.5A,
--------------
Seller owns all tangible personal properties which are necessary to permit the
operation of the System by Buyer in substantially the same manner as currently
operated and all such properties are included within the Assets free and clear
of all Encumbrances.
B. Seller has no properties or assets used or held for use in the
Business that are not included in the Assets, other than the Excluded Assets;
and (ii) except for the Excluded Assets, the Assets to be transferred to Buyer
at the Closing include all Equipment, Contracts, Governmental Permits and other
property and assets necessary for the conduct of the Business in the ordinary
course of business in substantially the same manner as conducted prior to the
Closing Date.
4.6 Real Property. Schedule 4.6 sets forth a list and description of
------------- ------------
all Real Property owned, leased, occupied or used by Seller in the Business, and
is true, complete and accurate in all material respects. No Real Property used
in connection with the Business is owned by Seller or any of its Affiliates.
Seller is holding, or shall hold at Closing, the leasehold interests to all Real
Property, including Real Property hereafter acquired, in each case free and
clear of any Encumbrances, except for Permitted Encumbrances. At the Closing,
Seller shall have and shall transfer to Buyer its leasehold interests in and to
all the Real Property free and clear of any and all Encumbrances (except for
Permitted Encumbrances). There are no pending or, to the best of Seller's
knowledge, threatened, any condemnation actions or special assessments or any
pending proceedings for changes in the zoning with respect to such Real Property
or any part thereof and Seller has not received any notice of the desire of any
public authority or other entity to take or use any Real Property or any part
thereof. All structures on the Real Property are structurally sound and in good
operating condition and repair (reasonable wear and tear excepted). Each parcel
of Real Property has access (either direct or by an easement included among the
Assets) to all public roads, utilities, and other services necessary for the
operation of
- 15 -
the relevant System with respect to such parcel. Seller has complied with, or
otherwise resolved to the satisfaction of the relevant Government Authority, all
notices or orders to correct violations of Legal Requirements issued by any
Governmental Authority having jurisdiction against or affecting any of the Real
Property. All leases and subleases pursuant to which any of the Real Property is
occupied or used are set forth on Schedule 4.6 and such leases and subleases are
------------
valid, subsisting, binding and enforceable in accordance with their respective
terms and there are no existing material defaults thereunder or events that with
notice or lapse of time or both would constitute defaults thereunder. Seller has
not nor, to the best of Seller's knowledge, has any other party to any contract,
lease or sublease relating to any Real Property given or received notice of
termination, and, to the best of Seller's knowledge, subject to the receipt of
any necessary Consents, the consummation of the transactions contemplated by
this Agreement will not result in any such termination. Seller is not nor will
it be, as a result of the transactions contemplated by this Agreement, with the
giving of notice or the passage of time or both, in material breach of any
provision of any contract, lease or sublease relating to any Real Property. All
easements, rights-of-way and other rights which are necessary for Seller's
current use of any Real Property are valid and in full force and effect, and
Seller has not received any notice with respect to the termination or breach of
any of such easements, rights-of-way or other similar rights.
4.7 Financial Statements; Operating Budget.
--------------------------------------
A. Seller has delivered to Buyer correct and complete copies of the
System's balance sheet and related statements of operations, income, changes in
financial position and statements of cash flows for the year ended December 31,
1995 including the detail supporting such financial statements (collectively,
the "1995 Financial Statements") and a letter from Price Waterhouse, independent
auditors for Seller, certifying that the Financial Statements have been prepared
in accordance with GAAP. The 1995 Financial Statements (i) have been prepared in
accordance with the books and records of Seller and (ii) fairly present the
financial condition and the results of operations and cash flows of the System
as of and for the period ended on such date, all in conformity with GAAP
consistently applied throughout such period, with no material difference between
such financial statements and the financial records maintained by Seller. Seller
has delivered to Buyer correct and complete copies of all filings made to
Governmental Authorities with respect to the System.
B. Since December 31, 1995, (i) the Business has been operated only
in the ordinary course; (ii) there has been no material adverse change in, and
no event has occurred which, so far as reasonably can be foreseen, is likely,
individually or in the aggregate, to result in any material adverse change in
the
- 16 -
business, operations, prospects, financial condition, or results of operations
of the Business, other than changes affecting the United States economy in
general or the cable television industry in general; (iii) there has been no
sale, assignment or transfer of any material assets or properties related to the
System, or any theft, damage, removal of property, destruction or casualty loss
which might be expected to materially adversely affect the Business or the
System; (iv) there has been no amendment or termination of any Governmental
Permit or any Contract material to the conduct of the Business; (v) there has
been no waiver or release of any material right or claim against any third party
relating to the Business; (vi) there has been no material labor dispute or union
activity with respect to or by Seller's employees which affects the operation of
the System; and (vii) there has been no agreement by Seller to take any of the
actions described in the preceding clauses (i) through (vi), except as
contemplated by this Agreement.
C. The 1996 operating budget relating to the Business which has been
delivered to Buyer was prepared in good faith in accordance with past practice
and is predicated upon the assumptions set forth therein, which assumptions are
consistent with prior budgeting practices and are reasonable in all material
respects.
4.8 Legal Proceedings. Except as set forth on Schedule 4.8 and any
----------------- ------------
proceedings affecting the cable television industry in general, there is no
judgment or order outstanding, or any action, suit, arbitration, proceeding,
controversy or investigation by or before any Governmental Authority or any
arbitrator pending, or to the best of Seller's knowledge, threatened, involving
or affecting the System, the Assets or the Business, which, if adversely
determined, would have a material adverse effect on the System, the Assets or
the Business or would materially impair the ability of Seller to perform its
obligations under this Agreement or the other Transaction Documents to which it
is a party. Seller is not in default or violation, and no event or condition
exists which, with notice or lapse of time or both, could become or result in a
default under or a violation of, any judgment or order of any Governmental
Authority.
4.9 Certain Employment and Employee Benefit Matters. Seller has no,
-----------------------------------------------
and no action or event has occurred that would cause Seller to have any,
liabilities under ERISA or similar laws with respect to employee benefit plans
of Seller regarding employees of the Business. There are no unions representing
employees of the System and no labor disputes pending between Seller and any of
its employees who work primarily in the operation of the System. Seller has
complied in all respects with all laws relating to the employment of labor,
including any provisions thereof relating to wages, hours, collective bargaining
and the payment of social security and other taxes, and Seller is not liable for
any arrearages of wages or any taxes or penalties for failure to comply
- 17 -
with any of the foregoing. Schedule 4.9 sets forth the names, job descriptions
------------
and present annual rates of compensation, including the length of time such
employee has been with the Seller, whether such employee is full-time or part-
time, any bonus or other direct or indirect compensation and employee benefits,
of all personnel whose work is performed wholly or substantially for the System,
and any employment agreements, commitments, arrangements or understandings,
written or oral, affecting such personnel.
4.10 Characteristics of the System.
-----------------------------
A. The System includes not more than 150 miles of energized cable
plant, of which not more than 18 miles are of underground construction, and
include at least 7,400 homes passed by energized cable. There are no pending
written complaints filed by Subscribers or other users of the System with any
Governmental Authority, other than such complaints as are received from time to
time in the ordinary course of business.
B. Schedule 4.10 sets forth accurately and completely the following
-------------
information as of April 1, 1996 with respect to the System:
(i) a description of the System's physical plant, including
with reasonable detail, headend trunk line and feeder cable, antenna structures
(including coordinates), transmitting and receiving equipment and capacity and
other electronic equipment;
(ii) an inventory of equipment and supplies on hand, including
without limitation converters, accurate and complete in all material respects;
(iii) without duplication, the approximate number of Basic
Subscribers and Bulk Units;
(iv) a listing of all communities included within the Franchise
Areas;
(v) basic, pay, audio and ancillary services offered, all
rates charged currently and for the prior three (3) years for each such service
or package or tier of services and the number of subscribers to each such
service or package or tier of services paying each such rate and all benchmark
rates for the System;
(vi) all broadcast and nonbroadcast programming carried by the
System, the channel capacity of the System, the station or signals carried, with
a breakdown as to each signal as between satellite and off-air reception,
current channel and frequencies utilized (including system radius and designated
coordinates reported to the FCC);
- 18 -
(vii) installation charges, where applicable;
(viii) a description in reasonable detail of all present marketing
programs, policies and practices, Seller's past practices with respect to
marketing programs, policies and practices, which are expected to be implemented
prior to the Closing Date and all rate increases proposed to be implemented
(including dates of implementation) prior to the Closing Date;
(ix) a description of all present customer service policies,
practices and procedures;
(x) all FCC licenses and registrations, including, but not
limited to, business radios, earth stations and microwave;
(xi) a description of all repair, manufacturing, assembly and
equipment enhancement activities engaged in by Seller;
(xii) all retransmission consent agreements and must-carry
requests required in the operation of the System; and
(xiii) detailed maps of the System.
4.11 Finders; Brokers and Advisors. Except for the engagement of
-----------------------------
Waller Capital Corporation, with respect to which Seller shall have sole
responsibility for the payment of all amounts owed, Seller has not employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement and Seller is not aware of any
claim or basis for any claim for payment of, or any unpaid liability to any
Person for any fees or commissions or like payments with respect to the
negotiations leading to this Agreement or the consummation of any of the
transactions contemplated by this Agreement.
4.12 Tax Matters.
-----------
A. Seller has as of the date hereof, and will have as of the
Closing Date, timely filed in proper form all Tax Returns and all other reports
that reasonably may affect Buyer's rights to and ownership of the Assets, the
System or the Business that are required to be filed as of the date hereof, or
which are required to be filed on or before the Closing Date, as the case may
be, and all such Tax Returns were prepared in good faith and are accurate and
complete in all material respects, and, to the best of Seller's knowledge, there
is no basis for assessment of any addition to any Taxes shown thereon. Except as
set forth on Schedule 4.12, all Taxes due or payable by Seller on or before the
-------------
date hereof or the Closing Date, as the case may be, the non-payment of which
could result in a lien upon the Assets, the System or the Business (including
any Taxes, liabilities or amounts owing resulting from
- 19 -
liability of Seller as the transferee of the assets of, or successor to, any
other corporation or entity or resulting by reason of Seller having been a
member of any group of corporations filing a consolidated, combined or unitary
Tax Return) have been or will be timely paid, except to the extent any such
Taxes (as set forth as of the date hereof on Schedule 4.12) are being contested
-------------
in good faith by appropriate proceedings by Seller and for which adequate
reserves for any disputed amounts shall have been established in accordance with
GAAP. Except as set forth on Schedule 4.12, as of the date hereof, there has
-------------
been no Tax examination, audit, proceeding or investigation of Seller, or with
respect to the Assets, the System or the Business, by any relevant Taxing
Authority, and Seller does not have any outstanding Tax deficiency or
assessment. Except as set forth on Schedule 4.12, there are no pending or, to
-------------
the best of Seller's knowledge, threatened actions, audits, examinations,
proceedings or investigations by any relevant Taxing Authority with respect to
Seller, the Assets, the System or the Business. There is no outstanding request
for an extension of time within which to pay any Taxes with respect to Seller,
the Assets, the System or the Business. There has been no waiver or extension of
any applicable statute of limitations for the assessment or collection of any
Taxes with respect to Seller, the Assets, the System or the Business. Seller has
withheld and paid in a timely manner to all relevant Taxing Authorities all
payments for withholding Taxes, unemployment insurance and other amounts
required to be withheld and paid. All Taxes of or with respect to Seller, the
Assets, the System and the Business relating to the period prior to the Closing
shall be the responsibility of Seller.
4.13 Equipment. Schedule 4.13 contains a list of all Equipment used
--------- -------------
or held for use by Seller in the operation of the Business. Except as set forth
on Schedule 4.13, the Equipment, whether or not set forth on Schedule 4.13 or
------------- -------------
hereafter acquired, is and will be at Closing in good operating condition and
repair (reasonable wear and tear excepted) and fit for the purpose it is being
used. All leases (including capital leases) pursuant to which any Equipment is
used are set forth on Schedule 4.13 and such leases shall be paid in full prior
-------------
to the Closing. At Closing, all Equipment subject to a lease on the date hereof
shall be transferred to Buyer free and clear of such leases and Buyer shall
assume no obligations under any such lease agreements.
4.14 Governmental Permits; Contracts.
-------------------------------
A. Schedule 4.14(i) contains a complete list of all Governmental
----------------
Permits and Schedule 4.14 (ii) contains a complete list of all Contracts. Each
------------------
Governmental Permit and Contract, including those that are entered into after
the date hereof, is in full force and effect, binding and enforceable in
accordance with its terms, and is valid under and complies in all material
respects with all applicable Legal Requirements. Except as set forth on Schedule
--------
- 20 -
4.14(i), Seller is the authorized legal holder of all Governmental Permits.
- -------
Except as set forth on Schedule 4.14(i) and 4.14(ii), neither Seller nor to the
--------------- --------
best of Seller's knowledge, any other party to any Governmental Permit or
Contract is in default thereunder or has given or received notice of
termination, cancellation, dispute or default or, to the best of Seller's
knowledge, has taken any action inconsistent with the continuance of any
Governmental Permit or Contract. Except for Contracts shown as oral contracts
and described in all material respects on Schedule 4.14 (ii), correct and
------------------
complete copies of each Governmental Permit and Contract have been delivered to
Buyer and its representatives, and with respect to those Governmental Permits
and Contracts executed after the date hereof, copies will be made available to
Buyer promptly following such execution and in any event prior to the Closing
Date. Except as set forth in Schedule 4.20, none of the Contracts require Buyer
-------------
to assume, or Seller to cause Buyer to assume, such Contract as a condition to
the transfer of the Assets and the System to Buyer.
B. Except as disclosed on Schedule 4.14(i), no approval,
-----------------
application, filing, registration, consent or other action of any Governmental
Authority is required to enable Seller to take advantage of the rights and
privileges intended to be conferred by any Governmental Permits, except for
approvals, applications, filings, registrations, consents or other actions that
(if not made or obtained) could not have a material adverse effect on Seller or
the Business. Seller has not received any notice from the granting Governmental
Authority with respect to any breach of any covenant under, or any default with
respect to, any Governmental Permits, which default has not been cured.
4.15 Insurance. Seller has in force policies of insurance with
---------
respect to the Assets and the Business and all bonds required to be obtained by
Seller with respect to the Business, including without limitation all bonds
required by Governmental Permits and Contracts, as set forth on Schedule 4.15.
-------------
All insurance policies are adequate, in accordance with prevailing cable
industry practices, to insure fully, less standard deductibles, against all
risks to which Seller and the Assets are exposed in the operation and conduct of
the Business. At no period of time did Seller lack any such insurance coverage.
Schedule 4.15 is true, complete and accurate and the insurance policies and
- -------------
bonds referred to therein are in full force and effect (free from any right of
termination on the part of the insurance carriers or bonding agencies), and
Seller has received no notice of non-renewal or cancellation of such insurance
policies or bonds. Seller will maintain such insurance policies and bonds in
full force and effect up to and including the Closing Date, and will furnish
Buyer evidence thereof. All claims, if any, made against Seller which are
covered by insurance are listed on Schedule 4.8 and are being defended by the
------------
insurers. To the best of Seller's knowledge, there
- 21 -
is no basis upon which any insurance carriers may disclaim coverage under any of
the insurance policies referred to on Schedule 4.15.
-------------
4.16 Hazardous Substances and Environmental Matters. (i) The Real
----------------------------------------------
Property is free of all asbestos-containing building materials susceptible to
becoming airborne if not disturbed; (ii) no quantity in any amount required to
be reported under any Legal Requirement (hereinafter "Reportable Quantity") of
any Hazardous Substance (as defined below) into, on, over or under the Real
Property which remains in, on, over or under the Real Property, except for such
substances that are in such amounts which are not of a Reportable Quantity under
any applicable environmental laws, or are of the type typically found in
commercial cleaning products, standard office supplies or other materials in
amounts generally used or produced by businesses similar to the Business; (iii)
no Reportable Quantity under applicable Legal Requirements of any Hazardous
Substance has been released into, on, over or under the Real Property unless
same shall have been cleaned up, removed or otherwise remediated in accordance
with Legal Requirements; (iv) Seller is, and has been, in compliance with all
Legal Requirements relating to the environment with respect to the Assets and
the operation of the Business and the System; and (v) Seller has not received
any notice from any Governmental Authority indicating that the Real Property or
any real property adjacent thereto has been or may be placed on any federal or
state "Superfund" or "Superlien" list. For these purposes, the term "Hazardous
Substances" includes any substance heretofore or hereafter designated as
"hazardous" or "toxic," including, without limitation, petroleum and petroleum
related substances, or having characteristics identified as "hazardous" or
"toxic" under any Legal Requirement including, without limitation, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, 42
U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act, 42
-- ---
U.S.C. Section 6901, et seq., the Federal Water Pollution Control Act, 33 U.S.C.
-- ---
Section 1247, et seq., the Clean Air Act, 42 U.S.C. Section 2001, et seq., and
-- --- -- ---
the Community Right to Know Act, 42 U.S.C. Section 11001, et seq., all as
-- ---
amended.
4.17 Accounts Receivable. The Accounts Receivable have not been
-------------------
assigned to or for the benefit of any other Person. The Accounts Receivable
reflected in the 1995 Financial Statements and Monthly Financial Statements and
all Accounts Receivable arising after the dates thereof up to and including the
Closing Date (to the extent not heretofore or theretofore collected) arose and
will arise from bona fide transactions in the ordinary course of business and,
other than Accounts Receivable which are more than 60 days past due from the
date of billing, the Accounts Receivable are, and will be, fully collectible.
- 22 -
4.18 System Compliance.
-----------------
A. Seller's operation of the System is in material compliance with
all applicable Legal Requirements, including without limitation, the
Communications Act, the Copyright Act, and the rules and regulations of the FCC
and the United States Copyright Office, including, without limitation, rules and
laws governing system registration, use of aeronautical frequencies and signal
carriage, equal employment opportunity, cumulative leakage index testing and
reporting, signal leakage, and subscriber privacy, except to the extent that the
failure to so comply with any of the foregoing could not (either individually or
in the aggregate) reasonably be expected to have a material adverse effect on
the Assets, the System or the Business. Without limiting the generality of the
foregoing except to the extent that the failure to comply with any of the
following could not (either individually or in the aggregate) reasonably be
expected to have a material adverse effect on the Assets, the System or the
Business and except as set forth in Schedule 4.18 hereto:
-------------
(i) the Franchise Area has been registered with the FCC;
(ii) all of the annual performance tests on the System required
under the rules and regulations of the FCC have been performed and the results
of such tests demonstrate satisfactory compliance with the applicable
requirements being tested in all material respects;
(iii) the System currently meets or exceeds the applicable
technical standards set forth in the rules and regulations of the FCC,
including, without limitation, the leakage limits contained in 47 C.F.R. Section
76.605 (a) (11);
(iv) the System is being operated in compliance with the
provisions of 47 C.F.R. Sections 76.610 through 76.619 (mid-band and super-band
signal carriage), including 47 C.F.R. Section 76.611 (compliance with the
cumulative signal leakage index) to the extent applicable;
(v) the System is presently being operated in compliance with
such authorizations (and all required certificates, permits and clearances from
governmental agencies, including the Federal Aviation Administration, with
respect to all towers, earth stations, business radios and frequencies utilized
and carried by the System have been obtained); and
(vi) all notices to subscribers of the System required by the
rules and regulations of the FCC have been provided.
- 23 -
B. All notices, statements of account, supplements and other
documents required under Section 111 of the Copyright Act and under the rules of
the Copyright Office with respect to the carriage of off-air signals by the
System have been duly filed, and the proper amount of copyright fees have been
paid on a timely basis, and the System qualifies for the compulsory license
under Section 111 of the Copyright Act, except to the extent that the failure to
so file or pay could not (either individually or in the aggregate) reasonably be
expected to have a material adverse effect on the Assets, the System or the
Business.
C. The carriage of all television station signals (other than
satellite super stations) by the System is permitted by valid retransmission
consent agreements or by must-carry elections by broadcasters.
D. Seller is in compliance with its obligations with regard to
protecting the privacy rights of any past or present customers of the System
except to the extent that the failure to so comply could not (either
individually or in the aggregate) reasonably be expected to have a material
adverse effect on the Assets, the System or the Business.
E. The Assets are adequate and sufficient for all of the current
operations of the System.
F. To Seller's knowledge, the System is not subject to effective
competition as of the date hereof.
G. No Governmental Authority has notified Seller of its application
to be certified to regulate basic service rates with respect to the System as
provided in 47 C.F.R. Section 76.910.
H. No Governmental Authority has notified Seller that it has been
certified to regulate basic service rates and has adopted regulations required
to commence such regulation with respect to the System as provided in 47 C.F.R.
Section 76.910(c) (2).
I. Except to the extent that a Governmental Authority regulates rates
pursuant to the Rate Regulation Rules, Seller is not aware of any reason that
the Seller cannot continue to charge its current programming rates in connection
with the Seller's operation of the System in compliance with the Communications
Act and the Rate Regulation Rules.
J. To Seller's knowledge, no reduction of rates or refunds to
subscribers is required thereunder as of the date hereof.
K. Seller is in compliance with its obligations under 47 C.F.R. Part
17 concerning the construction, marking and lighting
- 24 -
of antenna structures used by Seller in connection with the operation of the
System, except to the extent that the failure to so comply could not (either
individually or in the aggregate) reasonably be expected to have a material
adverse effect on the Assets, the System or the Business.
4.19 Intangibles. Except as set forth on Schedule 4.19, Seller owns
----------- -------------
or possesses royalty free licenses or other rights to use all Intangibles
necessary to the operation of the Business as presently conducted without any
material conflict with, or material infringement of, the rights of others. There
is no claim pending or, to the best of Seller's knowledge, threatened with
respect to any such Intangibles. Schedule 4.19 contains a true, correct and
-------------
complete list of all Intangibles which are material to the operation of the
System.
4.20 No Other Consents. Seller has obtained and is in compliance with
-----------------
all consents, approvals, authorizations, waivers, orders, licenses,
certificates, permits and franchises from, and has made all filings with, any
Governmental Authority and other Persons required for the operation of the
System as presently operated, all of which are in full force and effect and
enforceable in accordance with their respective terms and comply with all
applicable Legal Requirements, except for such failures which do not or could
not, individually or in the aggregate, be expected to have a material adverse
effect on the System or the Business. Except as set forth on Schedule 4.20, no
-------------
consent, authorization, approval, waiver, order, license, certificate or permit
of or from or declaration or filing with any Governmental Authority or other
Person is necessary to preclude any cancellation, suspension, termination or
reformation of any Governmental Permit or Contract, other than such consents,
authorizations, approvals, waivers, orders, licenses, certificates or permits
which do not or could not, individually or in the aggregate, have a material
adverse effect on the System or the Business.
4.21 No Undisclosed Liabilities. Except as and to the extent set
--------------------------
forth on Schedule 4.21, Seller does not have any liability or obligation (direct
-------------
or indirect, absolute, fixed, contingent or otherwise) arising out of the Assets
or conduct of the Business which was not reflected or reserved on the 1995
Financial Statements or Monthly Financial Statements, and Seller has not
incurred any such liability or obligation since the last day of the last Monthly
Financial Statement, other than in the ordinary course of business.
4.22 Liabilities to Subscribers. There are no obligations or
--------------------------
liabilities to subscribers of the System except with respect to (i) prepayments
or deposits made by such subscribers as set forth in the 1995 Financial
Statement or Monthly Financial Statements or, since the last day of the Monthly
Financial Statements incurred in the ordinary course of business consistent
- 25 -
with past practices and (ii) the obligation to supply services to subscribers in
the ordinary course of business in accordance with and pursuant to the terms of
the Governmental Permits.
4.23 Restoration. Other than property having an aggregate value of
-----------
less than $25,000, no property of any Person has been damaged, destroyed,
disturbed or removed in the process of construction or maintenance of the
System, which has not been, or will not be, prior to the Closing, repaired,
restored or replaced, and as to which an adequate reserve has not been
established by Seller.
4.24 Condition and Transfer of Tangible Property. The tangible
-------------------------------------------
personal property of Seller has been installed, operated and maintained in all
respects in accordance with the requirements of (i) all applicable Governmental
Permits and Contracts and (ii) technical standards and Legal Requirements of any
Governmental Authority or regulatory authorities, other than such requirements
which would not, individually or in the aggregate, have a material adverse
effect on the Assets, the Business or, to the best of Seller's knowledge,
Buyer's ability to operate and maintain the tangible personal property after the
Closing in substantially the same manner in which it is currently operated and
maintained by Seller. The System is or shall be at Closing capable of delivering
in the ordinary course of business to all subscribers, cable television services
(including a visual transmission) in compliance with all applicable Governmental
Permit requirements. At the Closing, Seller shall have and shall transfer to
Buyer good title to all tangible property included as part of the Assets.
4.25 Inventory. Seller has, and at the Closing will have, an
---------
inventory of spare parts and other materials relating to the System of the type
and nature and maintained at a level consistent with past practices and
otherwise in accordance with cable system industry practices.
4.26 Overbuilds. Except as set forth in Schedule 4.26, (I) no
---------- -------------
construction programs have been undertaken, or to Seller's knowledge, are
proposed or threatened to be undertaken, by any municipality or other cable
television, multichannel multipoint distribution systems or multipoint
distribution system provider or operator in any Franchise Area served by the
System; and (ii) no franchise or other application or request of any Person is
pending or to Seller's knowledge, threatened or proposed which relates to, or
which could materially adversely affect the System. Except as set forth on
Schedule 4.26, Seller is not, nor is an Affiliate of Seller, a party to any
- -------------
agreement restricting the ability of a third party to operate cable television
systems in the Franchise Areas.
4.27 Certain Programming Arrangements and Relationships. Except as
--------------------------------------------------
set forth on Schedule 4.27, Seller is not a party to any programming contract
-------------
with any Person providing for any exclusive
- 26 -
arrangement with respect to the provision of programming to the Business. Except
as set forth on Schedule 4.27, neither Seller nor any of its Affiliates has any
-------------
affiliation with (other than on a third party basis), equity interest in, profit
participation in, contractual right to acquire any such interest or
participation, or any other relationship with any Person that provides
programming to the System. Seller has not entered into any arrangement with any
community groups or similar third parties restricting or limiting the types of
programming which may be shown on the System.
4.28 Disclosure. No representation or warranty by Seller contained in
----------
this Agreement (including the exhibits and schedules hereto), and no statement
contained in any document, certificate or other instrument furnished to Buyer by
or on behalf of Seller (excluding drafts of any thereof) pursuant hereto
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows, which
representations and warranties, together with all other representations and
warranties of Buyer in this Agreement, shall be true and correct as of the
Closing Date as if expressly restated on said date, and shall survive the
Closing Date:
5.1 Organization and Qualification. Buyer is a limited liability
------------------------------
company duly formed under the Limited Liability Company Act of the State of
Delaware, and is validly existing and in good standing under the laws of the
State of Delaware. Buyer has all requisite power and authority to carry on its
business as currently conducted and to own, lease, use and operate its assets.
Buyer is duly qualified or licensed to do business and is in good standing under
the laws of each jurisdiction where the assets owned by it are located and its
business is conducted, except any such jurisdiction where the failure to be so
qualified or licensed and in good standing would not have a material adverse
effect on its assets or its business, or on the validity, binding effect or
enforceability of this Agreement and each other Transaction Document to which
Buyer is a party, or on the ability of Buyer to perform its obligations under
this Agreement and each other Transaction Document to which it is a party.
5.2 Authority and Validity. Buyer has full power and authority to
----------------------
execute and deliver this Agreement and each other Transaction Document to which
it is a party and to consummate the transactions contemplated by this Agreement
and each other Transaction Document to which it is a party. The execution and
delivery of this Agreement and each other Transaction Document to
- 27 -
which Buyer is a party and the consummation by Buyer of the transactions
contemplated by this Agreement and each other Transaction Document to which it
is a party have been duly and validly authorized by all necessary action on the
part of Buyer. This Agreement has been, and each of the other Transaction
Documents to which Buyer is a party will be on or prior to the Closing, duly and
validly executed and delivered by Buyer, and this Agreement and each of the
other Transaction Documents to which Buyer is a party constitutes and will
constitute on or prior to the Closing, a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with their respective terms.
5.3 No Breach or Violation.
----------------------
A. Except for (i) any consents that will be obtained or waived on or
prior to the Closing Date, (ii) filings and consents which, if not made or
obtained, would not have a material adverse effect on Buyer's ability to perform
its obligations under this Agreement and the other Transaction Documents to
which Buyer is a party and (iii) any Required Consents to the transfer to Buyer
of any of the Governmental Permits, no consent, waiver, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority is required to be made or obtained by Buyer in connection
with the execution, delivery and performance of this Agreement or the other
Transaction Documents to which it is a party.
B. Except with respect to any consents or filings covered by the
exceptions in clauses (i) - (iii) of Section 5.3A, the execution, delivery and
performance by Buyer of this Agreement and the other Transaction Documents to
which it is a party do not and will not: (i) violate or conflict with any
provision of Buyer's operating agreement or articles of organization; (ii)
violate any Legal Requirement; or (iii) (A) violate, conflict with or constitute
a breach of or default under (without regard to requirements of notice, passage
of time or elections of any Person), (B) permit or result in the termination,
suspension or modification of, (C) result in the acceleration of (or give any -
Person the right to accelerate) the performance of Buyer under, or (D) result in
the creation or imposition of any Encumbrance under, any material contract,
agreement, arrangement, commitment or plan to which Buyer is a party or by which
Buyer or any of its assets is bound or affected, except such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications, and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on Buyer's ability to perform its obligations under this
Agreement or the other Transaction Documents to which it is a party.
- 28 -
5.4 Litigation.
----------
A. There are no claims, actions, suits, proceedings or investigations
pending or, to the best of Buyer's knowledge, threatened, in any court or before
any Governmental Agency, or before any arbitrator, by or against or affecting or
relating to Buyer or any of its Affiliates which, if adversely determined, would
restrain or enjoin the consummation of the transactions contemplated by this
Agreement and the other Transaction Documents to which Buyer is a party or
declare unlawful the transactions or events contemplated by this Agreement and
the other Transaction Documents to which Buyer is a party or cause any of such
transactions to be rescinded.
B. There are no judgments, injunctions, orders or other judicial or
administrative mandates outstanding against or affecting Buyer or any of its
Affiliates which would hinder or delay the consummation of the transactions
contemplated by this Agreement or the other Transaction Documents to which Buyer
is a party.
5.5 Finders; Brokers and Advisors. Buyer has not employed any
-----------------------------
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement and Buyer is not aware of any
claim or basis for any claim for payment of, or any unpaid liability to any
Person for any fees or commissions or like payments with respect to the
negotiations leading to this Agreement or the consummation of any of the
transactions contemplated by this Agreement, except with respect to the
obligations of Seller referred to in Section 2.6.
ARTICLE VI
ADDITIONAL COVENANTS
6.1 Access to Premises and Records. Between the date of execution and
------------------------------
delivery of this Agreement and the Closing Date, Seller will give Buyer and its
representatives, during normal business hours and with reasonable prior notice,
access to the books and records, contracts and commitments of the Business and
to the Assets and will furnish to Buyer and its representatives such information
regarding the Business and the Assets as Buyer may from time to time reasonably
request. Without limiting the generality of the foregoing, Buyer shall have
access to all documents and information and reasonable access to books, records
and employees necessary to permit Buyer to verify, to its reasonable
satisfaction, the representations and warranties of the Seller contained herein,
including without limitation that (i) all offset frequencies relating to the
System are in place, and (ii) the System is otherwise in compliance with all
applicable Legal
- 29 -
Requirements, in each case to the extent represented and warranted in Section
4.18, and Buyer shall be permitted to conduct (if it so desires) a signal
leakage rideout and follow up and such other tests as Buyer shall deem necessary
to verify the foregoing. Seller shall give Buyer prompt written notice of (i)
any material adverse change in the condition of any of the Assets or the System
or any material change in any of the information contained in the
representations and warranties of Seller or information otherwise furnished to
Buyer which occurs after the date hereof and (ii) any claim, action,
investigation or proceeding threatened in writing or initiated relating to any
rate then being charged by Seller for any service provided by the System or the
carriage of or failure to carry any television broadcast signal. During such
period, Seller shall consult with Buyer and keep Buyer fully informed at all
times regarding any hearings or developments relating to any such claim, action,
investigation or proceeding. No such furnishing of information to Buyer and no
investigation by Buyer shall affect Buyer's right to rely on, or Seller's
liability with respect to, any representation or warranty made in this
Agreement.
6.2 Continuity and Maintenance of Operations. Except as specifically
----------------------------------------
permitted or required by this Agreement or by any Legal Requirement, Seller
shall:
A. Operate the Business in the ordinary course consistent with past
practices, including without limitation, its billing, promotional and marketing
practices and use commercially reasonable efforts to preserve any beneficial
business relationships with customers, suppliers, employees, Governmental
Authorities and others having business dealings with Seller relating to the
Business;
B. Maintain the Assets, including the plant and Equipment related
thereto, in good operating condition (normal wear and tear excepted), and
implement any capital expenditures required in connection with such maintenance;
C. Maintain all bonds and casualty and liability insurance relating
to the System as in effect on the date of this Agreement;
D. Keep all of its business books, records and files relating to the
System in the ordinary course of business in accordance with past practices, and
pay, consistent with past practices, all accounts payable and other debts,
liabilities and obligations relating to the System;
E. Continue to implement its procedures for disconnection and
discontinuance of service to System subscribers whose accounts are delinquent in
accordance with those in effect on the date of this Agreement;
- 30 -
F. Not sell, transfer or assign any Assets other than on an arms-
length basis in the ordinary course of business consistent with past practices;
G. Not permit the amendment or cancellation of any of the
Governmental Permits, Contracts or any other contract or agreement (other than
those constituting Excluded Assets) which, individually or in the aggregate,
materially adversely effects the System or the Business, provided, that Seller
shall satisfy all outstanding obligations under all personal property (including
vehicle) lease arrangements so that all such Assets shall be free and clear of
all Encumbrances at Closing;
H. Not enter into any contracts or commitments for the acquisition of
goods or services relating to the System or the Business, the performance of
which will not be completed by the Closing Date or involving an expenditure
individually in excess of $10,000 or expenditures in the aggregate in excess of
$30,000;
I. Not take or omit to take any action that would cause Seller to be
in breach of any of its representations or warranties in this Agreement;
J. Maintain inventories for the Business of equipment, cable and
supplies at normal levels consistent with past practice and good industry
standards;
K. Not increase the compensation or change any benefits available to
employees of Seller who work in the Business except as required pursuant to
existing written agreements or except in the ordinary course of business
consistent with past practice;
L. Report and write off Accounts Receivable in accordance with past
practices;
M. Withhold and pay when due all Taxes relating to employees of the
Business, the Assets, the Business and/or the System;
N. Not create, assume or permit to exist any Encumbrance (other than
Permitted Encumbrances) on any of the Assets, other than those Encumbrances
existing on the date hereof;
0. Maintain service quality of the System at a level at least
consistent with past practices;
P. File with the FCC all reports required to be filed under
applicable FCC rules and regulations, and otherwise comply with all Legal
Requirements with respect to the System;
- 31 -
Q. Not implement any new marketing program, policy or practice, or
implement any rate change, retiering or repackaging; and
R. Effect and facilitate the transition of the operation of the
System from Seller to Buyer as contemplated by this Agreement.
6.3 Employee Matters.
----------------
A. Except for those employees who are parties to employment
agreements with Seller that Buyer agrees to assume pursuant to Section 2.2B, the
employment of other employees of the Business will terminate on the Closing
Date. Buyer agrees to consider applications for employment from all current
employees of the Business. Nothing in this statement of intent shall be
construed to create any third party beneficiary rights in favor of any person
not a party to this Agreement or to constitute an offer of employment,
employment agreement or condition of employment for any of the employees of the
Business.
B. Seller shall retain liability for all workers' compensation claims
made by employees of the Business and the System filed on or before the Closing
Date. Seller shall also retain liability for all workers' compensation claims
filed by such employees after the Closing Date to the extent that such claims
relate to any compensable injuries incurred prior to the Closing Date.
C. Buyer shall not assume or have any liability under any agreement
with any individual related to such individual's employment in the Business at
or prior to the Closing Date or bonus, incentive or other employee benefit plans
maintained by Seller, including, without limitation, phantom stock plans, stock
incentive plans, opportunity pay plans, long term cash and incentive
compensation plans, covering persons employed by or who at any time prior to the
Closing Date were employed in the Business. Seller shall take such actions as
are necessary to ensure the preservation and delivery of all benefits accrued
through the Closing Date, whether payable presently or at some future date, to
employees of the Business in respect of any such bonus or incentive plans.
Seller shall be responsible for and shall pay all amounts payable to all of its
employees in connection with the termination of employment of any such employee
on or before the Closing Date in connection with the transactions contemplated
hereby, or otherwise, and also shall be responsible for all health insurance,
vacation pay and other benefits payable to such employees. Notwithstanding
anything contained herein to the contrary, Seller shall be responsible for
providing all the employee benefit plans in effect prior to the Closing Date to
the employees of the Business for thirty days after the Closing Date.
- 32 -
D. Seller shall be responsible for compliance with the notice and
continuation coverage requirements of Section 4980B of the Code that arise with
respect to the former employees of Seller and the Affected Employees (as defined
in ERISA), on account of the transactions contemplated by this Agreement, if
any.
E. Seller's long term disability plan shall be responsible for
payment of any and all covered benefits payable with respect to employment on or
before the Closing Date and for thirty days thereafter, regardless of whether
payment is required to be made after the Closing Date, for: (i) any individual
who is currently receiving such benefits as of the Closing Date, (ii) any
individual who becomes disabled prior to the Closing Date and who remains
disabled for the length of any qualifying disability period, and (iii) any
individual described in (i) and (ii) above whose disability ceases after the
Closing Date and who subsequently becomes disabled prior to the expiration of
ninety (90) days of active employment with Buyer, where such subsequent
disability is a continuation of such prior disability for which benefits were
due under Seller's or the System's welfare plan.
F. Except as otherwise provided in this Agreement, Seller shall
retain, and Buyer shall not assume, any liabilities or obligations of Seller or
any of its Affiliates to Employees with respect to claims incurred and
employment prior to the Closing Date.
G. Seller shall give all notices required to be given under the WARN
Act by any party related to or as a result of the transactions contemplated by
this Agreement, and shall indemnify and hold Buyer harmless for any liability
resulting from the failure of Seller and each System to do so. On the Closing
Date, seller shall deliver to Buyer a written description of any "employment
loss," as defined in the WARN Act, which occurs at any time within the ninety
(90) days prior to the Closing Date. For purposes of the WARN Act and this
Section 6.3, "Closing Date" shall mean the "effective date" of the transactions
contemplated by this Agreement, as defined in the WARN Act.
H. Buyer agrees that, solely for purposes of its vacation policies,
Buyer shall credit Seller's employees with prior periods of service at the
System, as indicated on Schedule 4.9.
------------
6.4 Consents.
--------
A. Seller will use commercially reasonable efforts to obtain, at its
own cost and expense as soon as practicable, the Consents, in form and substance
reasonably satisfactory to Buyer; provided that "commercially reasonable
efforts" for this purpose shall not require Seller to undertake extraordinary or
unreasonable measures to obtain such approvals and consents, including, without
limitation, the initiation or prosecution of legal proceedings or
- 33 -
the payment of fees in excess of normal and usual filing and processing fees.
Seller and Buyer will use commercially reasonable efforts to obtain, as soon as
practicable, the Consents of Governmental Authorities; provided, that
"commercially reasonable efforts" for this purpose shall not require Buyer to
agree to any change in any Contract or Governmental Permit as a condition to
obtaining any Consent, the effect of which is to make such Contract or
Governmental Permit more burdensome to Buyer, or otherwise to undertake
extraordinary or unreasonable measures to obtain such approvals and consents,
including, without limitation, the initiation or prosecution of legal
proceedings or the payment of fees in excess of normal and usual filing and
processing fees.
B. Following the Closing, Buyer will deliver promptly to the
Governmental Authorities for those Governmental Permits transferred at Closing
all bonds, letters of credit, indemnity agreements, or certificates of deposit
required by such Governmental Authorities and will use its commercially
reasonable efforts to cooperate with Seller to obtain a release by such
Governmental Authorities of Seller's bonds, letters of credit, indemnity
agreements, and certificates of deposit.
6.5 HSR Notification. As soon as practicable after the execution of
----------------
this Agreement and if required by applicable Legal Requirements, Seller and
Buyer will each complete and file, or cause to be completed and filed, any
notification and report required to be filed under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Each of the
parties will take any additional action that may be necessary, proper or
advisable, will cooperate to prevent inconsistencies between their respective
filings and will furnish to each other such necessary information and reasonable
assistance as the other may reasonably request in connection with its
preparation of necessary filings or submissions under the HSR Act. Buyer and
Seller shall use commercially reasonable efforts (including the filing of a
request for early termination) to obtain the early termination of the waiting
period under the HSR Act. The HSR Act filing fee shall be paid equally by the
parties.
6.6 Notification of Certain Matters. Each party will promptly notify
-------------------------------
the other of any fact, event, circumstance or action the existence or occurrence
of which would cause any of such party's representations or warranties under
this Agreement not to be true and correct in any material respect.
6.7 Risk of Loss; Condemnation.
--------------------------
A. Seller will bear the risk of any loss or damage to the Assets
resulting from fire, theft or other casualty at all times prior to the Closing.
If any such loss or damage is so substantial as to prevent normal operation of
any portion of the System within five days after the occurrence of the event
resulting
- 34 -
in such loss or damage, Seller shall immediately notify Buyer of that fact and
Buyer, at any time within ten days after receipt of such notice, may elect by
written notice to Seller either (i) to waive such defect and proceed toward
consummation of the acquisition of the Assets in accordance with this Agreement
or (ii) to terminate this Agreement. If Buyer elects to consummate the
acquisition of the Assets notwithstanding such loss or damage and does so, there
will be no adjustment in the aggregate consideration to be paid for the Assets
under Article II on account of such loss or damage but all insurance proceeds
paid or payable as a result of the occurrence of the event causing such loss or
damage will be delivered by Seller to Buyer at the Closing or the rights to such
proceeds will be assigned by Seller to Buyer at the Closing if not yet paid over
to Seller.
B. If, prior to the Closing, any portion of the System is taken or
condemned as a result of the exercise of the power of eminent domain, or if a
Governmental Authority having such power informs Seller or Buyer that it intends
to condemn any portion of the System (such event being referred to herein, in
either case, as a "Taking"), then Buyer may terminate this Agreement. If Buyer
does not so elect to terminate this Agreement then (i) if the Closing occurs,
Buyer shall have the sole right, in the name of Seller, if Buyer so elects, to
negotiate for, claim, contest and (if the Closing occurs) receive all damages
with respect to the Taking, (ii) Seller shall be relieved of its obligation to
convey to Buyer the Asset or interests that are the subject of the Taking and
(iii) at the Closing Seller shall assign to Buyer all of Seller's rights
(including the right to receive payment of damages) with respect to such Taking
and shall pay to Buyer all damages previously paid to Seller with respect to the
Taking.
6.8 Adverse Changes. Seller shall promptly notify Buyer in writing of
---------------
any materially adverse developments affecting the Assets, the Business or the
System which, to the best of Seller's knowledge, shall have occurred during the
period from the date hereof through the Closing Date, including, without
limitation, (a) any damage, destruction, loss (whether or not covered by
insurance) or other event materially affecting any of the Assets, the System or
the Business, (b) any notice of violation, forfeiture or complaint under any
Governmental Permits, or (c) anything which, if not corrected prior to the
Closing Date, will prevent Seller from fulfilling any condition to Closing
described herein.
6.9 No Solicitation. Between the date of this Agreement and the
---------------
Closing Date, Seller shall not, and shall cause its officers, directors,
employees, agents and representatives (including, without limitation, Waller
Capital Corporation, any investment banker, attorney or accountant retained by
Seller) not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal with respect to the Business, engage in
any negotiations concerning, or provide to any
- 35 -
other Person any information or data relating to the Business, the System, the
Assets, or Seller for the purposes of, or have any discussions with any Person
relating to, or otherwise cooperate in any way with or assist or participate in,
facilitate or encourage, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any effort or attempt by
any other Person to seek or effect a sale of all or substantially all of the
Assets, the System or the Business.
6.10 Forms 394. If not previously submitted, on or prior to the
---------
expiration of the fifteenth (15th) day after the date of this Agreement, Seller
and Buyer shall, each at its own expense, prepare and file properly prepared
Applications for Franchise Authority Consent to Assignment or Transfer of
Control or Cable Television Franchise FCC 394 ("Forms 394") with the local
Government Authorities that have issued franchises to Seller, and shall file
with all additional information required by such franchises or applicable local
Legal Requirements or that the Governmental Authorities deem necessary or
appropriate in connection with their consideration of the request of Seller or
Buyer that such authority approve of the transfer of the Franchises to Buyer.
6.11 Phase I Study. Within twenty (20) days after the execution of
-------------
this Agreement, Seller shall, at its sole expense, commission a qualified
engineering firm to conduct the Study in accordance with ASTM Standard 1527-94.
Within three (3) business days of receipt of the report of the completed Study,
Seller shall promptly deliver the report of the Study to Buyer. Buyer shall hold
the information about the Study and any related information or documentation in
confidence in accordance with the provisions of Section 6.13. If Buyer notifies
Seller in writing within thirty (30) Business Days from the date Buyer receives
the report of the Study that the Study discloses the existence of any breach, or
any facts which could be expected to result in a breach, of the representations
of Seller contained in Section 4.16, Seller shall promptly commence further
investigation and/or remedial action to cure the condition at its expense prior
to the Closing; provided that Seller shall not be obligated to spend more than
$100,000 in the aggregate in its attempt to cure all such conditions. Seller
shall notify Buyer within seven (7) days after its receipt of such written
notice from Buyer if Seller determines that it is or will be unable to cure such
conditions for $100,000 or less. If Seller exercises the right not to cure such
conditions because the aggregate cost would exceed $100,000, Buyer may elect (i)
to terminate this Agreement with no cost or obligation on the part of Seller or
(ii) to waive such obligations, in which event Buyer shall receive a credit at
the Closing in the amount, if any, by which $100,000 exceeds the aggregate
amount paid by Seller to third parties in connection with curing such conditions
and assume all liabilities and obligations in connection with such conditions
and hold harmless and indemnify Seller from same in accordance with
- 36 -
this Agreement, notwithstanding any provisions, including any representations
and warranties of Seller, of this Agreement to the contrary and Seller shall
have no liability under this Agreement or otherwise to Buyer related to or
arising from such conditions.
6.12 Monthly Financial Statements. Between the date of execution and
----------------------------
delivery of this Agreement and the Closing Date, Seller shall deliver to Buyer
within thirty (30) days after the end of each calendar month, unaudited
financial reports ("Monthly Financial Statements") in the form customarily
prepared by Seller as set forth in Schedule 6.12 with respect to the System and
-------------
other reports with respect to the System (including, without limitation, capital
expenditures to the System, reports setting forth the revenue and cash flow of
the System for each month and year-to-date, subscriber information for Basic
Subscribers and Bulk Units, disconnect requests, miles of plant, homes passed
and such other information as Buyer may reasonably request which is in the form
customarily prepared by Seller, beginning as soon as practicable after the date
of this Agreement). Such financial statements and monthly operating statements
shall present fairly and accurately the financial condition and results of
operations of Seller and the System for the period then ended and as of such
dates and be prepared in accordance with GAAP consistently applied through the
periods specified subject to normal year end adjustments.
6.13 Confidentiality. Each party shall maintain the confidentiality
---------------
of all documents or other information or data of the other party, whether
written or oral, and furnished to such party, its employees, agents, lenders,
accountants, representatives, advisors or consultants ("Confidential Parties")
in the course of the negotiation of this Agreement or in connection with the
transactions contemplated by this Agreement (the "Information"). Each party will
hold and use all reasonable efforts to cause its respective Confidential Parties
to hold in strict confidence all of the Information, and will not, without the
prior written consent of the other party, (i) use the Information for any
purpose other than in connection with the transactions contemplated by this
Agreement or in any proceeding, litigation or arbitration in respect thereof; or
(ii) release or disclose any Information to any other person, except to such
foregoing persons. Notwithstanding the foregoing, the following will not
constitute a part of the Information for the purposes of this Section:
(i) information that a party can show was known by it or any of its
respective Confidential Parties prior to the disclosure thereof by the other
party;
(ii) information that is or becomes generally available to the public
other than as a result of a disclosure directly or indirectly by the party or
any of its respective confidential Parties in breach of this Section 6.13;
- 37 -
(iii) information that is independently developed by such party
or any of its respective Confidential Parties; or
(iv) information that is or becomes available to such party on
a non-confidential basis from a source other than the other party or any of its
respective Confidential Parties, provided that such source is not known by the
party receiving the Information to be bound by any obligation or confidentiality
in relation thereto.
6.14 Covenant Not to Compete. For purposes of this Section 6.14 only,
-----------------------
the term "Seller" shall include all corporations, firms and entities controlled
by Seller. Seller shall cause John L. Booth, II and Ralph H. Booth, II, and
shall use its best efforts, at no cost or penalty to Seller, to cause James
Walker, to execute the Confidentiality and Non-Compete Agreements in the form
attached hereto as Exhibit D.
---------
A. Seller covenants and agrees that for a period of five years after
Closing (or such period as allowed by law if less than five years), Seller
(alone or in any combination therewith) will not be involved with either the
cable television, media or telecommunications business within a 50-mile radius
of the Franchise Areas. Notwithstanding anything contained herein, neither (i)
the ownership of securities of any company that is not controlled by any Seller
nor (ii) any involvement by Seller in Mediacom LLC or any Affiliate thereof
shall constitute a violation of this covenant.
B. Seller agrees that in the event that it commits a breach or
threatens to commit a breach of any of the provisions of this Section 6.14,
Buyer shall have the right and remedy to have the provisions of this Section
6.14 specifically enforced by any court having jurisdiction, it being
acknowledged and agreed that any such breach could cause immediate irreparable
injury to Buyer and that money damages would not provide an adequate remedy at
law for any such breach or threatened breach. Such right and remedy shall be in
addition to, and not in lieu of, any other rights and remedies including damages
available to Buyer at law or in equity.
C. If any of the provisions of or covenants contained in this
Section 6.14 are hereafter construed to be wholly or to any extent invalid or
unenforceable in any jurisdiction, the same shall be deemed automatically
modified to the minimum extent necessary to make such provision or covenant
enforceable, and the same shall not affect the remainder of the provisions to
the extent not invalid or unenforceable in such jurisdiction or the
enforceability thereof without limitation in any other jurisdiction.
6.15 Public Announcements. Prior to the Closing Date, all notices to
--------------------
third parties and other publicity relating to the transaction contemplated by
this Agreement shall be jointly planned
- 38 -
and agreed to by Seller and Buyer unless otherwise required by law; provided,
--------
however, that Seller may, from time to time advise its shareholders and lenders
- -------
and Buyer may, from time to time, advise its member and lenders, with respect to
this Agreement and the transactions contemplated by this Agreement without the
consent of the other. Seller shall not unreasonably refuse requests by Buyer,
once approval of the Governmental Authorities to the transfer of the franchises
is granted, to insert in invoices to Seller's subscribers, at Buyer's expense,
subscriber educational material concerning the transaction contemplated by this
Agreement.
6.16 Unauthorized Use of Channels. Seller shall take all actions
----------------------------
necessary to correct the System's pre-Closing unauthorized use of microwave
channels inconsistent with its CARS License (dated October 26, 1993; file no.
CAR-43763-02; call sign WBQ-804) including payment of actual out-of-pocket costs
incurred in connection therewith. Out-of-pocket costs shall include any
penalties imposed by the FCC, but shall exclude costs arising from any
consequential, exemplary or other punitive damages, or any other damages.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
one or more of which may be waived by Buyer, in its sole direction.
7.1 HSR Act. If required under applicable Legal Requirements, all
-------
filings required under the HSR Act shall have bean made and the applicable
waiting period shall have expired or been earlier terminated without the receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
7.2 Governmental or Legal Action. No action, suit or proceeding shall
----------------------------
be pending or threatened by any Governmental Authority or other Person and no
Legal Requirement shall have been enacted, promulgated or issued or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority or other Person that would (a) prohibit Buyer' s
ownership or operation of the System, the Business or the Assets or require
Buyer to divest itself of the System or any of the Assets after the Closing
Date, (b) result in the imposition of material damages against Buyer or any of
its Affiliates in connection with the consummation of the transactions
contemplated by this Agreement or (c) prevent or make illegal the consummation
of the transactions contemplated by this Agreement.
- 39 -
7.3 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Seller contained in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date, with the same effect as though made on and as of the Closing Date.
7.4 Performance of Agreements. Seller shall have performed in all
-------------------------
material respects all obligations and agreements and complied or caused to be
complied with all covenants and conditions required by this Agreement to be
performed or complied with by it at or prior to the Closing Date.
7.5 No Material Adverse Change. During the period from the date of
--------------------------
this Agreement through and including the Closing Date, there shall not have
occurred any material adverse change in the business, prospects, assets,
financial condition or operations of the System, other than any change arising
out of matters of a general economic nature or matters affecting the cable
television industry (national or regional) generally, and Seller shall not have
sustained any material loss or damage to the Assets or the System, whether or
not insured, that materially affects its ability to conduct the Business in a
manner consistent with past practice.
7.6 Consents. Seller shall have delivered to Buyer evidence, in form
--------
and substance reasonably satisfactory to Buyer, that all the Required Consents
have been obtained or given.
7.7 Transfer Documents. Seller shall have delivered to Buyer
------------------
customary bills of sale, general warranty deeds, assignments and other
instruments of transfer sufficient to convey good and marketable title to the
Assets in accordance with the terms of this Agreement and otherwise in form and
substance satisfactory to Buyer and its counsel.
7.8 Opinions of Counsel. Buyer shall have received the opinions of
-------------------
(a) Honigman Miller Schwartz and Cohn, counsel for Seller, dated the Closing
Date, substantially in the form of Exhibit E attached hereto and (b) Dow Lohnes
---------
& Albertson, FCC counsel for Seller, dated the Closing Date, substantially in
the form of Exhibit F attached hereto.
---------
7.9 Mediacom Equity Investment. Seller shall have completed its one
--------------------------
million dollar ($1,000,000) equity investment in Mediacom LLC to the
satisfaction of Buyer.
7.10 Discharge of Liens. Seller shall have secured the termination or
------------------
removal of all Encumbrances of any nature on the Assets, other than Permitted
Encumbrances.
7.11 The System. Seller shall have upgraded the cable plant of the
----------
System, including all drop materials, to 450 MHz bandwidth capacity in
compliance with any applicable Legal
- 40 -
Requirements and shall ensure that each Basic Subscriber and Bulk Unit will have
the capacity to receive all programming services capable of being delivered by
the System without additional capital costs to Buyer (other than costs for
converter equipment to upgrade a basic tier-only Subscriber to the expanded
tier, or to offer Pay-Per-View events).
7.12 Material Adverse Change. Financial institutions providing
-----------------------
financing to Buyer to consummate the transactions contemplated by this Agreement
shall not have exercised the Material Adverse Change clause under the financing
commitment letters provided to Buyer.
7.13 Additional Documents and Acts. Seller shall have delivered or
-----------------------------
caused to be delivered to Buyer all other documents required to be delivered
pursuant to this Agreement and done or caused to be done all other acts or
things reasonably requested by Buyer to evidence compliance with the conditions
set forth in this Article VII.
7.14 Certificates. Seller shall have furnished Buyer with such other
------------
certificates of Seller and others, dated as of the Closing Date, to evidence
compliance with the conditions set forth in this Article VII, as may be
reasonably requested by Buyer.
7.15 CARS License Modification. Seller shall have received
-------------------------
modification of its CARS License from the FCC and satisfied all its obligations
in connection therewith; provided that if such obligations are not satisfied
prior to the Closing Date but Seller shall have complied to the extent
reasonably possible to satisfy its covenant set forth in Section 6.16, Seller
shall not be deemed to be in breach of Section 6.16 for purposes of Section
10.2.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under the Agreement are subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions, any one or more of which may be waived by Seller, in its sole
discretion.
8.1 HSR Act. If required under applicable Legal Requirements, all
-------
filings required under the HSR Act shall have been made and the applicable
waiting period shall have expired or been earlier terminated without the receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
- 41 -
8.2 Governmental or Legal Actions. No action, suit or proceeding
-----------------------------
shall be pending or threatened by any Governmental Authority and no Legal
Requirement shall have been enacted, promulgated or issued or deemed applicable
to any of the transactions contemplated by this Agreement by any Governmental
Authority that would (a) prohibit Buyer's ownership or operation of the System,
the Business or the Assets, (b) result in the imposition of material damages
against Seller in connection with the consummation of the transactions
contemplated by this Agreement or (c) prevent or make illegal the consummation
of the transactions contemplated by this Agreement.
8.3 Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Buyer contained in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date, with the same effect as though made on and as of the Closing Date.
8.4 Performance of Agreements. Buyer shall have performed in all
---------------------------
material respects all obligations and agreements and complied or caused to be
completed with all covenants and conditions required by this Agreement to be
performed or complied with by Buyer at or prior to the Closing Date.
8.5 Opinions of Buyer's Counsel. Seller shall have received the
---------------------------
opinion of Cooperman Levitt Winikoff Lester & Newman, P.C., counsel for Buyer,
dated the Closing Date, substantially in the form of Exhibit G attached hereto.
---------
8.6 Additional Documents and Acts. Buyer shall have delivered or
-----------------------------
caused to be delivered to Seller all other documents required to be delivered
pursuant to this Agreement and done all other acts or things reasonably
requested by Seller to evidence compliance with the conditions set forth in this
Article VIII.
8.7 Certificates. Buyer shall have furnished Seller with such other
------------
certificates of Buyer and others, dated as of the Closing Date, to evidence
compliance with the conditions set forth in this Article VIII, as may be
reasonably requested by Seller.
ARTICLE IX
INDEMNITY
9.1 Seller's Indemnity.
------------------
A. Seller agrees to indemnify and hold Buyer harmless from, against
and in respect of, and shall on demand reimburse Buyer for:
(i) any and all loss, liability or damage resulting from any
untrue representation, breach of warranty or
- 42 -
nonfulfillment of any covenant or agreement by Seller contained in any
Transaction Document to which it is a party;
(ii) any and all obligations of Seller not specifically assumed
by Buyer pursuant to the terms of this Agreement, including any and all
liabilities arising with respect to the System, Assets and Contracts or
other agreements assumed by Buyer and relating to events which occurred
prior to the Closing Date, except to the extent adjusted in favor of Buyer
pursuant to Section 2.4;
(iii) any claims made by creditors with respect to non-
compliance with any bulk sales law relating to this Agreement and the
transactions contemplated hereby; and
(iv) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including without limitation,
legal fees and expenses, incident to any of the foregoing or incurred in
investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
B. If any claim covered by the foregoing indemnity is asserted
against Buyer by a third party, Buyer shall promptly give the Seller notice
thereof and give Seller an opportunity to defend the same with counsel of
Seller's choice at Seller's expense. Buyer shall provide reasonable cooperation
in connection with such defense. In the event that Seller desires to compromise
or settle any such claim, Buyer shall have the right to consent to such
settlement or compromise; provided, however, that if such compromise or
settlement is for money damages only and will include a full release and
discharge of Buyer, and Buyer withholds its consent to such compromise or
settlement, Buyer and Seller agree that (1) Seller's liability shall be limited
to the amount of the proposed settlement and Seller shall thereupon be relieved
of any further liability with respect to such claim, and (2) from and after such
date, Buyer will undertake all legal costs and expenses in connection with any
such claim and shall indemnify Seller from any further liability or obligation
to such third party in connection with such claim in excess of the amount of the
proposed settlement. If Seller fails to defend any claim within a reasonable
time, Buyer shall be entitled to assume the defense thereof, and Seller shall be
liable to Buyer for its expenses reasonably incurred, including attorney's fees
and payment of any settlement amount or judgment.
C. Notwithstanding anything in this Agreement to the contrary,
(i) Seller shall not be required to indemnify or otherwise be
liable to Buyer for any claim unless the losses, liabilities, damages,
costs and expenses of Buyer arising from
- 43 -
all such claims exceeds $25,000 (other than with respect to any claims
based on a breach of the representation set forth in Section 4.23, which
claims may be made notwithstanding, and shall not be counted toward, the
basket amount). If the losses, liabilities, damages, costs and expenses of
Buyer arising from all such claims exceeds $25,000, Seller shall be
required to indemnify Buyer for the full amount of all such claims, subject
to the other limitations in this Agreement;
(ii) Seller shall not be required to indemnify or otherwise be
liable to Buyer for any claim to the extent that the losses, liabilities,
damages, costs and expenses of Buyer arising from all such claims exceed in
the aggregate $2,500, 000;
(iii) Seller shall not be required to indemnify or otherwise be
liable to Buyer for any claim hereunder unless notice of such claim is
given to Seller: (a) with respect to any claims based on a breach of the
representations and warranties set forth in the first sentence of Section
4.5, and Sections 4.9 and 4.16, within six (6) years after the Closing
Date; (b) with respect to any claims based on a breach of the
representations and warranties set forth in Section 4.12, prior to the
expiration of the applicable statute of limitations relating to the subject
matter of such representation and warranty; (c) with respect to any claims
arising out of fraudulent conduct involving intentional misrepresentation
on behalf of Seller and any claims by third parties against Buyer, within
eighteen months after the Closing Date; and (d) with respect to all other
claims, within one year after the Closing Date.
9.2 Buyer's Indemnity.
------------------
A. Buyer agrees to indemnify and hold Seller harmless from, against
and in respect of, and shall on demand reimburse Seller for:
(i) any and all loss, liability or damage resulting from any
untrue representation, breach of warranty or nonfulfillment of any covenant
or agreement by Buyer contained in any Transaction Document delivered to
Seller hereunder;
(ii) any and all obligations of Seller assumed by Buyer
pursuant to the terms of this Agreement including any and all liabilities
arising under contracts or agreements assumed by Buyer and relating to
events which occurred after the date of Closing, except to the extent
adjusted in favor of Seller pursuant to Section 2.4; and
(iii) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses,
- 44 -
including without limitation, legal fees and expenses, incident to any of
the foregoing or incurred in investigating or attempting to avoid the same
or to oppose the imposition thereof, or in enforcing this indemnity.
B. If any claim covered by the foregoing indemnity is asserted
against Seller by a third party, Seller shall promptly give the Buyer notice
thereof and give Buyer an opportunity to defend the same with counsel of Buyer's
choice at Buyer's expense. Seller shall provide reasonable cooperation in
connection with such defense. In the event that Buyer desires to compromise or
settle any such claim, Seller shall have the right to consent to such settlement
or compromise; provided, however, that if such compromise or settlement is for
money damages only and will include a full release and discharge of Seller, and
Seller withholds its consent to such compromise or settlement, Seller and Buyer
agree that (1) Buyer's liability shall be limited to the amount of the proposed
settlement and Buyer shall thereupon be relieved of any further liability with
respect to such claim, and (2) from and after such date, Seller will undertake
all legal costs and expenses in connection with any such claim and shall
indemnify Buyer from any further liability or obligation to such third party in
connection with such claim in excess of the amount of the proposed settlement.
If Buyer fails to defend any claim within a reasonable time, Seller shall be
entitled to assume the defense thereof, and Buyer shall be liable to Seller for
its expenses reasonably incurred, including attorney's fees and payment of any
settlement amount or judgment.
9.3 Remedies Cumulative; Right to Offset. The remedies provided in
------------------------------------
this Article IX shall be cumulative and shall not preclude assertion by any
party hereto of any other rights or the seeking of any other remedies against
the other party as specifically set forth in this Agreement. Without limiting
any remedy otherwise available to Buyer under this Agreement, Buyer shall be
entitled, but shall not be obligated, to offset any amounts due to Seller under
the Senior Subordinated Note against any amounts due to Buyer under this
Agreement. Amounts offset by Buyer pursuant hereto shall reduce the outstanding
balance due under the Senior Subordinated Note.
ARTICLE X
LIABILITY IN THE EVENT OF A BREACH
10.1 Default by Buyer. If Buyer shall default in the performance of its
----------------
obligations under this Agreement in any material respect or if, as a result of
Buyer's breach of its obligations pursuant to this Agreement, the conditions
precedent to Seller's obligation to close specified in Section 8 (other than
Sections 8.1 and 8.2) are not satisfied, and Seller shall not then be in default
in the performance of its obligations hereunder in any material
- 45 -
respect, Seller shall be entitled, as its sole remedy, to terminate this
Agreement by written notice to Buyer and to receive the sum of $1,000,000, as
liquidated damages, in which event Seller and Buyer shall be discharged from all
further liability under this Agreement upon payment of such liquidated damages
to Seller. Seller and Buyer agree in advance that actual damages would be
difficult to ascertain and that the amount of such liquidated damages is a fair
and equitable amount to reimburse Seller for damages sustained due to such
default by Buyer of this Agreement.
10.2 Default by Seller. If Seller shall default in the performance of its
-----------------
obligations under this Agreement in any material respect or if, as a result of
Seller's breach of its obligations pursuant to this Agreement, the conditions
precedent to Buyer's obligation to close specified in Section 7 (other than
Sections 7.1 and 7.2 and, for the avoidance of doubt, except to the extent
caused solely by Seller's breach of this Agreement, Sections 7.5 and 7.12) are
not satisfied, and Buyer shall not then be in default in the performance of its
obligations hereunder in any material respect, Buyer shall be entitled, at
Buyer's sole option, either:
A. to require Seller to consummate and specifically perform the sale
in accordance with the terms of this Agreement, if necessary through injunction
or other court order or process, and to recover any costs and expenses incurred
by Buyer in connection therewith; or
B. to terminate this Agreement by written notice to Seller, and to
recover actual out-of-pocket damages, not including consequential, punitive or
exemplary damages, or any other damages.
ARTICLE XI
NOTICES
Any notices or other communications to the Seller or the Buyer, shall
be sent by certified or registered mail, return receipt requested, or by
telecopier with report of delivery, to the addresses set forth below, or to such
other address as Seller or Buyer may designate, from time to time, by written
notice to the other:
To Buyer: Mediacom California LLC
90 Crystal Run
Suite 406A
Middletown, New York 10940
Attention: Rocco B. Commisso
Facsimile: (914) 692-9090
- 46 -
with a copy to: Robert L. Winikoff, Esq.
Cooperman Levitt Winikoff
Lester & Newman, P.C.
800 Third Avenue - 30th Floor
New York, New York 10022
Facsimile: (212) 755-2839
To Buyer: Booth American Company
333 West Fort Street
Detroit, Michigan 48226
Attention: President
Facsimile: (313) 202-3390
with a copy to: David Foltyn, Esq.
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Facsimile: (313) 962-0176
ARTICLE XII
MISCELLANEOUS
12.1 Entire Agreement. This writing constitutes the entire agreement
----------------
of the parties with respect to the subject matter hereof and may not be
modified, amended or terminated, except by a written agreement specifically
referring to this Agreement signed by Buyer and Seller. No waiver of any breach
or default hereunder shall be considered valid unless in writing and signed by
the party giving such waiver, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
12.2 Successors and Assigns. This Agreement and all of the provisions
----------------------
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Neither the Agreement nor any
of the rights, interests or obligations hereunder shall be assigned, by
operation of law or otherwise, by any party hereto without the prior written
consent of the other party, provided, that Buyer may assign this Agreement to
any parent or Affiliate of Buyer without the prior written consent of Seller, as
long as Buyer remains liable hereunder. Nothing in this Agreement, express or
implied, is intended to confer upon any person other than the parties hereto and
their respective successors and permitted assigns, any rights, remedies or
obligations under or by reason of this Agreement.
12.3 Arbitration. Except for claims for injunctive relief under
-----------
Sections 6.13, 6.14 and l0.2.A, claims for damages pursuant to Section 10.1 or
l0.2.B and third-party claims by one party against the other in any action or
proceeding commenced by unaffiliated persons or firms, all claims, disputes and
differences hereunder shall be determined by arbitration under the rules then
- 47 -
obtaining of the American Arbitration Association in New York City. If $50,000
or more is at issue, the matter shall be heard by a panel of three arbitrators.
In such case, Seller and Buyer shall each designate one disinterested
arbitrator, and the two arbitrators so designated shall select the third
arbitrator. Buyer and Seller agree that in any dispute submitted for arbitration
in connection herewith, the "non-prevailing" party shall pay all fees and
expenses of the arbitration proceedings incurred by the "prevailing" party if
the amount of the award granted to the "prevailing" party is $100,000 or more in
excess of the award, if any, granted to the "non-prevailing" party.
12.4 Captions. The paragraph headings contained therein are for the
--------
purposes of convenience only and are not intended to define or limit the
contents of said paragraphs.
12.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which taken together, shall be deemed one original.
12.6 Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of New York, without regard to conflict of
law provisions in such state.
[Remainder of page intentionally left blank;
Signatures to follow]
- 48 -
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
SELLER:
BOOTH AMERICAN COMPANY
By: /s/ Ralph H. Booth, II
----------------------------------
Name: Ralph H. Booth, II
-----------------------------
Title: President & CFO
----------------------------
BUYER:
MEDIACOM CALIFORNIA LLC
By: Mediacom LLC, a Manager
-------------------------------------
Rocco B. Commisso, Manager
- 49 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SELLER:
BOOTH AMERICAN COMPANY
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
BUYER:
MEDIACOM CALIFORNIA LLC
By: Mediacom LLC, a Manager
/s/ Rocco B. Commisso
----------------------------------
Rocco B. Commisso, Manager
- 49 -
EXHIBIT 2.2
8/29/96
ASSET PURCHASE AGREEMENT
dated as of August 29, 1996
between
MEDIACOM LLC
and
SAGUARO CABLE TV INVESTORS, L.P.
Table of Contents
-----------------
Page
ARTICLE I CERTAIN DEFINITIONS 1
- --------- -------------------
ARTICLE II PURCHASE AND SALE 7
- ---------- -----------------
Section 2.1 Covenant of Purchase and Sale; Assets 7
Section 2.2 Excluded Assets 9
Section 2.3 Assumed and Retained Obligations
and Liabilities 10
Section 2.4 Purchase Price 11
Section 2.5 Escrow Amount 12
Section 2.6 Current Items Amount 12
Section 2.7 Purchase Price and Closing Adjustments 13
ARTICLE III RELATED MATTERS 15
- ----------- ---------------
Section 3.1 HSR Act Compliance 15
Section 3.2 Noncompetition Agreement 15
Section 3.3 Bulk Sales 15
Section 3.4 Use of Name and Logos 15
Section 3.5 Transfer Taxes 15
ARTICLE IV BUYER'S REPRESENTATIONS AND WARRANTIES 16
- ---------- --------------------------------------
Section 4.1 Organization of Buyer 16
Section 4.2 Authority 16
Section 4.3 No Conflict; Required Consents 16
Section 4.4 Litigation 17
Section 4.5 Finders and Brokers 17
Section 4.6 Full Access 17
Section 4.7 Taxpayer Identification Number 17
ARTICLE V SELLER'S REPRESENTATIONS AND WARRANTIES 17
- --------- ---------------------------------------
Section 5.1 Organization and Qualification of Seller 17
Section 5.2 Authority 18
Section 5.3 No Conflict; Required Consents 18
Section 5.4 Title to Assets; Sufficiency 19
Section 5.5 Franchises, Licenses, and Contracts 20
Section 5.6 Employee Benefits 20
Section 5.7 Employees 21
Section 5.8 Litigation 22
Section 5.9 Tax Returns; Other Reports 22
Section 5.10 System Compliance 23
Section 5.11 Systems Information 25
Section 5.12 Environmental 26
Section 5.13 Financial and Operational Information 27
Section 5.14 No Adverse Change; Operations of
the Business 28
Section 5.15 Taxpayer Identification Number 28
Section 5.16 Intangibles 28
Section 5.17 Accounts Receivable 29
Section 5.18 Bonds 29
i
Section 5.19 Exclusivity 29
Section 5.20 Rights to Assets 29
Section 5.21 Transactions with Affiliates and Employees 30
Section 5.22 Disclaimer of Warranty 30
Section 5.23 Real Property 30
Section 5.24 Equipment 31
Section 5.25 No Other Consents 31
Section 5.26 No Undisclosed Liabilities 32
Section 5.27 Liabilities to Subscribers 32
Section 5.28 Restoration 32
Section 5.29 Certain Programming Arrangements
and Relationships 32
Section 5.30 Finders; Brokers and Advisors 33
Section 5.31 Disclosure 33
ARTICLE VI COVENANTS 33
- ---------- ---------
Section 6.1 Certain Affirmative Covenants of Seller
Regarding the Systems 33
Section 6.2 Certain Negative Covenants of Seller 35
Section 6.3 FCC Approval; Forms 394 37
Section 6.4 Release of Certain Liens, Litigation
and Other Obligations 37
Section 6.5 Certain Other Covenants of Seller 37
Section 6.6 Employee Matters 38
Section 6.7 WARN Act 40
Section 6.8 Exclusivity 40
Section 6.9 Title Insurance 40
Section 6.10 Confidentiality 41
Section 6.11 Supplements to Schedules 42
Section 6.12 Notification of Certain Matters 42
Section 6.13 Commercially Reasonable Best Efforts 42
Section 6.14 Closing Date Financial Statements 43
Section 6.15 Customer Notification 43
Section 6.16 Consents 43
Section 6.17 Risk of Loss; Condemnation 43
Section 6.18 Phase I Study 44
Section 6.19 UCC Searches 45
ARTICLE VII CONDITIONS PRECEDENT 45
- ----------- --------------------
Section 7.1 Conditions to Buyer's Obligations 45
Section 7.2 Conditions to Seller's Obligations 47
ARTICLE VII CLOSING 48
- ----------- -------
Section 8.1 Closing; Time and Place 48
Section 8.2 Seller's Obligations 49
Section 8.3 Buyer's Obligations 50
ARTICLE IX TERMINATION 51
- ---------- -----------
Section 9.1 Termination Events 51
Section 9.2 Effects of Termination 51
Section 9.3 Financing Contingency 52
ii
ARTICLE X REMEDIES 52
- --------- --------
Section 10.1 Default by Buyer 52
Section 10.2 Default by Seller 52
ARTICLE XI INDEMNIFICATIONS 53
- ---------- ----------------
Section 11.1 Indemnification by Seller 53
Section 11.2 Indemnification by Buyer 54
Section 11.3 Indemnified Third Party Claims 54
Section 11.4 Determination of Indemnification Amounts
and Related Matters 55
Section 11.5 Time and Manner of Certain Claims 56
ARTICLE XII MISCELLANEOUS 56
- ----------- -------------
Section 12.1 Expenses 56
Section 12.2 Waivers 56
Section 12.3 Notices 56
Section 12.4 Entire Agreement; Amendments 57
Section 12.5 Binding Effect; Benefits 58
Section 12.6 Headings, Schedules, and Exhibits 58
Section 12.7 Counterparts 58
Section 12.8 Publicity 58
Section 12.9 Governing Law 58
Section 12.10 Third Parties; Joint Ventures 59
Section 12.11 Construction 59
Section 12.12 Arbitration 59
Section 12.13 Further Acts 60
iii
Contents of Omitted Schedules
-----------------------------
Schedule 2.1(a) Tangible Personal Property
Schedule 2.1(b) (I) Owned Real Property
Schedule 2.1(b) (II) Leased Real Property
Schedule 2.1(c) Franchises
Schedule 2.1(d) Licenses
Schedule 2.1(e) Contracts
Schedule 2.2 Other Excluded Assets
Schedule 2.4(d) Allocation
Schedule 4.3 No Conflict; Required Consents (Buyer)
Schedule 5.3 No Conflict; Required Consents (Seller)
Schedule 5.4 Additional Permitted Liens
Schedule 5.5 Franchises, Licenses and Contracts
Schedule 5.7 Employees
Schedule 5.8 Litigation
Schedule 5.9 Taxes
Schedule 5.10 Exceptions to System Compliance Warranties
Schedule 5.11 System Information
Schedule 5.12 Environmental
Schedule 5.16 Intangibles
Schedule 5.18 Bonds
Schedule 5.19 Exceptions to Exclusive Operations
Schedule 5.20 Third Party Rights in Assets
Schedule 5.21 Transactions with Affiliates and Employees
Schedule 5.24 Exceptions to Equipment
Schedule 5.25 Consents
Schedule 5.26 Undisclosed Liabilities
Schedule 5.29 Certain Programming Arrangements and Relationship
Schedule 6.9 Title Commitments
Contents of Omitted Exhibits
----------------------------
Exhibit 2.5 Escrow Agreement
Exhibit 3.2 Noncompetition Agreement
Exhibit 7.1(e) Opinion of Seller's Counsel
Exhibit 7.1(f) Opinion of Seller's FCC Counsel
Exhibit 7.2(e) Opinion of Buyer's Counsel
Exhibit 8.2(a) Bill of Sale
Registrants agree to furnish supplementally a copy of such Schedules and
Exhibits to the Commission upon request.
iv
8/29/96
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of August __, 1996, between Mediacom LLC, a New York limited liability
company whose Taxpayer Identification Number is 06-1433421 ("Buyer"), and
Saguaro Cable TV Investors, L.P., a Colorado limited partnership whose U.S.
Taxpayer Identification Number is 84-1116486 ("Seller").
RECITALS
--------
A. Seller owns and operates cable television Systems (as hereinafter
defined) franchised or holding other operating authority to serve areas in and
around the communities of Nogales, Rio Rico, Amado and Ajo, Arizona, and located
in the Counties of Pima and Santa Cruz, Arizona.
B. Seller is willing to convey to Buyer, and Buyer is willing to Purchase
from Seller, substantially all of the assets comprising the Systems and the
Business (as hereinafter defined), other than the Excluded Assets (as
hereinafter defined), upon the terms and conditions set forth in this Agreement.
AGREEMENTS
----------
In consideration of the mutual covenants and promises set forth herein,
Buyer and Seller agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the following terms, whether in singular or
plural forms, shall have the following meanings:
"Accounts Receivable" shall mean, as of the Closing Date, all subscriber,
paging, trade or other accounts receivable of Seller, determined in accordance
with GAAP, representing amounts owed to Seller in connection with its operation
of the Business in the ordinary course of business.
"Affiliate" shall mean, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the
1
direction of the management and policies of a Person, whether through the
ownership of voting securities or voting interests, by contract or otherwise.
"Agreement" means this Asset Purchase Agreement including all schedules and
exhibits attached hereto, as may be amended from time to time.
"Allocation" has the meaning given in Section 2.4(d).
"Assets" has the meaning given in Section 2.1.
"Assumed Obligations and Liabilities" has the meaning given in Section
2.3(a).
"Basic Cable" means the cable television services described as Basic on
Schedule 5.11.
- -------------
"Bill of Sale" has the meaning given in Section 8.2(a).
"Business" shall mean the paging business and cable television business
conducted by Seller through the Systems.
"Business Day" shall mean any day other than Saturday, Sunday or a day on
which banking institutions in New York, New York are required or authorized to
be closed.
"Business's Financial Statements" has the meaning given in Section 5.13(a).
"Cable Act" means Title VI of the Communications Act of 1934, as amended,
47 U.S.C. (S)(S) 151 et. seq., and all provisions of the Cable Communications
--------
Policy Act of 1984, Pub. L. No. 98-549, and the Cable Television Consumer
Protection and Competition Act of 1992, Pub. L. No. 102-385, as such statutes
may be amended from time to time, and the rules and regulations promulgated
thereunder.
"CATV" means Community Antenna Television.
"Closing" has the meaning given in Section 8.1.
"Closing Date" has the meaning given in Section 8.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, or any subsequent legislative enactment thereof, as in
effect from time to time.
"Commercially Reasonable Best Efforts" shall mean such best efforts as do
not require the party to (i) undertake extraordinary or unreasonable measures,
including, without limitation, the initiation or prosecution of legal
proceedings or the payment of fees in excess of normal and usual filing and
processing fees or
2
(ii) assume any additional liability or make any additional commitment.
"Communications Act" means the Communications Act of 1934, as amended.
"Contracts" has the meaning given in Section 2.1(e).
"Copyright Act" means the Copyright Act of 1976, as amended.
"Current Items Amount" has the meaning given in Section 2.6.
"Earnest Money Payment" has the meaning given in Section 2.4(b).
"EBU's" shall mean (i) the number of residential households that subscribe
to Basic Cable (exclusive of secondary outlets and courtesy accounts) which pay
the standard rate for Basic Cable in each System without discount, each of which
has paid in full without discount at least one monthly bill generated in the
ordinary course of business, none of which is pending disconnection for any
reason, none of which is, as of the Closing Date, delinquent in payment for
services for more than sixty days, and none of which has been obtained as a
subscriber within the twelve month period preceding the Closing Date by offers
made, promotions conducted and discounts given outside the ordinary course of
business, plus (ii) the number of equivalent bulk subscribers (determined by
----
dividing the aggregate dollar monthly amount collected from bulk/commercial
accounts for Basic Cable by the monthly rates for Basic Cable in each System),
each of which has paid in full without discount at least one monthly bill
generated in the ordinary course of business, none of which is pending
disconnection for any reason, none of which is, as of the Closing Date,
delinquent in payment for services for more than sixty days none of which is, as
of the Closing Date, delinquent in payment for services for more than sixty
days, and none of which has been obtained as a subscriber within the twelve
month period preceding the Closing Date by offers made, promotions conducted and
discounts given outside the ordinary course of business, provided, there shall
be excluded from the definition of EBU any subscriber or equivalent bulk
subscriber who comes within the definition of "EBU's" because its account has
been compromised or written off within the twelve month period preceding the
Closing Date, other than in the ordinary course of business consistent with past
practices for reasons such as service interrupted or waiver of late charges but
not for the purpose of making it qualify as an EBU.
"Eligible Accounts Receivable" has the meaning given in Section 2.6(a).
"Employee Benefit Plan" means any pension, retirement, profit-sharing,
deferred compensation, vacation, severance, bonus,
3
incentive, medical, vision, dental, disability, life insurance or any other
employee benefit plan as defined in Section 3(3) of ERISA to which Seller
contributes or which Seller sponsors or maintains, or by which Seller is
otherwise bound.
"Equipment" has the meaning given in Section 2.1(a).
"ERISA" has the meaning given in Section 5.6.
"Escrow Agent" shall be Bankers Trust, N.A., or such other party as Buyer
and Seller shall agree.
"Escrow Agreement" shall mean the Escrow Agreement among Buyer, Seller and
Escrow Agent, substantially in the form annexed hereto as Exhibit 2.5.
-----------
"Escrow Amount" has the meaning given in Section 2.5.
"Excluded Assets" has the meaning given in Section 2.2.
"Expenses" has the meaning given in Section 2.6(c).
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"Final Adjustment Certificate" has the meaning given in Section 2.7(c).
"Franchises" has the meaning given in Section 2.1(c).
"GAAP" shall mean generally accepted accounting principles as in effect in
the United States of America.
"Governmental Authority" means the United States of America, any state,
commonwealth, territory, or possession thereof, and any political subdivision or
quasi-governmental authority of any of the same, including any court, tribunal,
department, bureau, commission or board.
"Hazardous Substances" has the meaning given in
Section 5.12(d).
"Indemnitee" has the meaning given in Section 11.3(a).
"Indemnitor" has the meaning given in Section 11.3 (a).
"Initial Adjustment Certificate" has the meaning given in Section 2.7(a).
"Intangibles" has the meaning given in Section 5.16.
4
"Judgment" means any judgment, writ, order, injunction, award, or decree of
any court, judge, justice, magistrate, Governmental Authority or arbitrators.
"Leased Real Property" has the meaning given in Section 2.1(b).
"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, or order enacted, adopted or
promulgated by any Governmental Authority, including, without limitation,
Judgments and the Franchises.
"Licenses" has the meaning given in Section 2.1(d).
"Lien" means any security agreement, financing statement filed with any
Governmental Authority, conditional sale or other title retention agreement, any
lease, consignment or bailment given for purposes of security, any lien,
mortgage, indenture, pledge, caption, encumbrance, adverse interest,
constructive trust or other trust, claim, attachment, exception to or defect in
title or other ownership interest (including, but not limited to, reservations,
rights of entry, possibilities of reverter, encroachments, easement, rights-
of-way, rights of first refusal, restrictive covenants, leases, and licenses) of
any kind that otherwise constitutes an interest in or claim against property,
whether arising pursuant to any Legal Requirement, under any Contract or
otherwise.
"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation, hearing, or other similar activity or procedure that could result
in a Judgment.
"Losses" means any claims, losses, liabilities, damages, penalties, costs,
and expenses, including, without limitation, reasonable counsel fees and costs
and expenses incurred in the investigation, defense or settlement of any claims
covered by the indemnification provided for in Article 11 hereof, but shall in
no event include incidental or consequential damages.
"Noncompetition Agreement" has the meaning given in Section 3.2.
"Owned Real Property" has the meaning given in Section 2.1(b).
"Partner" means the general partner or any limited partner of Seller, and
"Partners" means the general partner and the limited partners of Seller,
collectively.
"Pay TV" means premium programming services selected by and sold to
subscribers on a per-channel or per-program basis.
5
"Permitted Lien" means (i) Liens for Taxes that are not yet due and payable
or that are being contested in good faith by appropriate proceedings and for
which adequate reserves has been established by Seller, (ii) rights reserved to
any Governmental Authority to regulate the affected property, (iii) as to leased
Assets, interests of the lessors thereof and Liens affecting the interests of
the lessors thereof, (iv) inchoate materialmen's, mechanics', workmen's,
repairmen's or other like Liens arising in the ordinary course of business, (v)
as to any parcel of Owned Real Property or Leased Real Property, Liens that do
not in any material respect, individually or in the aggregate, affect or impair
the value or use thereof as it is currently being used by Seller in the ordinary
course of the business or render title thereto unmerchantable or uninsurable,
and (vi) the Liens described on Schedule 5.4.
------------
"Person" means any natural person, Governmental Authority, corporation,
general or limited partnership, joint venture, trust, association, limited
liability company, or unincorporated entity of any kind.
"Pole Attachment Agreements" means pole attachment authorizations and
agreements held by Seller that relate to a System and were granted by a public
utility or other Person providing utility services, municipality or other
Governmental Authority.
"Purchase Price" has the meaning given in Section 2.4(a).
"Required Consents" shall mean any registration or filing with, consent or
approval of, notice to, or action by any Person or Governmental Authority
required to permit the transfer of the Assets to Buyer or to permit Seller to
perform any of its other obligations under this Agreement, as set forth in
Schedule 5.3.
- ------------
"Rate Regulation Rules" shall mean the FCC rules currently in effect
implementing the cable television rate regulations provisions of the Cable Act.
"Required EBU's" shall mean (i) 8,000 EBU's if the Closing Date is on or
prior to September 30, 1996 and (ii) 8,100 EBU's if the Closing Date is on or
after October 1, 1996.
"Study" shall mean a Phase I environmental study of all Leased Real
Property and Owned Real Property which shall be transferred to Buyer pursuant to
this Agreement.
"Subscriber Adjustment" has the meaning given in Section 2.7(b).
"Systems" shall mean the cable television reception and distribution
systems consisting of one or more headends, subscriber
6
drops and associated electronic and other equipment which are, or are capable of
being, operated as an independent system without interconnection with other
systems, and which provide cable television service pursuant to the respective
Franchises.
"Taxes" shall mean all levies and assessments imposed by any Governmental
Authority, including but not limited to income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes, and interest, penalties and other
government charges with respect thereto.
"Taxing Authority" shall mean any federal, state, local or foreign
governmental body or political subdivision with the power to impose Taxes.
"Tax Returns" shall mean any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Taxing Authority in connection with the determination,
assessment, collection, administration or reposition of any Taxes.
"Transaction Documents" shall mean this Agreement, the Escrow Agreement,
the Noncompetition Agreement and each other instrument, document, certificate
and agreement required or contemplated to be executed and delivered hereunder
and thereunder.
"To Seller's knowledge" or the equivalent means to the actual knowledge,
after due inquiry, of the general manager of any System or any officer or
director of Seller's general partner.
ARTICLE II
PURCHASE AND SALE
-----------------
Section 2.1 Covenant of Purchase and Sale; Assets. Subject to the terms and
conditions set forth in this Agreement, at Closing Seller shall sell, convey,
assign, and transfer to Buyer, and Buyer shall acquire from Seller in
consideration for the Purchase Price, free and clear of all Liens (except for
Permitted Liens, other than those Permitted Liens identified on Schedule 5.4 as
------------
Liens to be terminated, released, removed or satisfied as of the Closing Date) ,
all right, title and interest of Seller or any Affiliate of Seller in all of the
assets and properties, real and personal, tangible and intangible, used or held
for use by Seller in its operation of the Business (the "Assets"), including,
without limitation, the following:
(a) Equipment. All tangible personal property, including, without
---------
limitation, towers, tower equipment, antennae, aboveground and underground
cable, distribution systems, headend and line amplifiers, feeder line
cable,
7
distribution plant, programming signal decoders for each satellite service which
scrambles its signal, housedrops, including disconnected housedrops,
subscribers' devices (including converters, encoders, transformers behind
television sets and fittings), utility poles (if owned by Seller), local
origination equipment, vehicles and trailers, microwave equipment, testing
equipment, electronic devices, trunk and distribution coaxial and optical fiber
cable, power supplies, conduit, vaults and pedestals, grounding and pole
hardware, headend hardware (including origination, earth stations, transmission
and distribution systems), test equipment, power supplies, pagers and paging
units, office and billing computers and other equipment, furniture, fixtures,
supplies, inventory, and other physical assets owned, used or held for use by
Seller in connection with the Business, including but not limited to the items
described on Schedule 2.1 (a) (collectively, the "Equipment").
----------------
(b) Real Property. All interests in real property used by Seller in
-------------
connection with the operation of the Business, including all improvements,
fixtures and appurtenances thereon, owned by Seller, described on Schedule
--------
2.1(b) (I), ("Owned Real Property"), or leased by Seller, described on Schedule
- ---------- --------
2.1(b) (II) ("Leased Real Property"; and together with the Owned Real Property,
- -----------
the "Real Property").
(c) Franchises. All of the existing governmental authorizations for
----------
construction, maintenance and operation of the Business (individually, a
"Franchise" and collectively, the "Franchises") presently held by Seller as
listed on Schedule 2.1(c).
--------------
(d) Licenses. The intangible CATV channel distribution rights, cable
--------
television relay service (CARS), business radio and other licenses,
authorizations, or permits issued by the FCC or any other Governmental Authority
(excluding those listed on Schedule 2.1(c)) used in the operations of the
Business that are in effect as of the date hereof or entered or obtained in the
ordinary course of business between the date hereof and the Closing Date (the
"Licenses"), including, without limitation, the Licenses described on Schedule
--------
2.1(d).
- -----
(e) Contracts. The leases, private easements or rights of access,
---------
contractual rights to easements, Pole Attachment Agreements or joint line
agreements, underground conduit agreements, crossing agreements, bulk and
commercial service agreements, retransmission consent agreements and must-carry
requests, agreements for paging services and other contracts, leases, agreements
or understandings relating to the Business in effect as of the date hereof or
entered or obtained in the ordinary course of business between the date hereof
and the Closing Date as permitted by this Agreement (other than
8
Excluded Assets) (the "Contracts"), as described on Schedule 2.1(e).
--------------
(f) Accounts Receivable. All Accounts Receivable.
-------------------
(g) Goodwill. The goodwill associated with the Business.
--------
(h) Intangibles. The Intangibles, if any, associated with the Business.
-----------
(i) Books and Records. All engineering records, files, data, drawings,
-----------------
blueprints, schematics, reports, lists, plans and processes, maps of the
Systems, billing manuals and other data owned by the Seller relating to the
billing practices and procedures of the Business, and all files of
correspondence, lists, records, and reports concerning customers and
subscribers and prospective customers and subscribers of the Systems and the
Business, personnel records relating to employees of the Business who are to
be hired by Buyer, signal and program carriage, and dealings with
Governmental Authorities, including, but not limited to, all reports filed by
or on behalf of Seller with the FCC with respect to the Systems and
statements of account filed by or on behalf of Seller with the U.S. Copyright
Office with respect to the Business.
Section 2.2 Excluded Assets. Notwithstanding the provisions of Section 2.1,
the Assets shall not include the following, which shall be retained by Seller
(the "Excluded Assets"):
(a) programming and agreements other than those listed on Schedule
--------
2.1(e) (which are to be assigned);
-----
(b) insurance policies and rights and claims thereunder;
(c) bonds, letters of credit, surety instruments, and other similar
items;
(d) cash and cash equivalents;
(e) equipment owned by customers of the Business, such as converters
purchased by customers, pagers and house wiring;
(f) any agreement, right, asset or property owned or leased by Seller
that is not used or held for use in connection with its operation of the
Systems;
(g) all claims, rights, and interest in and to refunds of Taxes or fees
of any nature, or other claims against third parties, relating to the
operation of the Systems prior to the Closing Date;
9
(h) the account books of original entry, general ledgers and financial
records used in connection with the Systems, provided, however, that Seller
shall (i) from time to time upon reasonable notice from Buyer, provide to Buyer
access to any of such books and records as then may be in Seller's possession,
(ii) retain possession of such books and records for a reasonable period, not to
exceed three (3) years from the Closing Date (except for Tax-related books and
records which shall be retained by Seller for at least seven (7) years from the
Closing Date), and (iii) notify Buyer in writing at least thirty (30) days
prior to disposing of or destroying any of such books and records and permit
Buyer to arrange, at Buyer's cost, for the delivery to Buyer of the books and
records proposed to be disposed or destroyed;
(i) subject to the provisions of Section 3.4, Seller's trademarks, trade
names, service marks, service names, logos, and similar proprietary rights; and
(j) any other items described on Schedule 2.2.
------------
Section 2.3 Assumed and Retained Obligations and Liabilities.
(a) Assumed Obligations and Liabilities. Subject to the terms and
-----------------------------------
conditions of this Agreement, from and after the Closing Date, Buyer shall
assume, pay, discharge, and perform the following (the "Assumed Obligations and
Liabilities"):
(i) those obligations and liabilities attributable to periods after
the Closing Date under or with respect to any of the Franchises, Licenses or
Contracts assumed by Buyer;
(ii) other obligations and liabilities of Seller (including those
comprising the Current Liabilities Amount) to the extent that there shall be a
reduction in the Purchase Price with respect thereto pursuant to Section 2.6;
and
(iii) all obligations and liabilities arising out of Buyer's ownership
of the Assets or operation of the Systems and the Business after the Closing
Date (including without limitation all obligations and liabilities for
adjustments of revenues from the Business and for any rate refunds, rollback,
credit, penalty and/or interest payment required by the FCC or local franchising
authority relating to the rates charged to customers of the Systems and the
Business during any period after the Closing Date for which Buyer received
subscriber payments).
(b) Retained Obligations and Liabilities. All obligations and liabilities
------------------------------------
arising out of or relating to the Assets, the Systems or the Business and all
other liabilities and obligations of Seller and each Partner, other than the
10
Assumed Obligations and Liabilities, shall remain and be the obligations and
liabilities solely of Seller or the appropriate Partner (collectively, the
"Retained Obligations and Liabilities"). Without limiting the generality of the
foregoing, Retained Obligations and Liabilities shall include the following:
(i) all obligations and liabilities arising out of or relating to
the Litigation and Judgments relating to periods prior to the Closing Date,
including as disclosed on Schedule 5.8;
------------
(ii) unless specifically assumed by Buyer, all obligations and
liabilities arising before the Closing Date with respect to the Franchises,
Contracts, Owned Real Property and Leased Real Property;
(iii) all obligations and liabilities for adjustment of revenues from
the Business and for any rate refunds, rollback, credit, penalty and/or interest
payment required by the FCC or local franchising authority relating to the rates
charged to customers of the Systems and the Business during any period prior to
the Closing Date;
(iv) any liability under any claim relating to the period ending as
of the Closing Date that is or, but for the consummation of the transactions
contemplated hereby, would have been covered under any insurance policy of
Seller, and all liability associated with workmen's compensation claims that
relate to the period prior to the Closing Date, whether or not reported or due
or payable as of the Closing Date; and
(v) all obligations and liabilities with respect to the Excluded
Assets.
Section 2.4 Purchase Price.
(a) Calculation of Purchase Price. As consideration for its purchase of
-----------------------------
the Assets, Buyer shall pay to Seller a total price of $11,535,000, which amount
shall be subject to adjustment under certain circumstances as set forth herein
(the "Purchase Price").
(b) Earnest Money Payment. Upon execution of this Agreement, Buyer shall
---------------------
pay to Seller the sum of $50,000 ("Earnest Money Payment") which shall under no
circumstances be refundable to Buyer and shall unconditionally become the
property of Seller, but shall nonetheless be credited against the amount of the
Purchase Price due from Buyer at Closing.
(c) Payment of Purchase Price. At Closing, Buyer shall pay to Seller the
-------------------------
balance of the Purchase Price plus or minus
11
the Current Items Amount (as appropriate) as calculated and estimated in
the Initial Adjustment Certificate, less any Subscriber Adjustment in
accordance with the provisions of Section 2.7(b) and less the Escrow Amount
that shall have been deposited by Buyer into the escrow account established
pursuant to Section 2.5 below.
(d) Purchase Price Allocation. Attached hereto as Schedule 2.4(d) is
------------------------- ---------------
the allocation (the "Allocation") of the Purchase Price and the Assumed
Obligations and Liabilities to the individual assets or classes of asset
(within the meaning of Section 1060 of the Code). Buyer, Seller, each
Partner, and their respective affiliates, shall file all Tax returns and
schedules thereto (including, without limitation, those returns and forms
required by Section 1060 of the Code) consistent with the Allocation unless
otherwise required by the applicable Legal Requirements.
Section 2.5 Escrow Amount. On the later of 45 Business Days from the date
hereof and September 15, 1996 (unless this Agreement is terminated prior to such
date pursuant to Section 9.3), $550,000 of the Purchase Price ("Escrow Amount")
shall be deposited by Buyer into an interest bearing escrow account set up and
maintained by the Escrow Agent pursuant to the Escrow Agreement. All fees, costs
and expenses of the Escrow Agent to be paid pursuant to the Escrow Agreement
shall be payable one-half by Buyer and one-half by Seller.
Section 2.6 Current Items Amount. In addition to the payment by Buyer of
the Purchase Price, Buyer or Seller, as appropriate, shall pay to the other the
net amount of the adjustments and prorations effected pursuant to Sections
2.6(a), (b), and (c) (collectively, the "Current Items Amount").
(a) Eligible Accounts Receivable. Seller shall be entitled to a credit
----------------------------
in an amount equal to (i) ninety percent (90%) of the face amount of all
Eligible Accounts Receivable that are thirty (30) or fewer days past due as
of the Closing Date, (ii) sixty percent (60%) of the face amount of all
Eligible Accounts Receivable that are more than thirty (30) but fewer than
sixty (60) days past due as of the Closing Date, and (iii) zero percent
(0%) of the full amount of Eligible Accounts Receivable that are sixty (60)
or more days past due as of the Closing Date, it being understood and
agreed that all amounts owed by customers shall be discounted by the
percentage discount applicable to the most aged Eligible Account Receivable
attributable to such customer. "Eligible Accounts Receivable" shall mean
accounts receivable resulting from Seller's provision of cable television
service prior to the Closing Date to the Systems' subscribers. For purposes
of making "past due" calculations under this paragraph, the monthly billing
statements of Seller shall be
12
deemed to be due and payable on the first day of the period during which
the service for which such billing statements relate is provided.
(b) Advance Payments and Deposits. Buyer shall be entitled to a
-----------------------------
credit in an amount equal to the aggregate of (i) all deposits of
customers and subscribers of the Systems and the Business, and all
interest, if any, required to be paid thereon as of the Closing Date, for
converters, decoders, and similar items, and (ii) the appropriate portion
of all payments received by Seller for services to be rendered by Buyer
including services to subscribers of the Systems, after the Closing Date,
or for other services to be rendered by Buyer to other third parties after
the Closing Date for cable television commercials, channel leasing, or
other services or rentals, or paging, to the extent the obligations of
Seller relating thereto are assumed by Buyer at Closing.
(c) Expenses. As of the Closing Date, expenses of a recurring nature
--------
that are incurred to benefit the Business and are incurred in the ordinary
course of business (the "Expenses"), including those set forth below, shall
be prorated, in accordance with GAAP, so that all such Expenses for periods
prior to the Closing Date shall be for the account of Seller, and all such
expenses for periods after the Closing Date shall be for the account of
Buyer:
(i) all Expenses under any of the Franchises, the Licenses, or
the Contracts;
(ii) Taxes levied or assessed against any of the Assets or
payable with respect to cable television service and related sales to the
Systems subscribers or otherwise in connection with the Business;
(iii) Expenses for utilities, municipal assessments, rents and
service charges, and other goods or services furnished to the Business; and
(iv) copyright fees based on signal carriage by the Systems.
Provided, however, that Seller and Buyer shall not prorate any Expense payable
under or with respect to any Excluded Asset, or any expense for capital
expenditures actually incurred or contracted for prior to the Closing Date, all
of which shall remain and be solely for the account of Seller.
SECTION 2.7 PURCHASE PRICE AND CLOSING ADJUSTMENTS.
(a) The Initial Adjustment Certificate. No later than fifteen (15)
----------------------------------
Business Days prior to the Closing Date, Seller
13
shall deliver to Buyer Seller's certificate estimated as of the Closing Date
("Initial Adjustment Certificate") setting forth the number and calculation of
EBU's and all adjustments including the Current Items Amount and Subscriber
Adjustments, if any, proposed to be made at the Closing as of the Closing Date.
Prior to Closing, Seller shall provide Buyer or Buyer's representative with
copies of all books and records as Buyer may reasonably request for purposes of
verifying the Initial Adjustment Certificate and shall meet with Buyer's
accountants and other representatives, but without limiting Seller's obligations
hereunder to certify the Initial Adjustment Certificate.
At the Closing, all adjustments will be made on the basis of the Initial
Adjustment Certificate, provided Buyer has not given notice to Seller that, in
Buyer's opinion, the proposed adjustments are materially incorrect. If Buyer
gives notice that in its opinion, the proposed adjustments are materially
incorrect, and if the parties have not been able to resolve the matter prior to
the Closing Date, any disputed amounts shall be paid by the party to be charged
with a disputed adjustment, into escrow, and shall be held by the Escrow Agent
in accordance with the Escrow Agreement until the Closing Adjustments are
finally determined pursuant to Section 2.7(c), at which time Seller and Buyer
shall deliver a joint written notice to the Escrow Agent setting forth
appropriate instructions as to the disposition from escrow of such disputed
amounts deposited thereunder, in accordance with the Escrow Agreement.
(b) Subscriber Adjustment. The Purchase Price shall be reduced by an
---------------------
amount equal to $1,424 times the difference between the number of Required EBU's
and the number of EBU's actually delivered on the Closing Date (the "Subscriber
Adjustment").
(c) Trueup of Current Items Amount. As soon as practicable after the
------------------------------
Closing Date, and in any event within one hundred twenty (120) days after the
Closing Date, Buyer shall deliver to Seller a final calculation calculated as of
the Closing Date, of the Current Items Amount, the Subscriber Adjustment, if
any, and the number of EBU's, together with such supporting documentation as
Seller may reasonably request, in a certificate (the "Final Adjustment
Certificate"), which shall evidence in reasonable detail the nature and extent
of each calculation. The Final Adjustment Certificate shall be final and
conclusive unless objected to by Seller in writing within thirty (30) days after
delivery. Seller and Buyer shall attempt jointly to reach agreement as to the
amount of the Current Items Amount and Subscriber Adjustment within forty-five
(45) days after receipt by Buyer
14
of such written objection by Seller, which agreement, if achieved, shall be
binding upon both parties to this Agreement and not subject to dispute or
review. If Seller and Buyer cannot reach agreement as to the amount of the
closing adjustments within such forty-five (45) day period, Seller and
Buyer agree to submit promptly any disputed adjustment to arbitration in
accordance with Section 12.12 hereof. Any amounts due Buyer or Seller for
closing adjustments shall be paid by the party owing such amount (or, to
the extent disputed amounts are held by the Escrow Agent, shall be paid by
the Escrow Agent pursuant to joint written instructions of Buyer and Seller
in accordance with such final resolution) not later than five (5) Business
Days after such amounts shall have become final and conclusive.
ARTICLE III
RELATED MATTERS
---------------
SECTION 3.1 HSR ACT COMPLIANCE. Buyer and Seller each agrees that the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, does not require
either party to make any filings or take any other action thereunder in
connection with the transactions contemplated hereby insofar as the aggregate
consideration payable hereunder by Buyer to Seller shall in no event equal or
exceed $15,000,000.
SECTION 3.2 NONCOMPETITION AGREEMENT. Seller and R. Michael Kruger each
agrees to execute and deliver to Buyer at Closing a five-year noncompetition and
confidentiality agreement in the form of Exhibit 3.2 (the "Noncompetition
-----------
Agreement"). A portion of the Purchase Price, not to exceed $350,000, shall be
allocated as compensation for the Noncompetition Agreement.
SECTION 3.3 BULK SALES. Buyer and Seller each waives compliance by the
other with all bulk sales Legal Requirements applicable to the transactions
contemplated hereby.
SECTION 3.4 USE OF NAMES AND LOGOS. For a period of one-hundred twenty
(120) days after Closing, Buyer shall be entitled to use the trademarks, trade
names, service marks, service names, logos, and similar proprietary rights of
Seller to the extent incorporated in or on the Assets.
SECTION 3.5 TRANSFER TAXES. Seller and Buyer each shall be liable for one-
half of all sales, use, transfer, and similar Taxes (other than income taxes)
arising from or payable by reason of the transactions contemplated by this
Agreement, and each party shall indemnify and hold the other party harmless from
and against all Losses arising from Taxes for which it is liable hereunder.
15
ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES
--------------------------------------
Buyer represents and warrants to Seller, as of the date of this Agreement
and as of Closing; as follows:
SECTION 4.1. ORGANIZATION OF BUYER. Buyer is a limited liability company
duly organized, validly existing, and in good standing under the laws of the
State of New York, and has all requisite power and authority to own and lease
the properties and assets it currently owns and leases and to conduct its
activities as such activities are currently conducted. On or prior to Closing,
Buyer (or its assignee which shall assume the obligations of Buyer under this
Agreement) shall be qualified to do business and will be in good standing in
Arizona and will be qualified to do business and will be in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary.
SECTION 4.2 AUTHORITY. Buyer has all requisite limited liability company
power and authority to execute, deliver, and perform this Agreement and the
other Transaction Documents to which it is a party and consummate the
transactions contemplated by this Agreement and the other Transaction Documents
to which it is a party. The execution, delivery, and performance of this
Agreement and each other Transaction Documents to which it is a party and the
consummation of the transactions contemplated by this Agreement and each
transaction Documents to which Buyer is a party have been duly and validly
authorized by all necessary limited liability company action on the part of
Buyer. This Agreement has been, and the other Transaction Documents to which
Buyer is a party will be on or prior to the Closing, duly and validly executed
and delivered by Buyer, and this Agreement and each of the other Transaction
Documents to which Buyer is a party constitutes and will constitute on or prior
to Closing the valid and binding obligation of Buyer, enforceable against Buyer
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
SECTION 4.3 NO CONFLICT; REQUIRED CONSENTS. Except as set forth in Schedule
--------
4.3 or except as will not have a material adverse effect on the ability of Buyer
- ---
to perform its obligations hereunder, the execution, delivery, and performance
by Buyer of this Agreement and the other Transaction Documents to which it is a
party do not and will not (a) conflict with or violate any provision of the
articles of organization or operating agreement of Buyer, (b) violate any
provision of any Legal Requirement, (c) conflict with, violate, result in a
breach of, or constitute a default under any agreement to which Buyer is a party
or by which Buyer or the assets or properties owned or leased by it are bound or
affected, or (d) require any consent, approval, or authorization
16
of, or filing of any certificate, notice, application, report, other document
with, any Governmental Authority or other Person.
SECTION 4.4 LITIGATION. Except for any Litigation as may affect the cable
television industry (national or regional) generally, there is no Litigation
pending or, to Buyer's knowledge, threatened by, against, affecting, or relating
to Buyer or any of its Affiliates in any court or before any Governmental
Authority or any arbitrator that, if adversely determined, would restrain or
materially hinder or delay the consummation of the transactions contemplated by
this Agreement or cause any of such transactions to be rescinded.
SECTION 4.5 FINDERS AND BROKERS. Buyer has not employed any financial
advisor, broker, or finder, or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission, for which Seller
will in any way have any liability in connection with the transactions
contemplated by this Agreement.
SECTION 4.6 FULL ACCESS. Buyer's representatives have received access to
Seller's books and records and to the facilities and the Assets of the Systems
to the extent requested by Buyer, and Seller has cooperated with Buyer to the
end that Buyer has been able to conduct its own inspection and investigation of
the Systems and the Assets to Buyer's satisfaction and has independently
investigated, analyzed and appraised the condition, value, prospects and
profitability thereof and performed such other presigning due diligence in
connection with the transactions contemplated by this Agreement in accordance
with the normal practice of Buyer. Notwithstanding the foregoing, Buyer's
investigation shall not limit or effect any of the representations or warranties
of the Seller contained in this Agreement.
SECTION 4.7 TAXPAYER IDENTIFICATION NUMBER. Buyer's U.S. Taxpayer
Identification Number is as set forth in the introductory paragraph of this
Agreement.
ARTICLE V
SELLER'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
Seller represents and warrants to Buyer, as of the date of this Agreement
and as of Closing, as follows:
SECTION 5.1 ORGANIZATION AND QUALIFICATION OF SELLER. Seller is a limited
partnership duly organized and validly existing under the laws of the State of
Colorado, and has all requisite partnership power and authority to own, lease
and use the properties and assets it currently owns, leases and uses and to
conduct its activities as such activities are currently conducted. Seller is
duly qualified to do business as a foreign limited partnership in Arizona and is
not required to be qualified or
17
licensed in any other jurisdiction. Seller's general partner is Arizona and
Southwest Cable, Inc., which is a corporation duly organized, validly existing
and in good standing under the laws of the State of Arizona, and which has all
requisite corporate power and authority to own all its assets and to carry on
its business as now conducted. Seller has delivered to Buyer a true and complete
copy of the limited partnership agreement of Seller together with all amendments
and modifications thereto. Other than the management of the Business by Western
Cablesystems, Inc., an Affiliate of Seller, Seller has not conducted the
Business through, and none of the Assets are held or owned by, any subsidiary,
Affiliate or other entities.
SECTION 5.2 AUTHORITY. Seller has all requisite partnership power and
authority to execute, deliver, and perform this Agreement and each other
Transaction Document to which it is a party and consummate the transactions
contemplated hereby and thereby. The execution, delivery, and performance of
this Agreement and each other Transaction Document to which it is a party and
the consummation of the transactions contemplated by this Agreement and each
other Transaction Document to which Seller is a party have been duly and validly
authorized by all necessary partnership action on the part of Seller. This
Agreement and each other Transaction Document to which it is a party has been or
will be on or prior to the Closing, duly and validly executed and delivered by
Seller, and this Agreement and each other Transaction Document to which it is
the party constitute and will constitute on or prior to the Closing, the legal,
valid, and binding obligation of Seller, enforceable against Seller in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
SECTION 5.3 NO CONFLICT; REQUIRED CONSENTS.
(a) Except for (i) the Required Consents and (ii) filings, waivers,
approvals, actions, authorization, qualifications and consents which, if
not made or obtained, would not, individually or in the aggregate, have a
material adverse effect on the Assets, the Systems, the Business, Seller's
ability to perform its obligations under this Agreement or the other
Transaction Documents to which it to a party or, to the best of Seller's
knowledge, Buyer's ability to conduct the Business after the Closing in
substantially the same manner in which it is currently conducted by Seller,
no consent, waiver, approval, action or authorization of, or filing,
registration or qualification with, any Governmental Authority is required
to be made or obtained by Seller in connection with the execution, delivery
and performance of this Agreement or the other Transaction Documents to
which it is a party.
18
(b) Except as described on Schedule 5.3, the execution, delivery, and
------------
performance by Seller of this Agreement and each other Transaction Document
to which it is a party do not and will not (a) conflict with or violate any
provision of the limited partnership agreement of Seller; (b) violate any
provision of any Legal Requirement; (c) (i) conflict with, violate, result
in a breach of, or constitute a default under (without regard to
requirements of notice, passage of time or elections of any Persons), (ii)
permit or result in the termination, suspension or modification of, (iii)
result in the acceleration of (or give any Person the right to accelerate)
the performance of Seller under, any Contract, agreement, or understanding
to which Seller is a party or by which Seller or any of the Assets is bound
or affected or (d) result in the creation or imposition of any Lien or
other encumbrance of any nature whatsoever against or upon any of the
Assets; provided that, with respect to (c) and (d) of this Section 5.3,
such prohibition shall not apply to a conflict, violation, breach, default,
consent or filing that would not impair the ability of Seller to perform
hereunder or that would not have an adverse effect on any of the Assets or
the financial condition or business of any of the Systems or the Business.
Except as described on Schedule 5.3, no approval, application, filing,
------------
registration, contract or other action of any Person is required to enable
Seller to take advantage of the rights and privileges intended to be
conferred by any License or Franchise.
SECTION 5.4 TITLE TO ASSETS; SUFFICIENCY. Except for Permitted Liens,
Seller has good and marketable title to (or, in the case of Assets that are
leased, valid leasehold interests in) and possession of all of the Assets, free
and clear of all Liens. Upon Closing, Buyer will have good and marketable title
to and possession of the Assets, free and clear of all Liens (except for
Permitted Liens other than those designated Permitted Liens described on
Schedule 5.4, which will be terminated, released, removed or satisfied by the
- ------------
Closing Date). Except for the Excluded Assets and except for the absence of
various easements, apartment access agreements and/or commercial service
agreements permitting Seller to locate cable on real property owned by third
parties which individually or in the aggregate does not and will not have a
material adverse effect on any of the Assets, the operation of any System or the
financial condition or business of any System, the Assets constitute all
property and rights, real and personal, tangible and intangible, necessary or
required to operate the Business as currently operated and conducted and to
prepare and render complete and accurate invoices to the subscribers of the
Systems and customers of the Business as currently prepared and rendered;
provided, however, that support for the billing system currently used by the
- --------- -------
Business may not be available after December 31, 1996. Except as set forth on
Schedule 5.4, Seller has not signed any Uniform Commercial Code financing
- ------------
statement or any
19
security agreement or mortgage or similar agreement authorizing any Person to
file any financing statement or claim any security interest or lien with respect
to any of the Assets. Seller has no properties or assets used or held for use in
the Business that are not included in the Assets, other than the Excluded
Assets; and except for the Excluded Assets, the Assets to be transferred to
Buyer at the Closing include all Equipment, Contracts, Franchises, Licenses and
other property and assets necessary for the conduct of the Business in the
ordinary course of business in substantially the same manner as conducted prior
to the Closing Date.
SECTION 5.5 FRANCHISES, LICENSES AND CONTRACTS. Seller has delivered to
Buyer true and complete copies of each of the Franchises, Licenses, and
Contracts (including without limitation all Contracts with bulk or commercial
service accounts of any System) and all amendments, assignments and consents
thereto. Except for the Contracts that are Excluded Assets, Seller is not bound
or affected by any other material contract, agreement or understanding that
relates to the Business. Except as described on Schedule 5.5, other than the
------------
Franchises and the Licenses, Seller requires no franchise, license or permit
from any Governmental Authority to enable it to operate the Business as
currently operated. To Seller's knowledge, except as described in Schedule 5 5
------------
each of the Franchises, Licenses, and Contracts is in full force and effect, is
valid, binding and enforceable in accordance with its terms and is valid under
and complies in all respects within all applicable Legal Requirements. Except as
described on Schedule 5.5, there has not occurred any default by Seller nor, to
------------
Seller's knowledge, by any other Person under any of the Franchises, Licenses,
or Contracts. Seller has not received from any Governmental Authority a notice
of default under any Franchise or License that would require it (in order to
preserve its right to assert that a Governmental Authority has waived a default)
to provide written notice to a Governmental Authority of its failure or
inability to cure a default under such Franchise or License.
SECTION 5.6 EMPLOYEE BENEFITS. Neither Seller nor any Employee Benefit Plan
(as defined in the Employer Retirement Income Security Act of 1974, as amended
("ERISA"), maintained by Seller or by its general partner is in violation of the
provisions of ERISA; no reportable event, within the meaning of Sections 4043
(c) (1), (2), (3), (5), (6), (7), (10) or (13) of ERISA has occurred and is
continuing with respect to any such Employee Benefit Plan; and no prohibited
transaction within the meaning of Title I of ERISA has occurred with respect to
any such Employee Benefit Plan. Buyer is not required under ERISA, the Code or
any collective bargaining agreement to establish, maintain or continue any
Employee Benefit Plan maintained by Seller or any of Seller's Affiliates or
Partners.
20
SECTION 5.7 EMPLOYEES.
(a) Except as set forth in Schedule 5.7, there are no collective bargaining
------------
agreements applicable to any Person employed by Seller that renders services in
connection with the Systems or the Business, and Seller has no duty to bargain
with any labor organization with respect to any such Person. There are not
pending any unfair labor practice charges against Seller, nor is there any
demand for recognition or any other request or demand from a labor organization
for representative status with respect to any Person employed by Seller that
renders services in connection with the Systems or the Business.
(b) Seller is in substantial compliance with all applicable Legal
Requirements respecting employment conditions and practices, has withheld and
paid all amounts required by any applicable Legal Requirements or Contracts to
be withheld from the wages or salaries of its employees, and is not liable for
any arrears of wages or any Taxes (other than wages and Taxes that have not
become due or payable) or penalties for failure to comply with any of the
foregoing.
(c) Seller has not engaged in any unfair labor practice within the meaning
of the National Labor Relations Act and has not violated any Legal Requirement
prohibiting discrimination on the basis of race, color, national origin, sex,
religion, age, marital status, or handicap in its employment conditions or
practices. There are no pending or, to Seller's knowledge, threatened unfair
labor practice charges or discrimination complaints relating to race, color,
national origin, sex, religion, age, marital status, or handicap against Seller
before any Governmental Authority.
(d) There are no existing or, to Seller's knowledge, threatened labor
strikes, disputes, grievances, or other labor controversies affecting the
Business. There are no pending or, to Seller's knowledge, threatened
representation questions respecting Seller's employees. There are no pending or,
to Seller's knowledge, threatened arbitration proceedings under any Contracts.
(e) Except as set forth on Schedule 5.7, Seller is not a party to any
------------
employment agreement, commitment, arrangement or understating, written or oral,
relating to employees or consultants of the Business.
(f) Schedule 5.7 sets forth a true and complete list of the names, social
------------
security numbers, titles, job descriptions, and rates of compensation of all of
the employees of the Business, including the length of time such employee has
been employed with the Seller, whether such employee is full time
21
or part time, and any bonus or other direct or indirect compensation and
employee benefits.
SECTION 5.8 LITIGATION. Except as set forth on Schedule 5.8 and any
------------
Litigation or Judgment affecting the cable television industry generally, there
is no Litigation or Judgment outstanding or pending or to Seller's knowledge,
threatened, involving or affecting the Systems, the Assets or the Business. To
Seller's knowledge, no facts or circumstances exist that could reasonably be
expected to give rise to any such Litigation or Judgment that will have a
material adverse effect on the financial condition or operation of any of the
Systems, the Assets, the Business or the ability of Seller to perform its
obligations under this Agreement or the other Transaction Documents to which it
is a party, or that seeks or could result in the modification, revocation,
termination, suspension, or other limitation of any of the Franchises, Licenses
or Contracts.
SECTION 5.9 TAX RETURNS; OTHER REPORTS. Seller has as of the date hereof,
and will have as of the Closing Date, timely filed in proper form all Tax
Returns and all other reports that reasonably may affect Buyer's rights to and
ownership of the Assets, the Systems or the Business that are required to be
filed as of the date hereof, or which are required to be filed on or before the
Closing Date, as the case may be, and all such Tax Returns were prepared in good
faith and are accurate and complete in all material respects, and, to the best
of Seller's knowledge, there is no basis for assessment of any addition to any
Taxes shown thereon. Except as set forth on Schedule 5.9, all Taxes due or
------------
payable by Seller and the Partners on or before the date hereof or the Closing
Date, as the case may be, the non-payment of which could result in a lien upon
the Assets, any of the Systems or the Business (including any Taxes, liabilities
or amounts owing resulting from liability of Seller as the transferee of the
assets of, or successor to, any other corporation or entity or resulting by
reason of Seller having been a member of any group of corporations filing a
consolidated, combined or unitary Tax Return) have been or will be timely paid,
except to the extent any such Taxes (as set forth as of the date hereof on
Schedule 5.9) are being contested in good faith by appropriate proceedings by
- ------------
Seller and for which adequate reserves for any disputed amounts shall have been
established in accordance with GAAP. Except as set forth on Schedule 5.9, as of
------------
the date hereof, there has been no Tax examination, audit, proceeding or
investigation of Seller, or with respect to the Assets, the System or the
Business, by any relevant Taxing Authority, and Seller does not have any
outstanding Tax deficiency or assessment. Except as set forth on Schedule 5.9,
------------
there are no pending or, to the best of Seller's knowledge, threatened actions,
audits, examination, proceedings or investigations, by any relevant Taxing
Authority with respect to Seller, the Assets, the Systems, or the Business.
There is no outstanding request for an extension of time within which to pay
22
any Taxes with respect to Seller, the Assets, the Systems or the Business.
Seller has withheld and paid in a timely manner to all relevant Taxing
Authorities all payments for withholding Taxes, unemployment insurance and other
amounts required to be withheld and paid. All Taxes of or with respect to
Seller, the Assets, the Systems and the Business relating to the period prior to
the Closing shall be the responsibility of Seller.
SECTION 5.10 SYSTEM COMPLIANCE.
(a) Except as otherwise expressly provided herein and in the
Schedules hereto, Seller's operation of each of the Systems and the
Business is in material compliance with all applicable Legal Requirements,
including without limitation, the Communications Act, the Copyright Act,
the Cable Act, the Occupational Safety and Health Act, and the rules and
regulations of the FCC, the United States Copyright Office, and the Equal
Employment Opportunity Commission including, without limitation, rules and
laws governing system registration, use of aeronautical frequencies and
signal carriage, equal employment opportunity, cumulative leakage index
testing and reporting, signal leakage, and subscriber privacy, except to
the extent that the failure to so comply with any of the foregoing could
not (either individually or in the aggregate) reasonably be expected to
have a material adverse effect on the Assets, the Systems or the Business.
Without limiting the generality of the foregoing except to the extent that
the failure to comply with any of the following could not (either
individually or in the aggregate) reasonably be expected to have a material
adverse effect on the Assets, the Systems or the Business and except as set
forth in Schedule 5.10 hereto:
-------------
(i) the Franchises have been registered with the FCC;
(ii) all of the annual performance tests on each of the Systems
required under the rules and regulations of the FCC have been performed to
330 MHZ, except the Ajo System which have been performed to 300 MHZ, and
the results of such tests demonstrate satisfactory compliance with the
applicable requirements being tested in all material respects;
(iii) each of the Systems concurrently meet or exceed the
technical standards set forth in the rules and regulations of the FCC,
including, without limitation, the leakage limits contained in 47 C.F.R.
Section 76.605(a) (11);
(iv) each of the Systems is being operated in compliance with
the provisions of 47 C.F.R. Sections 76.610 through 76.619 (mid-band and
super-band signal carriage),
23
including 47 C.F.R. Section 76.611 (compliance with the cumulative signal
leakage index) to the extent applicable;
(v) each of the Systems is presently being operated in compliance
with such authorizations and all required certificates, permits and clearances
from governmental agencies, including the FAA, with respect to all towers, CARS
station licenses, business radios and frequencies utilized and carried by the
Systems have been obtained; and
(vi) all notices to subscribers of the Systems required by the rules
and regulations of the FCC have been provided.
(b) All notices, statements of account, supplements and other documents
required under Section 111 of the Copyright Act and under the rules of the
Copyright Office with respect to the carriage of off-air signals by the Systems
have been duly filed, and the proper amount of copyright fees have been paid on
a timely basis (except as to potential copyright liability arising from the
performance, exhibition or carriage of any music on the Systems which applies to
or affects the cable television industry generally), and the Systems qualify for
the compulsory license under Section 111 of the Copyright Act, except to the
extent that the failure to so file or pay could not (either individually or in
the aggregate) reasonably be expected to have an adverse effect on the Assets,
the Systems or the Business.
(c) The carriage of all television station signals (other than satellite
super stations) by the Systems is permitted by valid transmission consent
agreements or by must-carry elections by broadcasters.
(d) Seller is in compliance with its obligations with regard to protecting
the privacy rights of any past or present customers of the Systems except to the
extent that failure to so comply could not (either individually or in the
aggregate) reasonably be expected to have an adverse effect on the Assets, the
Business or the Systems.
(e) To the best of Seller's knowledge, the Assets are adequate and
sufficient for all of the current operations of the Systems except as set forth
in this Agreement and as described in the Schedules attached hereto.
(f) To Seller's knowledge, the Systems are not subject to effective
competition (as defined in the Cable Act and any FCC Legal Requirements) as of
the date hereof.
24
(g) No Governmental Authority has notified Seller of its application to be
certified to regulate rates with respect to any of the Systems as provided in 47
C.F.R. Section 76.910.
(h) No Governmental Authority has notified Seller that it has been
certified to regulate basic service rates and has adopted regulations required
to commence such regulation with respect to any of the Systems as provided in 47
C.F.R. Section 76.910 (e) (2).
(i) Except to the extent that a Governmental Authority regulates rates
pursuant to the Rate Regulation Rules, Seller is not aware of any reason that
the Seller cannot continue to charge its current programming rates in connection
with the Seller's operation of the Systems in compliance with the Cable Act and
the Rate Regulation Rules.
(j) To Seller's knowledge, no reduction of rates or refunds to subscribers
is required as of the date hereof.
(k) Seller is in compliance with its obligations under 47 C.F.R. Part 17
concerning the construction, marking and lighting of antenna structures used by
Seller in connection with the operation of each of the Systems.
SECTION 5.11 SYSTEMS INFORMATION.
(a) As of June 1, 1996, the Systems include not less than 10,800 homes
passed by energized cable (i.e., homes (including apartments and commercial
----
units) for which cable service may be provided solely by the installation of a
drop line without addition of trunk or feeder cable), and not more than 200
miles of energized cable plant, of which not more than 70 miles are of
underground construction. There are no pending rate complaints (as defined
pursuant to FCC Legal Requirements) filed by subscribers or other users of the
Systems with any Governmental Authority.
(b) Schedule 5.11 sets forth with reasonable accuracy and completeness the
-------------
following information as of June 30, 1996 with respect to each of the Systems
and the Business:
(i) a description of the Systems' physical plant and bandwith
capacity;
(ii) coordinates of locations, and System central point coordinates
and radius for FCC purposes;
(iii) inventory of plant materials;
(iv) a summary of services, the number of subscribers to each, and the
rate charged currently and for
25
the prior three (3) years, a summary of bulk subscribers and revenues, and a
calculation, without duplication, of EBU's, including, without limitation, the
number of residential and bulk subscribers in each System and revenue thereof in
each System;
(v) a listing of communities served, for FCC purposes, by the
Systems;
(vi) for each headend, a list of video channels and frequencies used,
content, and source
(vii) installation charges;
(viii) a description of Seller's past and current marketing programs
and practices, including those which are expected to be continued or implemented
prior to the Closing Date;
(ix) Seller's 1994 annual statement of Customer Policies and Required
Notices, and Notice of Protection of Subscriber Privacy;
(x) a description of Seller's repair, manufacturing and equipment
enhancement activities;
(xi) a list of free and courtesy connections; and
(xii) a description of the paging business, including services offered,
marketing practices, rates charged, inventory and the customer agreement.
SECTION 5.12 ENVIRONMENTAL.
(a) To Seller's knowledge, none of the Real Property is listed on the
National Priorities Lists or the Comprehensive Environmental Response,
Compensation, Liability Information System ("CERCLIS"), or is the subject of any
"Superfund" evaluation or investigation, or any other investigation or
proceeding of any Governmental Authority evaluating whether any remedial action
is necessary to respond to any release of Hazardous Substances on or in
connection with the Real Property.
(b) To Seller's knowledge, except as described on Schedule 5.12, no
-------------
surface impoundments or underground storage tanks are located in or on the Real
Property. Any such tanks have been duly registered with all appropriate
Governmental Authorities in accordance with all applicable Legal Requirements.
26
(c) To the knowledge of Seller, Seller is in compliance in all
material respects with, and holds all permits, licenses and authorizations
required under, all Legal Requirements with respect to pollution or
protection of the environment, including Legal Requirements relating to
actual or threatened emissions, discharges, or releases of Hazardous
Substances into the ambient air, surface water, ground water, land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous
Substances. Seller has received no notice of, and currently Seller does not
have knowledge of any past or present condition, circumstance, activity,
practice or incident (including without limitation, the presence, use,
generation, manufacture, disposal, release or threatened release of any
Hazardous Substances from or on the Real Property) that could reasonably be
expected to interfere materially with, prevent continued substantial
compliance with, or result in any Losses pursuant to any Legal Requirement
with respect to pollution or protection of the environment or that is
reasonably likely to give rise to any material liability, based upon or
related to the processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release, or threatened
release into the environment of any Hazardous Substance on, from or
attributable to the Real Property.
(d) For these purposes, the term "Hazardous Substances" includes any
substance heretofore or hereafter designated as "hazardous" or "toxic,"
including, without limitation, petroleum and petroleum related substances,
or having characteristics identified as "hazardous" or "toxic" under any
Legal Requirement including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
-- ---
Section 6901, et seq., the Federal Water Pollution Control Act, 33 U.S.C.
-- ---
Section 1247, et seq., the Clean Air Act, 42 U.S.C. Section 2001, et seq.,
-- --- -- ---
and the Community Right to Know Act, 42 U.S.C. Section 11001, et seq., all
-- ---
as amended.
SECTION 5.13 FINANCIAL AND OPERATIONAL INFORMATION. Seller has delivered to
Buyer correct and complete copies of the Business's audited balance sheet and
related statements of operations, income, changes in financial position and
statements of income and cash flows for the years ended December 31, 1993, 1994
and 1995, and an unaudited balance sheet and statements of profit and loss and
cash flow of the Business for the six months ending June 30, 1996 (the
"Business's Financial Statements"). The Business's Financial Statements have
been prepared in the ordinary course of business, are based on the books and
records of the Seller, were prepared in accordance with GAAP consistently
applied and present fairly the financial condition and results of
27
operations of the Business as of the dates and for the periods indicated, with
no material differences between such financial statements and the financial
records maintained by Seller. Upon the reasonable request of Buyer setting forth
a description of the items requested, Seller will make available to Buyer,
correct and complete copies of all filings made to Governmental Authorities with
respect to the Business.
SECTION 5.14 NO ADVERSE CHANGE; OPERATIONS OF THE BUSINESS. Except for
conditions affecting the cable television industry as a whole, (i) there has
been no material adverse change in, and no event has occurred which, so far as
reasonably can be foreseen, is likely, individually or in the aggregate to
result in any material adverse change in the Assets, the Business, liabilities,
financial condition, operations, earnings or business prospects of the Business;
(ii) the Assets or the operations of the Business have not been materially and
adversely affected as a result of any fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation, act of God, public force or
otherwise or any theft, damage, removal of property, destruction or other
casualty loss; (iii) Seller has not made any sale, assignment, lease or other
transfer of any of the properties relating to the Business other than in the
normal and ordinary course of business; (iv) Seller has continued the pricing
policies and has conducted the promotional, advertising and other business and
operational activities with respect to the Business (including, without
limitation, billing, collection, subscriber relations, and construction and
joint trenching activities) substantially and materially in the normal and
ordinary course of business consistent with past practices and cable television
industry practices; (v) there has been no amendment or termination of any
License, Franchise or any Contract; (vi) there has been no waiver or release of
any material right or claim against any third party relating to the Business;
(vi) there has been no material labor dispute or union activity with respect to
or by Seller's employees which affects the operation of the Business; and (vii)
there has been no agreement by Seller to take any of the actions described in
the preceding clauses (i) through (vi), except as contemplated by this
Agreement.
SECTION 5.15 TAXPAYER IDENTIFICATION NUMBER. Seller's U.S. Taxpayer
Identification Number is as set forth in the introductory paragraph of this
Agreement.
SECTION 5.16 INTANGIBLES. Seller neither uses nor holds any copyrights,
trademarks, trade names, service marks, service names, logos, licenses, permits
or other similar intangible property rights and interests ("Intangibles") in the
operations of the Business that does not incorporate the name "Saguaro,"
or variations thereof. In the operation of the Business, Seller is not aware
that it is infringing upon or otherwise acting adversely to the intangible
property rights and interests owned by any other
28
Persons, and there is no claim or action pending or, to Seller's knowledge,
threatened with respect thereto. Schedule 5.16 contains a true, correct and
-------------
complete list of all Intangibles which are material to the operation of the
Business.
SECTION 5.17 ACCOUNTS RECEIVABLE. The Accounts Receivable have not been
assigned to or for the benefit of any Person and are actual and bona fide
receivables representing obligations for the total dollar amount thereof shown
on the books of Seller, resulting from the ordinary course of Seller's business.
The Accounts Receivable are fully collectible in accordance with their terms,
subject to no offset or reduction of any nature except for a reserve for
uncollectible accounts consistent with the reserve established by Seller in its
most recent balance sheet delivered to Buyer in accordance with Section 5.13 and
statutory rights of offset which may be asserted against amounts held as
deposits.
SECTION 5.18 BONDS. Except as set forth on Schedule 5.18, there are no
-------------
franchise, construction, fidelity, performance, or other bonds posted by Seller
in connection with the Business.
SECTION 5.19 EXCLUSIVITY. Except for nationally distributed satellite
services and as set forth on Schedule 5.19, (i) Seller is currently the only
-------------
Person providing wireline or wireless cable television services or similar video
programming or related services within all or part of the geographic areas
served by the Systems; (ii) no Person other than Seller has been granted a
presently valid franchise or has a pending application for a franchise in the
communities or unincorporated areas presently served by the Systems; (iii)
Seller has no knowledge of any Person currently intending to apply for such a
franchise; (iv) no construction programs have been undertaken, or to Seller's
knowledge, are proposed or threatened to be undertaken, by any municipality or
other cable television, multichannel multipoint distribution systems or
multipoint distribution system provider or operator in any area served by the
Systems. Seller is not, nor is an Affiliate of Seller, a party to any agreement
restricting the ability of a third party to operate cable television systems in
the areas of the Systems.
SECTION 5.20 RIGHTS IN ASSETS. Except as set forth in Schedule 5.20, no
-------------
Person (including any Governmental Authority) has any right to acquire an
interest in any of the Systems or any of the Assets or the Business (including
any right of first refusal or similar right), other than rights of condemnation
or eminent domain afforded by law (none of which has been exercised and no
proceedings therefor have been commenced). Each Person that has such a right of
first refusal or similar right arising as a result of the proposed sale of the
Business as contemplated hereby has expressly declined to exercise such right
and has no further legal or contractual ability to hinder or prevent Seller's
performance in accordance with the terms of this Agreement.
29
SECTION 5.21 TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set
forth in Schedule 5.21, there is no lease, sublease, indebtedness, contract,
-------------
agreement, understanding, or other arrangement of any kind entered into by
Seller with respect to the Business with any employee, Affiliate or Partner of
the Seller which will be an Assumed Obligation and Liability.
SECTION 5.22 DISCLAIMER OF WARRANTY. Seller shall not be liable for or
bound in any manner by, and Buyer has not relied upon, any express or implied,
oral or written information, warranty, guaranty, promise, statement, inducement
or representation pertaining to the Business (including projections as to income
from and expense of any System, or the uses which can be made of, or the value,
prospects or profitability of such System), except as is expressly set forth in
this Agreement, in the Schedules attached to this Agreement or in the Business's
Financial Statements.
SECTION 5.23 REAL PROPERTY. Schedule 2.1(b) sets forth a list and
---------------
description of all Owned Real Property and Leased Real Property, and is true,
complete and accurate in all respects. Seller is holding, or shall hold at
Closing, title in fee simple to the Owned Real Property, and the leasehold
interests to all Leased Real Property, including Real Property hereafter
acquired, in each case free and clear of any Liens, except for Permitted Liens.
At the Closing, Seller shall have and shall transfer to Buyer (i) good and
marketable fee simple title to all its Owned Real Property and (ii) its
leasehold interests in and to all Leased Real Property, free and clear of any
and all Liens (except for Permitted Liens). There are not pending or, to the
best of Seller's knowledge, threatened, any condemnation actions or special
assessments or any pending proceedings for changes in the zoning with respect to
such Real Property or any part thereof and Seller has not received any notice of
the desire of any public authority or other entity to take or use any Real
Property or any part thereof. To Seller's knowledge, there is no material defect
in any of the structures on the Real Property which would interfere with the
current use of such structures or Buyer's ability to utilize such structures in
substantially the same manner in which they are currently used by Seller. Each
parcel of Real Property has access to all public roads, utilities, and other
services necessary for the operation of the relevant System with respect to such
parcel and except for the absence of various easements, apartment access
agreements and/or commercial service agreements permitting Seller to locate
cable on real property owned by third parties which individually or in the
aggregate does not and will not have a material adverse effect on any of the
Assets, the operation of any System or the financial condition or business of
any System, Seller has complied with or otherwise resolved to the satisfaction
of the relevant Government Authority, all notices or orders to correct
violations of Legal Requirements issued by any Governmental Authority having
jurisdiction against or affecting any of the Real Property. All
30
leases and subleases pursuant to which any of the Real Property is occupied or
used are set forth on Schedule 2.1(b) and such leases and subleases are valid,
---------------
subsisting, binding and enforceable in accordance with their respective terms
and there are no existing defaults thereunder or events that with notice or
lapse of time or both would constitute defaults thereunder. Seller has not nor,
to the best of Seller's knowledge, has any other party to any contract, lease or
sublease relating to any Leased Real Property given or received notice of
termination, and, to the best of Seller's knowledge, subject to the receipt of
any Required Consents, the consummation of the transactions contemplated by this
Agreement will not result in any such termination. Subject to the receipt of
Required Consents, Seller is not nor will it be, as a result of the transactions
contemplated by this Agreement, with the giving of notice or the passage of time
or both, in breach of any provision of any contract, lease or sublease relating
to any Real Property. All easements, rights-of-way and other rights which are
necessary for Seller's current use of any Real Property are valid and in full
force and effect, and Seller has not received any notice with respect to the
termination or breach of any of such easements, rights-of-way or other similar
rights.
SECTION 5.24 EQUIPMENT. Schedule 2.1(a) contains a list of all Equipment
---------------
used or held for use by Seller in the operation of the Business. To the best of
Seller's knowledge, except as set forth on Schedule 5.24, all of the tools, test
-------------
equipment, office equipment and office furniture listed on Schedule 2.1(a) are
---------------
and will be at Closing in good operating condition and repair (reasonable wear
and tear excepted) and fit for the purpose they are being used.
SECTION 5.25 NO OTHER CONSENTS. Seller has obtained and is in material
compliance with all consents, approvals, authorizations, waivers, orders,
licenses, certificates, permits and franchises from, and has made all filings
with, any Governmental Authority and other Persons required for the operation of
the Systems and the Business as presently operated, all of which are in full
force and effect and enforceable in accordance with their respective terms and
comply with all applicable Legal Requirements, except for such failures which do
not or could not, individually or in the aggregate, be expected to have a
material adverse effect on the Systems or the Business. Except as set forth on
Schedule 5.25, no consent, authorization, approval, waiver, order, license,
- -------------
certificate or permit of or from or declaration or filing with any Governmental
Authority or other Person is necessary to preclude any cancellation, suspension,
termination or reformation of any Contract, other than such consents,
authorizations, approvals, waivers, orders, licenses, certificates or permits
which do not or could not, individually or in the aggregate, have a material
adverse effect on the Systems or the Business.
31
SECTION 5.26 NO UNDISCLOSED LIABILITIES. Except as and to the extent set
forth on Schedule 5.26, Seller does not have any liability or obligation (direct
-------------
or indirect, absolute, fixed, contingent or otherwise) arising out of the Assets
or conduct of the Business which was not reflected or reserved on the Business'
Financial Statements, and Seller has not incurred any such liability or
obligation since the last day of the last Business' Financial Statement, other
than in the ordinary course of business.
SECTION 5.27 LIABILITIES TO SUBSCRIBERS. There are no obligations or
liabilities to subscribers of the Systems or other customers of the Business
except with respect to (i) prepayments or deposits made by such subscribers or
customers in the ordinary course of business consistent with past practices as
set forth in the Business's Financial Statements or, since the last day of the
monthly financial statements of the Business delivered to Buyer and (ii) the
obligation to supply services to subscribers and customers in the ordinary
course of business in accordance with and pursuant to the terms of the Licenses,
Franchises and Contracts.
SECTION 5.28 RESTORATION. No property of any Person has been damaged,
destroyed, disturbed or removed in the process of construction or maintenance of
the Business, which has not been, or will not be, prior to the Closing,
repaired, restored or replaced, or as to which an adequate reserve has not been
established by Seller.
SECTION 5.29 CERTAIN PROGRAMMING ARRANGEMENTS AND RELATIONSHIPS. Except as
set forth on Schedule 5.29, Seller is not a party to any programming contract
-------------
with any Person providing for any exclusive arrangement with respect to the
provision of programming to Seller or the Systems. Except as set forth on
Schedule 5.29, neither Seller nor any of its Affiliates has any affiliation with
- -------------
(other than on a third party basis), equity interest in, profit participation
in, contractual right to acquire any such interest or participation, or any
other relationship with any Person that provides programming to the Systems.
Seller has not entered into any arrangement with any community groups or similar
third parties restricting or limiting the types of programming which may be
shown on the Systems.
SECTION 5.30 FINDERS; BROKERS AND ADVISORS. Except for the engagement of
Waller Capital Corporation, with respect to which Seller shall have sole
responsibility for the payment of all amounts owed, Seller has not employed any
financial advisory, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by its Agreement and Seller is not aware of any
claim or basis for any claim for payment of, or any unpaid liability to any
Person for any fees or commissions or like payments with respect to the
negotiations
32
leading to this Agreement or the consummation of any of the transactions
contemplated by this Agreement.
SECTION 5.31 DISCLOSURE. No representation or warranty by Seller contained
in this Agreement (including the exhibits and schedules hereto), and no
statement contained in any document, certificate or other instrument furnished
to Buyer by or on behalf of Seller (excluding drafts of any thereof) pursuant
hereto contains or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. Except for matters affecting the
cable television industry generally, there is no fact known to Seller which
could reasonably be expected to materially adversely affect the Business, any of
the Systems or the Assets which has not been set forth in this Agreement.
ARTICLE VI
COVENANTS
---------
SECTION 6.1 CERTAIN AFFIRMATIVE COVENANTS OF SELLER REGARDING THE SYSTEMS.
Except as Buyer may otherwise consent in writing, between the date of this
Agreement and Closing, Seller shall:
(a) (i) operate the Business in the ordinary course of business
consistent with Seller's past practices; (ii) perform all of its
obligations under all of the Franchises, Licenses, and Contracts without
breach or default; (iii) operate the Business in substantial compliance
with all applicable Legal Requirements; (iv) continue the pricing,
marketing, advertising, promotion and other activities with respect to the
Business and each System (including without limitation billing, collection,
subscriber, and construction and joint trenching matters) substantially and
materially in the normal and ordinary course of business consistent with
Seller's past practices; and (v) use its Commercially Reasonable Best
Efforts to (A) preserve the current business organization of the Business
intact, including preserving existing relationships with Persons having
business with the Business, (B) keep available the services of its
employees providing services in connection with the Business, and (C)
maintain inventories of equipment and supplies at historic levels and
consistent with good industry practices;
(b) provide Buyer and its counsel, lenders, accountants, and other
representatives access to the Business, the employees of the Business, the
Owned real property and Leased Real Property, the other Assets and Seller's
books and records relating to the Business during normal business hours,
provided that such access shall not unreasonably disrupt the normal
business operations of the Business, and provided
33
further, that no investigation by Buyer shall affect or limit the scope of
any representations and warranties of Seller herein or otherwise limit
liability for any breach of such representations and warranties of Seller;
(c) as soon as practicable after the date of this Agreement, and at
its expense, make all filings, and exercise Commercially Reasonable Best
Efforts to obtain in writing as promptly as practicable all approvals,
authorizations and consents described on Schedule 5.3 and deliver to Buyer
------------
copies thereof promptly upon receiving them;
(d) promptly deliver to Buyer copies of any monthly and quarterly
financial statements for the Business and other reports with respect to the
operation of the Business regularly prepared by Seller at any time from the
date hereof until Closing;
(e) promptly inform Buyer in writing of any material adverse change in
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of the Business or the Assets, including, without
limitation, (a) any damage, destruction, loss (whether or not covered by
insurance) or other event materially affecting any of the Assets, the
Systems or the Business, (b) any notice of violation, forfeiture or
complaint under any Licenses or Franchises, or (c) anything which, if not
corrected prior to the Closing Date, will prevent Seller from fulfilling
any condition to Closing described herein;
(f) continue to carry and maintain in full force and effect its
existing bonds and casualty and liability insurance with respect to the
Business through and including the Closing Date;
(g) maintain its books, records and accounts with respect to the
Assets and the operation of the Business in the usual, regular and ordinary
manner on a basis consistent with past practices and pay, consistent with
past practices, all accounts payable and other debts, liabilities and
obligations relating to the Business;
(h) maintain the Assets, including the plant and Equipment related
thereto, in accordance with past practices and in compliance with the terms
of this Agreement, fulfill installation requests in the normal course of
business, and make routine capital expenditures in accordance with past
practices and good industry practice which are necessary to maintain the
normal operations of the Systems and the Business, including, but not
limited to, completing ongoing line extensions, placing conduit or cable in
new developments,
34
fulfilling installation requests, and continuing work on existing
construction projects;
(i) continue to implement its procedures for disconnection and
discontinuance of service to System subscribers whose accounts are
delinquent in accordance with those in effect on the date of this
Agreement;
(j) report and write off Accounts Receivable in accordance with past
practices;
(k) withhold and pay when due all Taxes relating to employees of the
Business, the Assets, and/or the System;
(l) maintain service quality of the Systems at a level at least
consistent with past practices;
(m) file with the FCC all reports required to be filed under
applicable FCC rules and regulations, and otherwise comply with all Legal
Requirements with respect to the Business; and
(n) effect and facilitate the transition of the operation of the
Systems from Seller to Buyer as contemplated by this Agreement.
SECTION 6.2 CERTAIN NEGATIVE COVENANTS OF SELLER. Except as Buyer may
otherwise consent in writing, which consent may be withheld at Buyer's sole
discretion, or as otherwise contemplated by this Agreement, between the date
hereof and Closing, Seller shall not do or cause to be done any of the
following:
(a) enter into, modify, terminate, renew, suspend, or abrogate any
Franchise, License or material Contract other than in the ordinary course
of business, provided that for purposes of this clause (a) a material
Contract shall mean a Contract pursuant to which Seller would incur either
monetary liabilities which, after the Closing Date, would exceed $10,000
individually or liabilities in the aggregate in excess of $30,000 or a
material non-monetary obligation;
(b) enter into, modify, or renew any retransmission consent agreement
other than an agreement which contains materially the same terms as such
retransmission consent agreement which is indicated on Schedule 2.1(e)
--------------
contains, provided that if Buyer does not participate in the negotiations
of any new, modified or renewed retransmission agreement or if Buyer does
not approve the terms of any such agreement, Buyer has the right to
terminate this Agreement by written notice to the Seller. Seller shall not
be entitled to recover any damages from the Buyer in connection with a
termination pursuant to this Section 6.2(b);
35
(c) sell, assign, lease or otherwise dispose of any of the Assets,
unless such Assets are consumed or disposed of in the ordinary course of
business or in conjunction with the acquisition of replacement property of
equivalent kind and value, or are no longer used or useful in the business
or operation of the Systems;
(d) create, assume, or permit to exist any Lien upon any Asset other
than Permitted Liens;
(e) except as provided elsewhere herein (i) change customer rates for
Basic Service or charges for remotes or installations, (ii) implement any
tiering, re-tiering or repackaging of cable television programming offered
by such System or make any other change in the programming services or
channel positions (including the addition or deletion of any channels) of
such System, or (iii) take any other action that would subject the rates
for any tier of service to regulation;
(f) seek amendments or modifications to existing Licenses, Franchises,
or Contracts or accept or agree to accede to any modification or amendment
to, or any condition to the transfer of, any of the Licenses, Franchises,
Contracts or Real Property that may adversely affect Buyer;
(g) enter into any transaction or permit the taking of any action or
omit taking any action that would result in any of Seller's representations
and warranties contained in this Agreement not being true and correct when
made or at Closing;
(h) increase the number of employees in the Business, increase the
compensation or change any benefits available to employees of Seller who
work in the Business except as required pursuant to the existing written
agreements indicated on Schedule 5.7 or as otherwise expressly described on
------------
Schedule 5.7; and
------------
(i) except as set forth in Section 6.5(b), not implement any new
marketing program, policy or practice, or implement any rate change,
retiering or repackaging.
SECTION 6.3 FCC APPROVAL; FORMS 394.
(a) Promptly after the execution of this Agreement, but no later than
the twentieth (20th) Business Day after the date hereof, Seller shall, at
its sole expense, make application to the FCC for the consent and approval
of the FCC to the transfer of the ownership and operation of all FCC
Licenses of the Systems from Seller to Buyer.
(b) If not previously submitted, on or prior to the expiration of the
fifteenth (15th) Business Day after the date
36
of this Agreement, Seller and Buyer shall, each at its own expense, prepare
and file properly prepared Applications for Franchise Authority consent to
Assignment or Transfer of Control of Cable Television Franchise FCC 394
("Forms 394") with the local Governmental Authorities that have issued
franchises to Seller, and shall file all additional information required by
such franchises or applicable local Legal Requirements or that the
Governmental Authorities deem necessary or appropriate in connection with
their consideration of the request of Seller or Buyer that such authority
approve of the transfer of the Franchises to Buyer.
SECTION 6.4 RELEASE OF CERTAIN LIENS, LITIGATION AND OTHER OBLIGATIONS.
Seller shall take all necessary actions, including without limitation the
discharging or other satisfaction of related claims and obligations, to cause
the termination, release, removal or satisfaction on or prior to the Closing
Date, of (i) all designated Permitted Liens listed on Schedule 5.4, and (ii)
------------
all other outstanding liabilities and obligations relating to the Business other
than subscriber and customer deposits and prepaid subscriber and customer fees,
in each case without incurring any obligations on the part of Buyer or otherwise
adversely affecting Buyer.
SECTION 6.5 CERTAIN OTHER COVENANTS OF SELLER. Not later than August 30,
1996, Seller shall have caused the monthly cable television rates that are
charged by Seller for individual basic service to be changed as set forth below:
System: Current rate: Changed Rate:
------ ------------ ------------
Nogales $20.75 $22.00
Rio Rico $20.75 $22.00
Amado (no change) $20.75 $20.75
Ajo $24.00 $24.50
In addition, a new franchise fee line item equal to 3% of items
subject to franchise fees, shall be added to the monthly billing statement
for subscribers of the Ajo System only, and a franchise fee line item shall
continue to be added for all other Systems when applicable.
In connection with the foregoing rate increases, Seller may add
KQBN-TV Channel 14 (from Tucson) and the Cartoon Channel to the channel
line-ups shown in Schedule 5.11 for Nogales and Rio Rico, and may modify
other services if necessary to obtain channel position.
37
SECTION 6.6 EMPLOYEE MATTERS.
(a) Seller shall terminate all of its employees who primarily perform
services with respect to the operations of the Systems immediately prior to
Closing. Seller shall be responsible for and shall cause to be discharged
and satisfied in full all amounts owed to any employee of Seller through
the Closing Date, including wages, salaries, accrued vacation, any
employment, incentive, compensation or bonus agreements, or other benefits
or payments on account of termination, and shall indemnify and hold Buyer
harmless from any Losses thereunder. Seller shall retain liability for all
workers' compensation claims made by employees of the Business and the
Systems filed on or before the Closing Date. Seller shall also retain
liability for all workers' compensation claims filed by such employees
after the Closing Date to the extent that such claims relate to any
compensable injuries incurred prior to the Closing Date.
(b) Buyer shall not assume or have any liability under any agreement
with any individual related to such individual's employment in the Business
at or prior to the Closing Date or bonus, incentive or other employee
benefit plans maintained by Seller, including, without limitation, phantom
stock plans, stock incentive plans, opportunity pay plans, long term cash
and incentive compensation plans, covering persons employed by or who at
any time prior to the Closing Date were employed in the Business. Seller
shall take such actions as are necessary to ensure the preservation and
delivery of all benefits accrued through the Closing Date, whether payable
presently or at some future date, to employees of the Business in respect
of any such bonus or incentive plans. Seller shall be responsible for and
shall pay all amounts payable to all of its employees in connection with
the termination of employment of any such employee on or before the Closing
Date in connection with the transactions contemplated hereby, or otherwise,
and also shall be responsible for all health insurance, vacation pay and
other benefits payable to such employees for all periods prior to and
including the Closing Date.
(c) Seller shall be responsible for compliance with the notice and
continuation coverage requirements of Section 4980B of the Code that arise
with respect to the former employees of Seller and the Affected Employees
(as defined in ERISA), on account of the transactions contemplated by this
Agreement, if any.
(d) Seller's long term disability plan shall be responsible for
payment of any and all covered benefits, payable with respect to employment
on or before the Closing Date and for thirty days thereafter, regardless of
whether
38
payment is required to be made after the Closing Date, for: (i) any
individual who is currently receiving such benefits as of the Closing Date,
(ii) any individual who becomes disabled prior to the Closing Date and who
remains disabled for the length of any qualifying disability period, and
(iii) any individual described in (i) and (ii) above whose disability
ceases after the Closing Date and who subsequently becomes disabled prior
to the expiration of ninety (90) days of active employment with Buyer,
where such subsequent disability is a continuation of such prior disability
for which benefits were due under Seller's or the System's welfare plan.
(e) Except as otherwise provided in this Agreement, Seller shall
retain, and Buyer shall not assume, any liabilities or obligations of
Seller or any of its Affiliates to employees with respect to claims
incurred and employment prior to the Closing Date.
(f) Prior to or as of the Closing Date, Seller shall have made
arrangements reasonably satisfactory to Buyer for termination of all
deferred compensation, pension, 401 (k), or other similar employee
benefits plans, which arrangements shall not create any liability or
obligation for Buyer after Closing.
(g) Buyer may offer (but is not obligated to offer) employment to any
or all of the employees of Seller who primarily perform services with
respect to the operations of the Systems as of the Closing Date. Buyer
shall recognize the term of service with Seller of any employee of Seller
hired by Buyer in determining such employee's vacation benefits under
Buyer's vacation plan. Buyer also shall permit any former employee of
Seller hired by Buyer to participate in Buyer's group health plan without
imposing any waiting periods so long as such employee was covered by
Seller's health plan immediately prior to the Closing. To the extent that
accrued vacation time is included in the Current Items Amount, Buyer either
shall permit any former employee of Seller who is hired by Buyer to take
any such accrued vacation at whatever times the employee would have been
entitled to take such vacation had the employee not left the employ of
Seller, or shall pay such employee for any such accrued vacation time that
such employee is not able to take under Buyer's vacation plan. Nothing in
this statement of intent shall be construed to create any third party
beneficiary rights in favor of any person not a party to this Agreement or
to constitute an offer of employment, employment agreement or condition of
employment for any of the employees of the Business.
SECTION 6.7 WARN ACT. Seller shall give all notices required to be given
under the Federal Workers Adjustment and Retraining Notification Act ("WARN
Act") by any party related to or as a
39
result of the transactions contemplated by this Agreement, and shall indemnify
and hold Buyer harmless for any liability resulting from the failure of Seller
and the Systems to do so. On the Closing Date, Seller shall deliver to Buyer a
written description of any "employment loss," as defined in the WARN Act, which
occurs at any time within the ninety (90) days prior to the Closing Date. For
purposes of the WARN Act and this Section 6.7, "Closing Date" shall mean the
"effective date" of the transactions contemplated by this Agreement, as defined
in the WARN Act.
SECTION 6.8 EXCLUSIVITY. Between the date of this Agreement and the earlier
of the termination of this Agreement in accordance with its terms and the
Closing Date, Seller shall not, and shall cause its Partners, officers,
directors, employees, agents and representatives (including, without limitation,
Waller Capital Corporation, any investment banker, attorney or accountant
retained by Seller) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal with respect to the
Business, engage in any negotiations concerning, or provide to any other Person
any information or data relating to the Business, any of the Systems, the
Assets, or Seller for the purposes of, or have any discussions with any Person
relating to, or otherwise cooperate in any way with or assist or participate in,
facilitate or encourage, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any effort or attempt by
any other Person to seek or effect a sale of all or substantially all of the
Assets, the Systems or the Business.
SECTION 6.9 TITLE INSURANCE. Attached hereto as Schedule 6.9 are the title
------------
commitments to the Owned Real Property which have been obtained by Seller.
Seller represents, warrants and covenants that (a) title to the Owned Real
Property is and on the Closing Date shall be insurable on substantially the same
terms as set forth on the attached title commitments, and (b) a current survey
of the Owned Real Property by a registered professional surveyor would not show
any matter or thing that (i) violates any representation or warranty contained
herein or (ii) does or could materially affect the Business. Seller will
reasonably cooperate with Buyer if Buyer elects to obtain title insurance
policies and boundary surveys indicating for each surveyed parcel (i) access
from public rights of way, (ii) all improvements and (iii) encroachments across
the parcel's boundary lines by such improvements or improvements by owners of
adjacent parcels, for parcels of Owned Real Property or Leased Real Property, it
being understood that Buyer shall have the sole responsibility for obtaining and
paying for such policies and boundary surveys. The obtaining of title insurance
and/or surveys shall not be a condition to the obligations of Buyer to
consummate the transactions contemplated hereunder.
40
SECTION 6.10 CONFIDENTIALITY. Any non-public information that either party
("Recipient Party") may obtain from the other ("Disclosing Party") in connection
with this Agreement with respect to the Disclosing Party or the Systems shall be
confidential and, unless and until Closing shall occur, Recipient Party shall
not disclose any such information to any third party (other than its directors,
officers, Partners and employees, and representatives of its advisers and
lenders whose knowledge thereof is necessary in order to facilitate the
consummation of the transactions contemplated hereby) or use such information to
the detriment of Disclosing Party; provided that (a) Recipient may use and
disclose any such information once it has been publicly disclosed (other than by
Recipient Party in breach of its obligations under this Section) or that
rightfully has come into the possession of Recipient Party (other than from
Disclosing Party), and (b) to the extent that Recipient Party may become
compelled by Legal Requirements to disclose any of such information, Recipient
Party may disclose such information if it shall have made all reasonable
efforts, and shall have afforded Disclosing Party the opportunity, to obtain an
appropriate protective order, or other satisfactory assurance of confidential
treatment, for the information compelled to be disclosed. If this Agreement is
terminated, Recipient Party shall use all reasonable efforts to cause to be
delivered to Disclosing Party, and retain no copies of, any documents, work
papers and other materials obtained by or on the behalf of Recipient Party from
Disclosing Party, whether so obtained before or after the execution hereof. The
rights and obligations of Buyer and Seller under this Section shall survive
Closing or the termination of this Agreement. Notwithstanding the foregoing, the
following will not constitute a part of the information for the purposes of this
Section:
(i) information that a party can show was known by the Recipient
Party prior to the disclosure thereof by the Disclosing Party;
(ii) information that is or becomes generally available to the public
other than as a result of a disclosure directly or indirectly by the
Recipient Party in breach of this Section 6.10;
(iii) information that is independently developed by the Recipient
Party; or
(iv) information that is or becomes available to the Recipient Party
on a non-confidential basis from a source other than the Disclosing Party,
provided that such source is not known by the Recipient Party to be bound
by any obligation or confidentiality in relation thereto.
SECTION 6.11 SUPPLEMENTS TO SCHEDULES. Each of Seller and Buyer shall, from
time to time prior to Closing, supplement the
41
Schedules to this Agreement with additional information that, if existing or
known to it on the date of this Agreement, would have been required to be
included in such Schedules. For purposes of determining the satisfaction of any
of the conditions to the obligations of Buyer and Seller in Sections 7.1 and 7.2
and the liability of Seller or of Buyer following Closing for breaches of its
representations and warranties under this Agreement, the Schedules to this
Agreement shall be deemed to include only (a) the information contained therein
on the date of this Agreement and (b) information added to the Schedules by
written supplements to such Schedules delivered prior to Closing by the party
making such amendment that (i) are accepted in writing by the other party or
(ii) reflect actions expressly permitted by this Agreement to be taken prior to
Closing. Notwithstanding any information contained in the Schedules, all
liabilities and obligations arising out of or relating to the operation of the
Systems prior to the Closing Date shall be the responsibility of the Seller.
SECTION 6.12 NOTIFICATION OF CERTAIN MATTERS. Each party will promptly
notify the other party in writing of any fact, event, circumstance, action or
omission (i) that, if known at the date of this Agreement, would have been
required to be disclosed in or pursuant to this Agreement, or (ii) the existence
or occurrence of which would cause any of such party's representations or
warranties under this Agreement not to be true in any material respect, and with
respect to clause (ii) the party responsible thereof or pursuant to this
Agreement shall use commercially reasonable best efforts to remedy the same.
SECTION 6.13 COMMERCIALLY REASONABLE BEST EFFORTS. Each party shall use
Commercially Reasonable Best Efforts to take all steps within its power, and
will cooperate with the other party, to cause to be fulfilled those of the
conditions to the other party's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions, and to
execute and deliver such instruments and take such other commercially reasonable
best actions as may be necessary to carry out the intent of this Agreement and
consummate the transactions contemplated hereby.
SECTION 6.14 CLOSING DATE FINANCIAL STATEMENTS. Seller shall promptly
deliver to Buyer after Closing a true and complete copy of the unaudited balance
sheet for the Business as of the Closing Date and the unaudited statements of
profit and loss and cash flow of the Business for the period then ended, in each
case the report format shall be that in which the Business's Financial
Statements are presented. Not later than ninety (90) days after December 31,
1996, Seller shall deliver to Buyer an audited balance sheet and statements of
income and cash flow of the Business for the period commencing January 1, 1996
and ending on the Closing Date.
42
SECTION 6.15 CUSTOMER NOTIFICATION. As soon as reasonably practicable after
execution of this Agreement and in accordance with Section 12.9, the parties
shall jointly announce to the general public the transactions contemplated
hereby. All reasonable additional costs and expenses actually incurred and
related to mail notification of subscribers shall be borne and paid by Seller.
Other means of notifying subscribers may be employed by either party, at the
expense of the initiating party, but in no event shall any notification be
initiated without the prior consent of the other party (which consent shall not
be unreasonably withheld).
SECTION 6.16 CONSENTS.
(a) Seller will use Commercially Reasonable Best Efforts to obtain, at
its own cost and expense as soon as practicable, the Required Consents, in
form and substance reasonably satisfactory to Buyer. Seller and Buyer will
use Commercially Reasonable Best Efforts to obtain, as soon as practicable,
the Consents of Governmental Authorities; provided, that Commercially
Reasonable Best Efforts for this purpose shall not require Buyer to agree
to any change in any Contract or as a condition to obtaining any Consent,
the effect of which is to make such Contract more burdensome to Buyer.
(b) Following the Closing, Buyer will deliver promptly to the
Governmental Authorities for those Governmental Permits transferred at
Closing all bonds, letters of credit, indemnity agreements, or certificates
of deposit required by such Governmental Authorities and will use its
Commercially Reasonable Best Efforts to cooperate with Seller to obtain a
release by such Governmental Authorities of Seller's bonds, letters of
credit, indemnity agreements, and certificates of deposit.
SECTION 6.17 RISK OF LOSS; CONDEMNATION.
(a) Seller will bear the risk of any loss or damage to the Assets
resulting from fire, theft or other casualty at all times prior to the
Closing. If any such loss or damage is so substantial as to prevent normal
operation of any portion of the Systems within five days after the
occurrence of the event resulting in such loss or damage, Seller shall
immediately notify Buyer of that fact and Buyer, at any time within ten
days after receipt of such notice, may elect by written notice to Seller
either (i) to waive such defect and proceed toward consummation of the
acquisition of the Assets in accordance with this Agreement or (ii) to
terminate this Agreement. If Buyer elects to consummate the acquisition of
the Assets notwithstanding such loss or damage and does so, at Buyer's
election (i) there will be an adjustment in the aggregate
43
consideration to be paid for the Assets under Article II on account of such
loss or damage and Seller shall be entitled to all insurance proceeds paid
as a result of such loss or damage or (ii) all insurance proceeds paid or
payable as a result of the occurrence of the event causing such loss or
damage will be delivered by Seller to Buyer at the Closing or the rights to
such proceeds will be assigned by Seller to Buyer at the Closing if not yet
paid over to Seller.
(b) If, prior to Closing, any portion of any System is taken or
condemned as a result of the exercise of the power of eminent domain, or if
a Governmental Authority having such power informs Seller or Buyer that it
intends to condemn any portion of any System (such event being referred to
herein, in either case, as a "Taking"), then Buyer may terminate this
Agreement. If Buyer does not so elect to terminate this Agreement then (i)
if the Closing occurs, Buyer shall have the sole right, in the name of
Seller, if Buyer so elects, to negotiate for, claim, contest and (if the
Closing occurs) receive all damages with respect to the Taking, (ii) Seller
shall be relieved of its obligation to convey to Buyer the Asset or
interests that are the subject of the Taking and (iii) at the Closing
Seller shall assign to Buyer all of Seller's rights (including the right to
receive payment of damages) with respect to such Taking and shall pay to
Buyer all damages previously paid to Seller with respect to the Taking.
SECTION 6.18 PHASE I STUDY. Within twenty (20) days after the execution of
this Agreement, Seller shall, at its sole expense, commission a qualified
engineering firm to conduct the Study in accordance with ASTM Standard 1527-94.
Within three (3) business days of receipt of the completed Study, Seller shall
promptly deliver the Study to Buyer. If Buyer notifies Seller in writing within
thirty (30) Business Days from the date Buyer receives the report of the Study
that the Study discloses the existence of any breach, or any facts which could
be expected to result in a breach, of the representations of Seller contained in
Section 5.12, Seller shall promptly commence further investigation and/or
remedial action to cure the condition at its expense prior to the Closing;
provided that Seller shall not be obligated to spend more than $50,000 in the
aggregate in its attempt to cure all such conditions. Seller shall notify Buyer
within seven (7) days after its receipt of such written notice from Buyer if
Seller determines that it is or will be unable to cure such conditions for
$50,000 or less. If Seller exercises the right not to cure such conditions
because the aggregate cost would exceed $50,000, Buyer may elect (i) to
terminate this Agreement without waiver of any remedies available to Buyer
hereunder or (ii) to waive such obligations, in which event Buyer shall receive
a credit at the Closing in the amount, if any, by which $50,000 exceeds the
aggregate amount paid by Seller to third parties in connection with curing such
44
conditions and assume all liabilities and obligations in connection with such
conditions and hold harmless and indemnify Seller from same in accordance with
this Agreement, notwithstanding any provisions, including any representations
and warranties of Seller, of this Agreement to the contrary and Seller shall
have no liability under this Agreement or otherwise to Buyer related to or
arising from such conditions.
SECTION 6.19 UCC SEARCHES. Seller shall reimburse Buyer, no later than ten
(10) Business Days following receipt of the invoice therefor from Buyer, for the
actual costs (other than attorney review in connection therewith) incurred by
Buyer in obtaining Uniform Commercial Code lien, judgment and tax searches on
the Assets, the Seller and the general partner of Seller prior to Closing and a
bringdown certificate with respect thereto as of the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT
--------------------
SECTION 7.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligations of Buyer to
consummate the transactions contemplated by this Agreement shall be subject to
the following conditions, any one or more of which may be waived by Buyer, in
its sole discretion.
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Seller in this Agreement shall be true and accurate in
all material respects at and as of Closing with the same effect as if made
at and as of Closing, except for changes contemplated under this Agreement
and except for representations and warranties made only at and as of a
certain date.
(b) Performance of Agreements. Seller shall have performed all
-------------------------
obligations and agreements and complied with all covenants in this
Agreement to be performed and complied with by it at or before Closing, and
no event which would constitute a breach of the terms of this Agreement on
the part of Seller shall have occurred or be continuing. Notwithstanding
the generality of the preceding sentence, Seller shall have strictly
performed its obligations and agreements and strictly complied with its
covenants set forth in Section 6.5.
(c) Officer's Certificate. Buyer shall have received a certificate
---------------------
executed by an executive officer of the general partner of Seller, dated as
of Closing, reasonably satisfactory in form and substance to Buyer,
certifying that the conditions specified in Sections 7.1(a) and (b) have
been satisfied.
45
(d) Legal Proceedings. There shall be no Legal Requirement, and no
-----------------
Judgment shall have been entered and not vacated by any Governmental Authority
of competent jurisdiction in any Litigation relating to any Legal Requirement,
that enjoins, restrains, makes illegal, or prohibits consummation of the
transactions contemplated by this Agreement, and there shall be no Litigation
pending or threatened that seeks or that, if successful, would have the effect
of any of the foregoing.
(e) Opinion of Seller's Counsel. Buyer shall have received an opinion
---------------------------
of Krys Boyle Golz Freedman & Scott, P.C., counsel to Seller, dated as of
Closing, substantially in the form of Exhibit 7.1(e).
--------------
(f) Opinion of Seller's FCC Counsel. Buyer shall have received an
-------------------------------
opinion of Cole, Raywid & Braverman, special communications counsel to Seller,
dated as of Closing, substantially in the form of Exhibit 7.1(f).
-------------
(g) Consents. Buyer shall have received evidence, in form and
--------
substance reasonably satisfactory to it, that all consents, approvals and
authorizations identified on Schedule 5.3 as Required Consents have been
------------
obtained and remain in full force and effect; provided, however, that to the
extent such Required Consents relate to consents by the FCC to assignments of
Licenses, this condition shall be deemed met if such consents to assignment have
been requested prior to Closing and Buyer is entitled to operate the Systems
under such Licenses pursuant to conditional use authorizations from the FCC
until the FCC's consent is received.
(h) Noncompetition Agreement. Seller and R. Michael Kruger shall each
------------------------
have delivered to Buyer the Noncompetition Agreement duly executed by
Seller and R. Michael Kruger, respectively.
(i) Liens, Litigation and Other Obligations. Seller shall have
---------------------------------------
delivered evidence satisfactory to Buyer that all Liens, Litigation and other
obligations or liabilities of the Systems that are to be terminated, released,
removed, satisfied or waived prior to or as of the Closing Date under Section
6.4 have been so terminated, released, removed, satisfied or waived, or will be
terminated, released, removed, satisfied or waived simultaneously with the
Closing.
(j) No Material Adverse Change. There shall not have been any material
--------------------------
adverse change in the Assets, liabilities, financial condition, earnings or
business prospects of the Systems or the Business, other than any change due to
an event (other than an event described in the following proviso) that affects
the cable television industry in general; provided,
46
however, that for purposes of this Agreement, the actual regulation by any
Governmental Authority of rates, charges or fees charged to the subscribers
of any System shall be deemed to be a material adverse change in the
financial condition and business prospects of such System.
(k) Systems. The Systems shall include not less than 10,800 homes
-------
passed by energized cable (i.e., homes (including apartments and commercial
----
units) for which cable service may be provided solely by the installation
of a drop line without addition of trunk or feeder cable or electronic
components) and not more than 200 miles of energized cable plant, of which
not more than 70 miles are of underground construction.
(1) Transfer Documents. Seller shall have delivered to Buyer
------------------
customary bills of sale, general warranty deeds, assignments and other
instruments of transfer sufficient to convey good and marketable title to
the Assets in accordance with the terms of this Agreement and otherwise in
form and substance reasonably satisfactory to Buyer and its counsel.
(m) Other Documents. All other documents and certificates and other
---------------
items required to be delivered under this Agreement by Seller to Buyer at
or prior to Closing shall have been delivered or shall be tendered at the
Closing.
(n) Material Adverse Change. The financial institutions providing
-----------------------
financing to Buyer to consummate the transactions contemplated by this
Agreement shall not have exercised the Material Adverse Change clause under
the financing commitment letters provided to Buyer.
SECTION 7.2 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller
to consummate the transactions contemplated by this Agreement shall be subject
to the following conditions, any one or more of which may be waived by Seller,
in its sole discretion:
(a) Accuracy of Representations. The representations and warranties of
---------------------------
Buyer in this Agreement shall be true and accurate in all material respects
at and as of Closing with the same effect as if made at and as of Closing
except for changes contemplated under this Agreement and except for
representations and warranties made only at and as of a certain date.
(b) Performance of Agreements. Buyer shall have performed in all
-------------------------
material respects all obligations and agreements and complied in all
material respects with all covenants in this Agreement to be performed and
complied with by it at or before Closing, and no event that would
constitute
47
a material breach of the terms of this Agreement on the part of Buyer shall
have occurred or be continuing.
(c) Officer's Certificate. Seller shall have received a certificate
---------------------
executed by an executive officer of Buyer, dated as of Closing, reasonably
satisfactory in form and substance to Seller, certifying that the
conditions specified in Sections 7.2(a) and (b) have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement, and no
-----------------
Judgment shall have been entered and not vacated by any Governmental
Authority of competent jurisdiction in any Litigation relating to any Legal
Requirement, that enjoins, restrains, makes illegal, or prohibits
consummation of the transactions contemplated hereby, and there shall be no
Litigation pending or threatened that seeks or that, if successful, would
have the effect of any of the foregoing.
(e) Opinion of Buyer's Counsel. Seller shall have received an
--------------------------
opinion of Cooperman Levitt Winikoff Lester & Newman, P.C., general counsel
to Buyer, dated as of Closing, substantially in the form of Exhibit 7.2(e).
--------------
(f) Other Documents. All other documents certificates, and other items
---------------
required to be delivered under this Agreement by Buyer to Seller at or
prior to Closing shall have been delivered or shall be tendered at the
Closing.
ARTICLE VIII
CLOSING
-------
SECTION 8.1 CLOSING; TIME AND PLACE.
(a) Subject to the terms and conditions of this Agreement, the closing
of the transactions contemplated by this Agreement ("the Closing") shall be
held at the offices of Cooperman Levitt Winikoff Lester & Newman, P.C., 800
Third Avenue, 30th Floor, New York, New York 10022, at 10:00 a.m., local
time, on November 30, 1996, or at such earlier or later date as may be
agreed upon by Seller and Buyer (the "Closing Date"). Seller and Buyer
shall, without modifying or expanding their obligations hereunder, exercise
their diligent, good faith efforts to cause the Closing to occur as quickly
as reasonably possible.
(b) If at any time prior to the scheduled Closing Date, all of the
conditions contained in Article VII have been met or waived, Buyer may give
notice to Seller of the Closing. Such notice shall state a date and time,
not less than ten
48
Business Days from the date of such notice, for Closing to occur.
(c) If on November 30, 1996, all of the conditions contained in
Article VII have not been met or waived, then the Closing shall be deferred
until all such conditions have been met or waived but not to a date later
that December 31, 1996. Upon the last of the conditions being so met or
waived, Seller or Buyer may give notice to the other of the Closing, which
notice shall state a date and time, not less than ten Business Days from
the date of such notice, for the Closing to occur.
SECTION 8.2 SELLER'S OBLIGATIONS. At Closing, Seller shall deliver or cause
to be delivered to Buyer the following:
(a) Bill of Sale. Executed counterparts of a Bill of Sale and
------------
Assignment and Assumption Agreement relating to the Assets in the form of
Exhibit 8.2(a) (the "Bill of Sale");
-------------
(b) Deeds. General warranty deeds in form and substance reasonably
-----
satisfactory to buyer conveying to Buyer the Owned Real Property;
(c) Officer's Certificate. The certificate described in Section
---------------------
7.1(c);
(d) Evidence of Authorizing Actions. Evidence reasonably satisfactory
-------------------------------
to Buyer that Seller has taken all action necessary to authorize the
execution of this Agreement and the consummation of the transactions
contemplated hereby;
(e) Opinion of Seller's Counsel. The opinion described in Section
---------------------------
7.1(e);
(f) Opinion of Seller's FCC Counsel. The opinion described in Section
-------------------------------
7.1(f);
(g) Vehicle Titles. Title certificates to all vehicles that constitute
--------------
Assets, endorsed for transfer of title to Buyer, and any separate bills of
sale and other vehicle title transfer documentation required by the laws of
the State of Arizona or such county or other state in which such vehicles
are titled;
(h) Documents and Records. All (i) existing blueprints, schematics,
---------------------
working drawings, plans, specifications, projections, statistics,
engineering records, original plant records, construction, and as-built
maps relating to the Systems, (ii) customer lists, files and records used
by the Seller in connection with the operation of the Systems, including
lists of all pending subscriber hook-ups, disconnects and all repair
orders, supply orders and any other
49
records pertinent to the operation of the Systems, and (iii) personnel
files and records relating to the employees of the Systems who have
accepted Buyer's offer of employment after the Closing Date. Delivery of
the foregoing shall be deemed made to the extent such lists, files, and
records are located as of the Closing Date at any of the offices included
in the Owned Real Property or the Leased Real Property;
(i) Noncompetition Agreements . The Noncompetition Agreements, duly
-------------------------
executed by each of Seller and R. Michael Kruger;
(j) Incumbency. An incumbency certificate of Seller and the general
----------
partner of Seller evidencing the authority of the entitles and individuals
who are signatories to this Agreement and each other Transaction Documents
to which Seller it is a party; and
(k) Other. Such other documents and instruments, including, but not
-----
limited to, such documents or instruments evidencing the satisfaction of
the conditions set forth in Section 7.1(i) hereof, as shall be necessary to
effect the intent of this Agreement and consummate the transactions
contemplated hereby.
SECTION 8.3 BUYER'S OBLIGATIONS. At Closing, Buyer shall deliver or cause
to be delivered to Seller the following:
(a) Purchase Price and Current Items Amount. The Purchase Price plus
---------------------------------------
or minus the Current Items Amount, the Subscriber Adjustment and Escrow, as
determined in accordance with the provisions of Section 2.7(a);
(b) Bill of Sale. Executed counterparts of the Bill of Sale in the
------------
form of Exhibit 8.2(a);
(c) Officer's Certificate. The certificate described in Section
---------------------
7.2(c);
(d) Evidence of Authorizations. Evidence reasonably satisfactory to
--------------------------
Seller that Buyer has taken all action necessary to authorize the execution
of this Agreement and the consummation of the transactions contemplated
hereby;
(e) Incumbency. An incumbency certificate of Buyer evidencing the
----------
authority of the entities and individuals who are signatories to this
Agreement and each other Transaction Documents to which Buyer is a party;
(f) Opinion of Buyer's Counsel. The opinion described in Section
--------------------------
7.2(e); and
50
(g) Other. Such other documents and instruments as shall be necessary
-----
to effect the intent of this Agreement and consummate the transactions
contemplated hereby.
ARTICLE IX
TERMINATION
-----------
SECTION 9.1 TERMINATION EVENTS. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned as follows:
(a) At any time, by the mutual agreement of Buyer and Seller;
(b) By either Buyer or Seller upon written notice to the other, if the
other is in material breach or default of its respective covenants,
agreements, or other obligations herein, or if any of its representations
herein are not true and accurate in all material respects when made or when
otherwise required by this Agreement to be true and accurate, and such
breach, default or failure is not cured by the earlier of (i) thirty (30)
days of receipt of notice that such breach, default or failure exists or
has occurred, or (ii) December 31, 1996;
(c) By either Buyer or Seller upon written notice to the other, if any
conditions to its obligations set forth in Sections 7.1 and 7.2,
respectively, shall not have been satisfied on or before the Closing Date
for any reason other than a breach or default by such party of its
respective covenants, agreements, or other obligations hereunder, or any of
its representations herein not being true and accurate when made or when
otherwise required by this Agreement to be true and accurate; or
(d) As otherwise provided herein.
SECTION 9.2 EFFECT OF TERMINATION. If this Agreement shall be terminated
pursuant to Section 9.1, all obligations of the parties hereunder shall
terminate, except for the obligations set forth in Sections 6.10, 10.1, 10.2,
12.1, and 12.8. Termination of this Agreement pursuant to Section 9.1(b) shall
not limit or impair any remedies that Buyer or Seller may have with respect to a
breach or default by the other of its covenants, agreements or obligations
hereunder.
SECTION 9.3 FINANCING CONTINGENCY. Buyer shall have the right to terminate
this Agreement without any monetary penalty to Buyer (other than the forfeiture
by Buyer of the Earnest Money Payment paid to Seller pursuant to Section 2.4(b)
hereof) upon the occurrence of either of the following events: (a) Buyer shall
51
provide written notice to Seller on or before the later of forty-five (45)
Business Days from the date hereof or September 15, 1996 that Buyer is not able
to obtain sufficient financing to consummate the purchase and sale contemplated
by this Agreement, or (b) Buyer shall provide written notice to Seller at any
time before the Closing Date that Buyer has received written notification from
its senior lender for this transaction that there has been a material adverse
change in either the Systems or the cable television business generally that is
sufficient to cause such lender to refuse to finance Buyer's purchase of the
Systems from Seller (in which event a copy of such written notification from
Buyer's lender shall accompany Buyer's written notification to Seller).
ARTICLE X
REMEDIES
--------
SECTION 10.1 DEFAULT BY BUYER. If Buyer shall default in the performance of
its obligations under this Agreement in any material respect or if, as a result
of Buyer's breach of its obligations pursuant to this Agreement, the conditions
precedent to Seller's obligation to close specified in Section 7.2 are not
satisfied, and Seller shall not then be in default in the performance of its
obligations hereunder in any material respect, Seller shall be entitled, as its
sole remedy, to terminate this Agreement by written notice to Buyer and to
recover its actual out-of-pocket costs and expenses (including reasonable
attorneys and other professional fees) incurred in connection with the execution
of this Agreement and the satisfaction of its obligations hereunder, but not
including consequential, punitive or exemplary damages, or any other damages.
Seller agrees that such damages shall not exceed the amount of the Escrow
Amount.
SECTION 10.2 DEFAULT BY SELLER. If Seller shall default in the performance
of its obligations under this Agreement in any material respect or if, as a
result of Seller's breach of its obligations pursuant to this Agreement, the
conditions precedent to Buyer's obligation to close specified in Section 7.1 are
not satisfied, and Buyer shall not then be in default in the performance of its
obligations hereunder in any material respect, Buyer shall be entitled, at
Buyer's sole option, either:
(a) to require Seller to consummate and specifically perform the sale
in accordance with the terms of this Agreement, if necessary through
injunction or other court order or process, and to recover any damages,
costs and expenses incurred by Buyer in connection therewith; or
(b) to terminate this Agreement by written notice to Seller, and to
recover its out-of-pocket costs and expenses (including reasonable
attorneys and other professional fees) in connection with the execution of
this Agreement and the
52
satisfaction of its obligations hereunder, but not including consequential,
punitive or exemplary damages, or any other damages.
ARTICLE XI
INDEMNIFICATION
---------------
SECTION 11.1 INDEMNIFICATION BY SELLER. From and after Closing, Seller
shall indemnity and hold harmless Buyer from and against any and all Losses
arising out of or resulting from the following:
(a) Any representations and warranties made by Seller in this
Agreement not being true and accurate when made or when required by this
Agreement to be true and accurate, except for Losses that relate to any
circumstance, act or omission constituting a breach of any representation
or warranty by Seller or failure by Seller to comply with any of its
covenants, agreements or obligations hereunder of which Buyer has received
notice and which Buyer has waived in writing;
(b) Any breach or default by Seller in the performance of its
covenants, agreements, or obligations under this Agreement;
(c) Any liabilities relating to employees of Seller or any Partner
working for the Systems asserted under any Legal Requirement or otherwise
pertaining to any labor or employment matter arising out of conditions
existing or actions or events occurring prior to the Closing Date;
(d) Any liabilities and obligations arising out of or relating to the
operation of the Systems prior to the Closing Date, including, without
limitation, the Retained Liabilities and Obligations;
(e) Any claims made by creditors with respect to noncompliance with
any bulk sales law relating to this Agreement and the transactions
contemplated hereby; and
(f) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including without limitation,
legal fees and expenses, incident to any of the foregoing or incurred in
investigating or attempt to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
SECTION 11.2 INDEMNIFICATION BY BUYER. From and after Closing, Buyer shall
indemnify and hold harmless Seller and each Partner from and against any and all
Losses arising out of or resulting from the following:
53
(a) Any representations and warranties made by Buyer in this Agreement
not being true and accurate when made or when required by this Agreement to
be true and accurate, except for Losses that relate to any circumstance,
act or omission constituting a breach of any representation or warranty by
Buyer or failure by Buyer to comply with any of its covenants, agreements
or obligations hereunder of which Seller has received notice and which
Seller has waived in writing;
(b) Any breach or default by Buyer in the performance of its
covenants, agreements, or obligations under this Agreement;
(c) Any of the Assumed Obligations and Liabilities;
(d) Any liabilities relating to employees of Seller hired by Buyer
pursuant to Section 6.6 arising after the Closing Date asserted under any
federal, state or local law or regulation or otherwise pertaining to any
labor or employment matter arising out of conditions existing or actions or
events occurring subsequent to the Closing Date;
(e) Any liabilities and obligations arising out of or relating to the
operation of the Systems subsequent to the Closing Date; and
(f) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including without limitation,
legal fees and expenses, incident to any of the foregoing or incurred in
investigating or attempt to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
SECTION 11.3 INDEMNIFIED THIRD PARTY CLAIM.
(a) If any Person not a party to this Agreement shall make any demand
or claim or file or threaten to file or continue any Litigation with respect
to which Buyer or Seller is entitled to indemnification pursuant to Sections
11.1 or 11.2, respectively, then within ten (10) days after notice (the
"Notice") by the party entitled to such indemnification (the "Indemnitee")
to the other (the "Indemnitor") of such demand, claim or Litigation, the
Indemnitor shall have the option, at its sole cost and expense, to retain
counsel for the Indemnitee (which counsel shall be reasonably satisfactory
to the Indemnitee), to defend any such Litigation. Thereafter, the
Indemnitee shall be permitted to participate in such defense at its own
expense, provided that, if the named parties to any such Litigation
(including any impleaded parties) include both the Indemnitor and the
Indemnitee or, if the Indemnitor proposes that the same counsel represent
both the Indemnitee and the Indemnitor and representation of both
54
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them, then the Indemnitee shall have
the right to retain its own counsel at the cost and expense of the
Indemnitor, unless the Indemnitor shall acknowledge in writing its
indemnity obligation, in which event the retention by Indemnitee of its own
counsel shall be at its cost and expense. If the Indemnitor shall fail to
respond within ten (10) days after receipt of the Notice, the Indemnitee
may retain counsel and conduct the defense of such Litigation as it may in
its sole discretion deem proper, at the sole cost and expense of the
Indemnitor.
(b) The Indemnitee shall provide reasonable assistance to the
Indemnitor and provide access to its books, records and personnel as the
Indemnitor reasonably requests in connection will the investigation or
defense of the indemnified Losses. The Indemnitor shall promptly upon
receipt of reasonable supporting documentation reimburse the Indemnitee for
out-of-pocket costs and expenses incurred by the latter in providing the
requested assistance.
(c) In the event that Indemnitor desires to compromise or settle any
such claim, Indemnitee shall have the right to consent to such settlement
or compromise; provided, however, that if such compromise or settlement is
for money damages only and will include a full release and discharge of
Indemnitee, and Indemnitee withholds its consent to such compromise or
settlement, Indemnitor and Indemnitee agree that (1) Indemnitor's liability
shall be limited to the amount of the proposed settlement and Indemnitor
shall thereupon be relieved of any further liability with respect to such
claim, and (2) from and after such date, Indemnitee will undertake all
legal costs and expenses in connection with such claim and shall indemnify
Indemnitor from any further liability or obligation to such third party in
connection with such claim in excess of the amount of the proposed
settlement. If Indemnitor fails to defend any claim within a reasonable
time, Indemnitee shall be entitled to assume the defense thereof, and
Indemnitor shall be liable to Indemnitee for its expenses reasonably
incurred, including attorney's fees and payment of any settlement amount or
judgment.
SECTION 11.4 DETERMINATION OF INDEMNIFICATION AMOUNTS AND RELATED MATTERS.
(a) In calculating amounts payable to an Indemnitee hereunder, the
amount of the indemnified losses shall be reduced by the amount of any
insurance proceeds paid to the Indemnitee for such Losses.
(b) Subject to the provisions of Section 11.3, all amounts payable by
the Indemnitor to the Indemnitee in respect
55
of any Losses under Sections 11.1 or 11.2 shall be payable by the
Indemnitor as incurred by the Indemnitee.
(c) The provisions of Sections 11.3 and 11.4 shall be applicable to
any claim for indemnification made under any other provision of this
Agreement and all references in Sections 11.3 and 11.4 to Sections 11.1 and
11.2 shall be deemed to be references to such other provisions of this
Agreement.
SECTION 11.5 TIME AND MANNER OF CERTAIN CLAIMS. Except as otherwise
provided herein, the representations, warranties and covenants of Buyer and
Seller in this Agreement shall survive Closing for a period of twelve (12)
months except for representations, warranties and covenants (i) relating to
title, ownership, employee benefit matters, Copyright Act matters and Taxes,
which shall survive until the expiration of the applicable statute of
limitations and (ii) relating to environmental matters, which shall survive
until the third anniversary of the Closing Date, and Buyer's and Seller's rights
to make claims dated thereafter shall likewise expire and be extinguished on
such dates. Neither Seller nor Buyer shall have any liability under Sections
11.1(a) or 11.2(a), respectively, unless a claim for Losses for which
indemnification is sought thereunder is asserted by the party seeking
indemnification by written notice to the party from whom indemnification is
sought within the applicable survival period.
ARTICLE XII
MISCELLANEOUS
-------------
SECTION 12.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each of the parties shall pay its own expenses and the fees and
expenses of its counsel, accountants, and other experts in connection with this
Agreement.
SECTION 12.2 WAIVERS. No action taken pursuant to this Agreement, including
any investigation by or on behalf of any party hereto, shall be deemed to
constitute a waiver by the party taking the action of compliance with any
representation, warranty, covenant or agreement contained herein or in any
document delivered pursuant hereto. The waiver by any party hereto of any
condition or of a breach of another provision of this Agreement shall not
operate or be construed as a waiver of any other condition or subsequent breach.
The waiver by any party of any of the conditions precedent to its obligations
under this Agreement shall not preclude it from seeking redress for breach of
this Agreement other than with respect to the condition so waived.
SECTION 12.3 NOTICES. All notices, requests, demands, applications,
services of process, and other communications which are required to be or may be
given under this Agreement shall be in
56
writing and shall be deemed to have been duly given if sent by facsimile
transmission, delivered by overnight or other courier service, or mailed,
certified first class mail, postage prepaid, return receipt requested, to the
parties hereto at the following addresses:
To Seller: Saguaro Cable TV Investors, L.P.
c/o Arizona And Southwest Cable, Inc.
513 Wilcox Street, Suite 230
Castle Rock, Colorado 80104
Attn: R. Michael Kruger, President
Telecopy: (203) 688-5001
Copies (which shall not constitute notice) to:
Krys Boyle Golz Freedman
& Scott, P.C.
Dominion Plaza, Suite 2700 South
600 Seventeenth Street
Denver, Colorado 80202-5427
Attn: Stanley F. Freedman, Esq.
Telecopy: (303) 893-2882
To Buyer: Mediacom LLC
90 Crystal Run Road, Suite 406-A
Middletown, New York 10940
Attn: Rocco B. Commisso, Manager
Telecopy: (914) 692-9099
Copies (which shall not constitute notice) to:
Cooperman Levitt Winikoff
Lester & Newman, P.C.
800 Third Avenue, 30th Floor
New York, New York 10010
Attn: Robert L. Winikoff, Esq,
Telecopy: (212) 755-2839
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective,
(i) if delivered by courier service or by facsimile transmission, upon actual
receipt by the intended recipient, or (ii) if mailed, upon the earlier of five
(5) days after deposit with the U. S. Postal Service or the date of delivery as
shown on the return receipt therefor.
SECTION 12.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement embodies the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, oral or written,
with respect thereto. This Agreement may not be modified orally, but only by an
57
agreement in writing signed by the party or parties against whom any waiver,
change, amendment, modification, or discharge may be sought to be enforced.
SECTION 12.5 BINDING EFFECT; BENEFITS. This Agreement shall inure to the
benefit of and will be binding upon the parties hereto and their respective
heirs, legal representatives, successors, and permitted assigns. Neither Buyer
nor Seller shall assign this Agreement or delegate any of its duties hereunder
to any other Person without the prior written consent of the other, provided,
that Buyer may assign this Agreement to any Affiliate of Buyer without the prior
written consent of Seller. Nothing in this Agreement, express or implied, is
intended to confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies or obligations
under or by reason of this Agreement.
SECTION 12.6 HEADINGS, SCHEDULES, AND EXHIBITS. The section and other
headings contained in this Agreement are for reference purposes only and will
not affect the meaning or interpretation of this Agreement. Reference to
schedules and exhibits shall, unless otherwise indicated, refer to the schedules
or exhibits attached to this Agreement, which shall be incorporated in and
constitute a part of this Agreement by such reference.
SECTION 12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together will be deemed to be one and the same instrument.
SECTION 12.8 PUBLICITY. Seller and Buyer shall consult with and cooperate
with the other with respect to the content and timing of all press releases and
other public announcements, and any oral or written statements to Seller's
employees concerning this Agreement and the transactions contemplated hereby.
Neither Seller nor Buyer shall make any such release, announcement, or
statements without the prior written consent of the other, which shall not be
unreasonably withheld or delayed; provided, however, that Seller or Buyer may at
any time make any announcement required by Legal Requirements so long as such
party, promptly upon learning of such requirement, notifies the other of such
requirement and consults with the other in good faith with respect to the
wording of such announcement.
SECTION 12.9 GOVERNING LAW. The validity, performance, and enforcement of
this Agreement and all transaction documents, unless expressly provided to the
contrary, shall be governed by the laws of the State of Arizona without
giving effect to the principles of conflicts of law of such state. Each party
hereby submits to the jurisdiction of the appropriate courts of the State of
Arizona and agrees to be served with legal process from any of such courts.
Each party hereby irrevocably waives, to the fullest extent
58
permitted by law, any objection that it may have, whether now or in the future,
to the laying of venue in, or to the jurisdiction of, any and each of such
courts for the purpose of any such suit, action, proceeding or judgment and
further waives any claim that any such suit, action, proceeding or judgment has
been brought in an inconvenient forum.
SECTION 12.10 THIRD PARTIES; JOINT VENTURES. This Agreement constitutes an
agreement solely among the parties hereto, and, except as otherwise provided
herein, is not intended to and will not confer any right, remedies, obligations,
or liabilities, legal or equitable, including any right of employment on any
Person (including but not limited to any employee or former employee of Seller)
other than the parties hereto and their respective successors or assigns, or
otherwise constitute any Person a third party beneficiary under or by reason of
this Agreement. Nothing in this Agreement, expressed or implied, is intended to
or shall constitute the parties hereto partners or participants in a joint
venture.
SECTION 12.11 CONSTRUCTION. This Agreement has been negotiated by Buyer and
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement shall not apply in any
construction or interpretation of this Agreement.
SECTION 12.12 ARBITRATION. Except for claims for injunctive relief under
Section 6.10, claims for damages or specific performance pursuant to Section
10.1 or 10.2 and third-party claims by one party against the other in any action
or proceeding commenced by unaffiliated persons or firms, all claims, disputes
and differences hereunder shall be determined by arbitration under the rules
then obtaining of the American Arbitration Association in Arizona. If $50,000 or
more is at issue, the matter shall be heard by a panel of three arbitrators. In
such case, Seller and Buyer shall each designate one disinterested arbitrator,
and the two arbitrators so designated shall select the third arbitrator. Buyer
and Seller agree that in any dispute submitted for arbitration in connection
herewith, the "non-prevailing" party shall pay all fees and expenses of the
arbitration proceedings incurred by the "prevailing" party if the amount of
award granted to the "prevailing" party is in excess of the award, if any,
granted to the "non-prevailing" party; otherwise each party shall pay its own
fees and expenses and one-half of the arbitration fees and expenses.
SECTION 12.13 FURTHER ACTS. Buyer and Seller shall, without further
consideration, execute and deliver such further instruments and documents and do
such other acts and things as the other may reasonably request in order to
confirm the transactions contemplated by this Agreement. Without limiting the
foregoing,
59
Seller shall deliver to Buyer any and all checks, drafts or other forms of
payment received in respect of any of the Accounts Receivable acquired by Buyer
pursuant to the terms of this Agreement and any of the Accounts Receivable
subsequent to the Closing Date derived from the operations of the Business.
[Remainder of this page intentionally left blank;
Signatures to follow]
60
IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of the
date first written above.
BUYER:
MEDIACOM LLC
BY: /s/ Rocco B. Commisso
---------------------------------
Name: Rocco B. Commisso
Title: Manager
SELLER:
SAGUARO CABLE TV INVESTORS, L.P.
BY: Arizona and Southwest Cable, Inc.,
its General Partner
BY: _______________________________
Name: R. Michael Kruger
Title: President
SOLELY FOR PURPOSES
OF SECTION 3.2:
________________________________
R. MICHAEL KRUGER
61
IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of the
date first written above.
BUYER:
MEDIACOM LLC
By: ______________________________
Name: Rocco B. Commisso
Title: Manager
SELLER:
SAGUARO CABLE TV INVESTORS, L.P.
By: Arizona and Southwest Cable, Inc.
its General Partner
By: /s/ R. Michael Kruger
-------------------------------
Name: R. Michael Kruger
Title: President
SOLELY FOR PURPOSES
OF SECTION 3.2:
/s/ R. Michael Kruger
- --------------------------------
R. Michael Kruger
61
SCHEDULES TO
ASSET PURCHASE AGREEMENT
DATED AS OF AUGUST 29 1996
BETWEEN
MEDIACOM LLC
AND
SAGUARO CABLE TV INVESTORS, L.P.
Notwithstanding anything contained in these Schedules, all liabilities
relating to the operation of the Business prior to Closing shall be the sole
responsibility of Seller.
EXHIBIT 2.3
8/29/96
ASSET PURCHASE AGREEMENT
dated as of August 29, 1996
between
MEDIACOM CALIFORNIA LLC
and
VALLEY CENTER CABLESYSTEMS, L.P.
TABLE OF CONTENTS
-----------------
Page
ARTICLE I CERTAIN DEFINITIONS 1
- --------- -------------------
ARTICLE II PURCHASE AND SALE 7
- ---------- -----------------
Section 2.1 Covenant of Purchase and Sale; Assets 7
Section 2.2 Excluded Assets 9
Section 2.3 Assumed and Retained Obligations and Liabilities 10
Section 2.4 Purchase Price 11
Section 2.5 Escrow Amount 12
Section 2.6 Current Items Amount 12
Section 2.7 Purchase Price and Closing Adjustments 14
ARTICLE III RELATED MATTERS 16
- ----------- ---------------
Section 3.1 HSR Act Compliance 16
Section 3.2 Noncompetition Agreement 16
Section 3.3 Bulk Sales 16
Section 3.4 Use of Name and Logos 16
Section 3.5 Transfer Taxes 16
ARTICLE IV BUYER'S REPRESENTATIONS AND WARRANTIES 16
- ---------- --------------------------------------
Section 4.1 Organization of Buyer 16
Section 4.2 Authority 17
Section 4.3 No Conflict; Required Consents 17
Section 4.4 Litigation 17
Section 4.5 Finders and Brokers 18
Section 4.6 Full Access 18
Section 4.7 Taxpayer Identification Number 18
ARTICLE V SELLER'S REPRESENTATIONS AND WARRANTIES 18
- --------- ---------------------------------------
Section 5.1 Organization and Qualification of Seller 18
Section 5.2 Authority 19
Section 5.3 No Conflict; Required Consents 19
Section 5.4 Title to Assets; Sufficiency 20
Section 5.5 Franchises, Licenses, and Contracts 21
Section 5.6 Employee Benefits 21
Section 5.7 Employees 21
Section 5.8 Litigation 22
Section 5.9 Tax Returns; Other Reports 23
Section 5.10 System Compliance 24
Section 5.11 Systems Information 25
Section 5.12 Environmental 27
Section 5.13 Financial and Operational Information 28
Section 5.14 No Adverse Change; Operations of the Business 28
Section 5.15 Taxpayer Identification Number 29
Section 5.16 Intangibles 29
Section 5.17 Accounts Receivable 29
Section 5.18 Bonds 30
i
Section 5.19 Exclusivity 30
Section 5.20 Rights to Assets 30
Section 5.21 Transactions with Affiliates and Employees 30
Section 5.22 Disclaimer of Warranty 30
Section 5.23 Real Property 31
Section 5.24 Equipment 32
Section 5.25 No Other Consents 32
Section 5.26 No Undisclosed Liabilities 32
Section 5.27 Liabilities to Subscribers 32
Section 5.28 Restoration 33
Section 5.29 Certain Programming Arrangements and Relationships 33
Section 5.30 Finders; Brokers and Advisors 33
Section 5.31 Disclosure 33
ARTICLE VI COVENANTS 34
- ---------- ---------
Section 6.1 Certain Affirmative Covenants of Seller Regarding the
Systems 34
Section 6.2 Certain Negative Covenants of Seller 36
Section 6.3 FCC Approval; Forms 394 37
Section 6.4 Release of Certain Liens, Litigation and Other
Obligations 38
Section 6.5 Certain Other Covenants of Seller 38
Section 6.6 Employee Matters 38
Section 6.7 WARN Act 40
Section 6.8 Exclusivity 40
Section 6.9 Title Insurance 41
Section 6.10 Confidentiality 41
Section 6.11 Supplements to Schedules 42
Section 6.12 Notification of Certain Matters 42
Section 6.13 Commercially Reasonable Best Efforts 42
Section 6.14 Closing Date Financial Statements 42
Section 6.15 Customer Notification 43
Section 6.16 Consents 43
Section 6.17 Risk of Loss; Condemnation 43
Section 6.18 [Intentionally Omitted] 44
Section 6.19 UCC Searches 44
ARTICLE VII CONDITIONS PRECEDENT 44
- ----------- --------------------
Section 7.1 Conditions to Buyer's Obligations 44
Section 7.2 Conditions to Seller's Obligations 46
ARTICLE VII CLOSING 48
- ------------ -------
Section 8.1 Closing; Time and Place 48
Section 8.2 Seller's Obligations 48
Section 8.3 Buyer's Obligations 49
ARTICLE IX TERMINATION 50
- ---------- -----------
Section 9.1 Termination Events 50
Section 9.2 Effects of Termination 51
Section 9.3 Financing Contingency 51
ii
ARTICLE X REMEDIES 51
- --------- --------
Section 10.1 Default by Buyer 51
Section 10.2 Default by Seller 52
ARTICLE XI INDEMNIFICATIONS 52
- ---------- ----------------
Section 11.1 Indemnification by Seller 52
Section 11.2 Indemnification by Buyer 53
Section 11.3 Indemnified Third Party Claims 54
Section 11.4 Determination of Indemnification Amounts
and Related Matters 55
Section 11.5 Time and Manner of Certain Claims 55
ARTICLE XII MISCELLANEOUS 56
- ----------- -------------
Section 12.1 Expenses 56
Section 12.2 Waivers 56
Section 12.3 Notices 56
Section 12.4 Entire Agreement; Amendments 57
Section 12.5 Binding Effect; Benefits 57
Section 12.6 Headings, Schedules, and Exhibits 57
Section 12.7 Counterparts 58
Section 12.8 Publicity 58
Section 12.9 Governing Law 58
Section 12.10 Third Parties; Joint Ventures 58
Section 12.11 Construction 58
Section 12.12 Arbitration 59
Section 12.13 Further Acts 59
iii
CONTENTS OF OMITTED SCHEDULES
-----------------------------
Schedule 2.1(a) Tangible Personal Property
Schedule 2.1(b) (I) Owned Real Property
Schedule 2.1(b) (II) Leased Real Property
Schedule 2.1(c) Franchises
Schedule 2.1(d) Licenses
Schedule 2.1(e) Contracts
Schedule 2.2 Other Excluded Assets
Schedule 2.4(d) Allocation
Schedule 4.3 No Conflict; Required Consents (Buyer)
Schedule 5.3 No Conflict; Required Consents (Seller
Schedule 5.4 Additional Permitted Liens
Schedule 5.5 Franchises, Licenses, and Contracts
Schedule 5.7 Employees
Schedule 5.8 Litigation
Schedule 5.9 Taxes
Schedule 5.10 Exceptions to System Compliance Warranties
Schedule 5.11 System Information
Schedule 5.12 Environmental
Schedule 5.16 Intangibles
Schedule 5.18 Bonds
Schedule 5.19 Exceptions to Exclusive Operations
Schedule 5.20 Third Party Rights in Assets
Schedule 5.21 Transactions with Affiliates and Employees
Schedule 5.24 Exceptions to Equipment
Schedule 5.25 Consents
Schedule 5.26 Undisclosed Liabilities
Schedule 5.29 Certain Programming Arrangements and Relationships
CONTENTS OF OMITTED EXHIBITS
----------------------------
Exhibit 2.5 Escrow Agreement
Exhibit 3.2 Noncompetition Agreement
Exhibit 7.1(e) Opinion of Seller's Counsel
Exhibit 7.1(f) Opinion of Seller's FCC Counsel
Exhibit 7.2(e) Opinion of Buyer's Counsel
Exhibit 8.2(a) Bill of Sale
Registrants agree to furnish supplementally a copy of such Schedules and
Exhibits to the Commission upon request.
iv
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of August __, 1996, between Mediacom California LLC, a Delaware limited
liability company whose Taxpayer Identification Number is 13-3860951 ("Buyer"),
and Valley Center Cablesystems, L.P., a Colorado limited partnership whose U.S.
Taxpayer Identification Number is 84-1084049 ("Seller").
RECITALS
--------
A. Seller owns and operates cable television Systems (as hereinafter
defined) franchised or holding other operating authority to serve areas in and
around the communities of Valley Center and Pauma, California and located in the
County of San Diego, California.
B. Seller is willing to convey to Buyer, and Buyer is willing to Purchase
from Seller, substantially all of the assets comprising the Systems and the
Business (as hereinafter defined), other than the Excluded Assets (as
hereinafter defined), upon the terms and conditions set forth in this Agreement.
AGREEMENTS
----------
In consideration of the mutual covenants and promises set forth herein,
Buyer and Seller agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the following terms, whether in singular or
plural forms, shall have the following meanings:
"Accounts Receivable" shall mean, as of the Closing Date, all subscriber,
trade or other accounts receivable of Seller, determined in accordance with
GAAP, representing amounts owed to Seller in connection with its operation of
the Business in the ordinary course of business.
"Affiliate" shall mean, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"Agreement" means this Asset Purchase Agreement including all schedules and
exhibits attached hereto, as may be amended from time to time.
"Allocation" has the meaning given in Section 2.4(d).
"Assets" has the meaning given in Section 2.1.
"Assumed Obligations and Liabilities" has the meaning given in Section
2.3(a).
"Basic Cable" means the cable television services described as Basic on
Schedule 5.11.
- -------------
"Bill of Sale" has the meaning given in Section 8.2(a).
"Business" shall mean the cable television business conducted by Seller
through the Systems.
"Business Day" shall mean any day other than Saturday, Sunday or a day on
which banking institutions in New York, New York are required or authorized to
be closed.
"Business's Financial Statements" has the meaning given in Section 5.13.
"Cable Act" means Title VI of the Communications Act of 1934, as amended,
47 U.S.C. (S)(S) 151 et. seq., and all provisions of the Cable Communications
--------
Policy Act of 1984, Pub. L. No. 98-549, and the Cable Television Consumer
Protection and Competition Act of 1992, Pub. L. No. 102-385, as such statutes
may be amended from time to time, and the rules and regulations promulgated
thereunder.
"CATV" means Community Antenna Television.
"Closing" has the meaning given in Section 8.1.
"Closing Date" has the meaning given in Section 8.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, or any subsequent legislative enactment thereof, as in
effect from time to time.
"Commercially Reasonable Best Efforts" shall mean such best efforts as do
not require the party to (i) undertake extraordinary or unreasonable measures,
including, without limitation, the initiation or prosecution of legal
proceedings or the payment of fees in excess of normal and usual filing and
processing fees or (ii) assume any additional liability or make any additional
commitment.
2
"Communications Act" means the Communications Act of 1934, as amended.
"Contracts" has the meaning given in Section 2.1(e).
"Copyright Act" means the Copyright Act of 1976, as amended.
"Current Items Amount" has the meaning given in Section 2.6.
"Earnest Money Payment" has the meaning given in Section 2.4(b).
"EBU's" shall mean (i) the number of residential households that subscribes
to Basic Cable (exclusive of secondary outlets and courtesy accounts) which pay
the standard rate for Basic Cable in each System without discount, (or, in the
case of each subscriber in the Rincon subdivision, which pay not less than
$24.64 per month, without discount, and in the case of each subscriber in the
Skyline subdivision, which pay not less than $19.58 per month, without discount)
each of which has paid in full without discount at least one monthly bill
generated in the ordinary course of business, none of which is pending
disconnection for any reason, none of which is, as of the Closing Date,
delinquent in payment for services for more than sixty days, and none of which
has been obtained as a subscriber within the twelve month period preceding the
Closing Date by offers made, promotions conducted and discounts given outside
the ordinary course of business, plus (ii) the number of equivalent bulk
----
subscribers (determined by dividing the aggregate dollar monthly amount
collected from bulk/commercial accounts for Basic Cable by the monthly rates for
Basic Cable in each System), each of which has paid in full without discount at
least one monthly bill generated in the ordinary course of business, none of
which is pending disconnection for any reason, none of which is, as of the
Closing Date, delinquent in payment for services for more than sixty days none
of which is, as of the Closing Date, delinquent in payment for services for more
than sixty days, and none of which has been obtained as a subscriber within the
twelve month period preceding the Closing Date by offers made, promotions
conducted and discounts given outside the ordinary course of business, provided,
there shall be excluded from the definition of EBU any subscriber or equivalent
bulk subscriber who comes within the definition of "EBU's" because its account
has been compromised or written off within the twelve month period preceding the
Closing Date, other than in the ordinary course of business consistent with past
practices for reasons such as service interrupted or waiver of late charges but
not for the purpose of making it qualify as an EBU.
"Eligible Accounts Receivable" has the meaning given in Section 2.6(a).
3
"Employee Benefit Plan" means any pension, retirement, profit-sharing,
deferred compensation, vacation, severance, bonus, incentive, medical, vision,
dental, disability, life insurance or any other employee benefit plan as defined
in Section 3(3) of ERISA to which Seller contributes or which Seller sponsors or
maintains, or by which Seller is otherwise bound.
"Equipment" has the meaning given in Section 2.1(a).
"ERISA" has the meaning given in Section 5.6.
"Escrow Agent" shall be Bankers Trust, N.A., or such other party as Buyer
and Seller shall agree.
"Escrow Agreement" shall mean the Escrow Agreement among Buyer, Seller and
Escrow Agent, substantially in the form annexed hereto as Exhibit 2.5.
-----------
"Escrow Amount" has the meaning given in Section 2.5.
"Excluded Assets" has the meaning given in Section 2.2.
"Expenses" has the meaning given in Section 2.6(c).
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"Final Adjustment Certificate" has the meaning given in Section 2.7(c).
"Franchises" has the meaning given in Section 2.1(c).
"GAAP" shall mean generally accepted accounting principles as in effect in
the United States of America.
"Governmental Authority" means the United States of America, any state,
commonwealth, territory, or possession thereof, and any political subdivision or
quasi-governmental authority of any of the same, including any court, tribunal,
department, bureau, commission or board.
"Hazardous Substances" has the meaning given in Section 5.12(d).
"Indemnitee" has the meaning given in Section 11.3(a).
"Indemnitor" has the meaning given in Section 11.3(a).
"Initial Adjustment Certificate" has the meaning given in Section 2.7(a).
4
"Intangibles" has the meaning given in Section 5.16.
"Judgment" means any judgment, writ, order, injunction, award, or decree of
any court, judge, justice, magistrate, Governmental Authority or arbitrators.
"Leased Real Property" has the meaning given in Section 2.1(b).
"Legal Requirements" means applicable common law and any statute,
ordinance, code or other law, rule, regulation, or order enacted, adopted or
promulgated by any Governmental Authority, including, without limitation,
Judgments and the Franchises.
"Licenses" has the meaning given in Section 2.1(d).
"Lien" means any security agreement, financing statement filed with any
Governmental Authority, conditional sale or other title retention agreement, any
lease, consignment or bailment given for purposes of security, any lien,
mortgage, indenture, pledge, caption, encumbrance, adverse interest,
constructive trust or other trust, claim, attachment, exception to or defect in
title or other ownership interest (including, but not limited to, reservations,
rights of entry, possibilities of reverter, encroachments, easement, rights-of-
way, rights of first refusal, restrictive covenants, leases, and licenses) of
any kind that otherwise constitutes an interest in or claim against property,
whether arising pursuant to any Legal Requirement, under any Contract or
otherwise.
"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation, hearing, or other similar activity or procedure that could result
in a Judgment.
"Losses" means any claims, losses, liabilities, damages, penalties, costs,
and expenses, including, without limitation, reasonable counsel fees and costs
and expenses incurred in the investigation, defense or settlement of any claims
covered by the indemnification provided for in Article 11 hereof, but shall in
no event include incidental or consequential damages.
"Noncompetition Agreement" has the meaning given in Section 3.2.
"Owned Real Property" has the meaning given in Section 2.1(b).
"Partner" means the general partner or any limited partner of Seller, and
"Partners" means the general partner and the limited partners of Seller,
collectively.
5
"Pay TV" means premium programming services selected by and sold to
subscribers on a per-channel or per-program basis.
"Permitted Lien" means (i) Liens for Taxes that are not yet due and payable
or that are being contested in good faith by appropriate proceedings and for
which adequate reserves has been established by Seller, (ii) rights reserved to
any Governmental Authority to regulate the affected property, (iii) as to leased
Assets, interests of the lessors thereof and Liens affecting the interests of
the lessors thereof, (iv) inchoate materialmen's, mechanics', workmen's,
repairmen's or other like Liens arising in the ordinary course of business, (v)
as to any parcel of Owned Real Property or Leased Real Property, Liens that do
not in any material respect, individually or in the aggregate, affect or impair
the value or use thereof as it is currently being used by Seller in the ordinary
course of the business or render title thereto unmerchantable or uninsurable,
and (vi) the Liens described on Schedule 5.4.
------------
"Person" means any natural person, Governmental Authority, corporation,
general or limited partnership, joint venture, trust, association, limited
liability company, or unincorporated entity of any kind.
"Pole Attachment Agreements" means pole attachment authorizations and
agreements held by Seller that relate to a System and were granted by a public
utility or other Person providing utility services, municipality or other
Governmental Authority.
"Purchase Price" has the meaning given in Section 2.4(a).
"Required Consents" shall mean any registration or filing with, consent or
approval of, notice to, or action by any Person or Governmental Authority
required to permit the transfer of the Assets to Buyer or to permit Seller to
perform any of its other obligations under this Agreement, as set forth in
Schedule 5.3.
- ------------
"Rate Regulation Rules" shall mean the FCC rules currently in effect
implementing the cable television rate regulations provisions of the Cable Act.
"Required EBU's" shall mean 2,000 EBU's.
"Study" shall mean a Phase I environmental study of all Real Property and
Owned Real Property which shall be transferred to Buyer pursuant to this
Agreement.
"Subscriber Adjustment" has the meaning given in Section 2.7(b).
6
"Systems" shall mean the cable television reception and distribution
systems consisting of one or more headends, subscriber drops and associated
electronic and other equipment which are, or are capable of being, operated as
an independent system without interconnection with other systems, and which
provide cable television service pursuant to the respective Franchises.
"Taxes" shall mean all levies and assessments imposed by any Governmental
Authority, including but not limited to income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes, and interest, penalties and other
government charges with respect thereto.
"Taxing Authority" shall mean any federal, state, local or foreign
governmental body or political subdivision with the power to impose Taxes.
"Tax Returns" shall mean any return, report, information return or other
document (including any related or supporting information) filed or required to
be filed with any Taxing Authority in connection with the determination,
assessment, collection, administration or reposition of any Taxes.
"Transaction Documents" shall mean this Agreement, the Escrow Agreement,
the Noncompetition Agreement and each other instrument, document, certificate
and agreement required or contemplated to be executed and delivered hereunder
and thereunder.
"To Seller's knowledge" or the equivalent means to the actual knowledge,
after due inquiry, of the general manager of any System or any officer or
director of Seller's general partner.
ARTICLE II
PURCHASE AND SALE
-----------------
SECTION 2.1 COVENANT OF PURCHASE AND SALE; ASSETS. Subject to the terms and
conditions set forth in this Agreement, at Closing Seller shall sell, convey,
assign, and transfer to Buyer, and Buyer shall acquire from Seller in
consideration for the Purchase Price, free and clear of all Liens (except for
Permitted Liens, other than those Permitted Liens identified on Schedule 5.4 as
------------
Liens to be terminated, released, removed or satisfied as of the Closing Date),
all right, title and interest of Seller or any Affiliate of Seller in all of the
assets and properties, real and personal, tangible and intangible, used or held
for use by Seller in its operation of the Business (the "Assets"), including,
without limitation, the following:
7
(a) Equipment. All tangible personal property, including, without
---------
limitation, towers, tower equipment, antennae, aboveground and underground
cable, distribution systems, headend and line amplifiers, feeder line
cable, distribution plant, programming signal decoders for each satellite
service which scrambles its signal, housedrops, including disconnected
housedrops, subscribers' devices (including converters, encoders,
transformers behind television sets and fittings), utility poles (if owned
by Seller), local origination equipment, vehicles and trailers, microwave
equipment, testing equipment, electronic devices, trunk and distribution
coaxial and optical fiber cable, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, headend hardware (including
origination, earth stations, transmission and distribution systems), test
equipment, power supplies, office and billing computers and other
equipment, furniture, fixtures, supplies, inventory, and other physical
assets owned, used or held for use by Seller in connection with the
Business, including but not limited to the items described on Schedule
--------
2.1(a) (collectively, the "Equipment").
(b) Real Property. All interests in real property used by Seller in
-------------
connection with the operation of the Business, including all improvements,
fixtures and appurtenances thereon, owned by Seller, described on Schedule
--------
2.1(b) (I), ("Owned Real Property"), or leased by Seller, described on
----------
Schedule 2.1(b) (II) ("Leased Real Property"; and together with the Owned
--------------------
Real Property, the "Real Property").
(c) Franchises. All of the existing governmental authorizations for
----------
construction, maintenance and operation of the Business (individually, a
"Franchise" and collectively, the "Franchises") presently held by Seller as
listed on Schedule 2.1(c).
--------------
(d) Licenses. The intangible CATV channel distribution rights, cable
--------
television relay service (CARS), business radio and other licenses,
authorizations, or permits issued by the FCC or any other Governmental
Authority (excluding those listed on Schedule 2.1(c)) used in the
operations of the Business that are in effect as of the date hereof or
entered or obtained in the ordinary course of business between the date
hereof and the Closing Date (the "Licenses"), including, without
limitation, the Licenses described on Schedule 2.1(d).
---------------
(e) Contracts. The leases, private easements or rights of access,
---------
contractual rights to easements, Pole Attachment Agreements or joint line
agreements, underground conduit agreements, crossing agreements, bulk and
commercial service agreements, retransmission consent agreements and must-
carry
8
requests, agreements for leases, agreements or understandings relating to
the Business in effect as of the date hereof or entered or obtained in the
ordinary course of business between the date hereof and the Closing Date as
permitted by this Agreement (other than Excluded Assets) (the "Contracts"),
as described on Schedule 2.1(e).
--------------
(f) Accounts Receivable. All Accounts Receivable.
-------------------
(g) Goodwill. The goodwill associated with the Business.
--------
(h) Intangibles. The Intangibles, if any, associated with the
-----------
Business.
(i) Books and Records. All engineering records, files, data,
-----------------
drawings, blueprints, schematics, reports, lists, plans and processes, maps
of the Systems, billing manuals and other data owned by the Seller relating
to the billing practices and procedures of the Business, and all files of
correspondence, lists, records, and reports concerning customers and
subscribers and prospective customers and subscribers of the Systems and
the Business, personnel records relating to employees of the Business who
are to be hired by Buyer, signal and program carriage, and dealings with
Governmental Authorities, including, but not limited to, all reports filed
by or on behalf of Seller with the FCC with respect to the Systems and
statements of account filed by or on behalf of Seller with the U.S.
Copyright Office with respect to the Business.
SECTION 2.2 EXCLUDED ASSETS. Notwithstanding the provisions of Section 2.1,
the Assets shall not include the following, which shall be retained by Seller
(the "Excluded Assets"):
(a) programming and agreements other than those listed on Schedule
--------
2.1(e) (which are to be assigned);
------
(b) insurance policies and rights and claims thereunder;
(c) bonds, letters of credit, surety instruments, and other similar
items;
(d) cash and cash equivalents;
(e) equipment owned by customers of the Business, such as converters
purchased by customers, pagers and house wiring;
9
(f) any agreement, right, asset or property owned or leased by Seller
that is not used or held for use in connection with its operation of the
Systems;
(g) all claims, rights, and interest in and to refunds of Taxes or
fees of any nature, or other claims against third parties, relating to the
operation of the Systems prior to the Closing Date;
(h) the account books of original entry, general ledgers and
financial records used in connection with the Systems, provided, however,
that Seller shall (i) from time to time upon reasonable notice from Buyer,
provide to Buyer access to any of such books and records as then may be in
Seller's possession, (ii) retain possession of such books and records for a
reasonable period, not to exceed three (3) years from the Closing Date
(except for Tax-related books and records which shall be retained by Seller
for at least seven (7) years from the Closing Date), and (iii) notify Buyer
in writing at least thirty (30) days prior to disposing of or destroying
any of such books and records and permit Buyer to arrange, at Buyer's cost,
for the delivery to Buyer of the books and records proposed to be disposed
or destroyed;
(i) subject to the provisions of Section 3.4, Seller's trademarks,
trade names, service marks, service names, logos, and similar proprietary
rights; and
(j) any other items described on Schedule 2.2.
------------
SECTION 2.3 ASSUMED AND RETAINED OBLIGATIONS AND LIABILITIES.
(a) Assumed Obligations and Liabilities. Subject to the terms and
-----------------------------------
conditions of this Agreement, from and after the Closing Date, Buyer shall
assume, pay, discharge, and perform the following (the "Assumed Obligations
and Liabilities"):
(i) those obligations and liabilities attributable to periods
after the Closing Date under or with respect to any of the Franchises,
Licenses or Contracts assumed by Buyer;
(ii) other obligations and liabilities of Seller (including
those comprising the Current Liabilities Amount) to the extent that there
shall be a reduction in the Purchase Price with respect thereto pursuant to
Section 2.6; and
(iii) all obligations and liabilities arising out of Buyer's
ownership of the Assets or operation of the Systems and the Business after
the Closing Date (including without
10
limitation all obligations and liabilities for adjustments of revenues from the
Business and for any rate refunds, rollback, credit, penalty and/or interest
payment required by the FCC or local franchising authority relating to the rates
charged to customers of the Systems and the Business during any period after the
Closing Date for which Buyer received subscriber payments).
(b) Retained Obligations and Liabilities. All obligations and liabilities
------------------------------------
arising out of or relating to the Assets, the Systems or the Business and all
other liabilities and obligations of Seller and each Partner, other than the
Assumed Obligations and Liabilities, shall remain and be the obligations and
liabilities solely of Seller or the appropriate Partner (collectively, the
"Retained Obligations and Liabilities"). Without limiting the generality of the
foregoing, Retained Obligations and Liabilities shall include the following:
(i) all obligations and liabilities arising out of or relating to
the Litigation and Judgments relating to periods prior to the Closing Date,
including as disclosed on Schedule 5.8;
------------
(ii) unless specifically assumed by Buyer, all obligations and
liabilities arising before the Closing Date with respect to the Franchises,
Contracts, Owned Real Property and Leased Real Property;
(iii) all obligations and liabilities for adjustment of revenues from
the Business and for any rate refunds, rollback, credit, penalty and/or interest
payment required by the FCC or local franchising authority relating to the rates
charged to customers of the Systems and the Business during any period prior to
the Closing Date;
(iv) any liability under any claim relating to the period ending as
of the Closing Date that is or, but for the consummation of the transactions
contemplated hereby, would have been covered under any insurance policy of
Seller, and all liability associated with workmen's compensation claims that
relate to the period prior to the Closing Date, whether or not reported or due
or payable as of the Closing Date; and
(v) all obligations and liabilities with respect to the Excluded
Assets.
SECTION 2.4 PURCHASE PRICE.
(a) Calculation of Purchase Price. As consideration for its purchase of
-----------------------------
the Assets, Buyer shall pay to Seller a total price of $2,515,000, which amount
shall be subject to
11
adjustment under certain circumstances as set forth herein (the "Purchase
Price").
(b) Earnest Money Payment. Upon execution of this Agreement, Buyer
---------------------
shall pay to Seller the sum of $25,000 ("Earnest Money Payment") which
shall under no circumstances be refundable to Buyer and shall
unconditionally become the property of Seller, but shall nonetheless be
credited against the amount of the Purchase Price due from Buyer at
Closing.
(c) Payment of Purchase Price. At Closing, Buyer shall pay to Seller
-------------------------
the balance of the Purchase Price plus or minus the Current Items Amount
(as appropriate) as calculated and estimated in the Initial Adjustment
Certificate, less any Subscriber Adjustment in accordance with the
provisions of Section 2.7(b) and less the Escrow Amount that shall have
been deposited by Buyer into the escrow account established pursuant to
Section 2.5 below.
(d) Purchase Price Allocation. Attached hereto as Schedule 2.4(d) is
------------------------- --------------
the allocation (the "Allocation") of the Purchase Price and the Assumed
Obligations and Liabilities to the individual assets or classes of asset
(within the meaning of Section 1060 of the Code). Buyer, Seller, each
Partner, and their respective affiliates, shall file all Tax returns and
schedules thereto (including, without limitation, those returns and forms
required by Section 1060 of the Code) consistent with the Allocation unless
otherwise required by the applicable Legal Requirements.
SECTION 2.5 ESCROW AMOUNT. On the later of 45 Business Days from the date
hereof and September 15, 1996 (unless this Agreement is terminated prior to such
date pursuant to Section 9.3), $175,000 of the Purchase Price ("Escrow Amount")
shall be deposited by Buyer into an interest bearing escrow account set up and
maintained by the Escrow Agent pursuant to the Escrow Agreement. All fees, costs
and expenses of the Escrow Agent to be paid pursuant to the Escrow Agreement
shall be payable one-half by Buyer and one-half by Seller.
SECTION 2.6 CURRENT ITEMS AMOUNT. In addition to the payment by Buyer of
the Purchase Price, Buyer or Seller, as appropriate, shall pay to the other the
net amount of the adjustments and prorations effected pursuant to Sections
2.6(a), (b), and (c) (collectively, the "Current Items Amount").
(a) Eligible Accounts Receivable. Seller shall be entitled to a
----------------------------
credit in an amount equal to (i) ninety percent (90%) of the face amount of
all Eligible Accounts Receivable that are thirty (30) or fewer days past
due as of the Closing Date, (ii) sixty percent (60%) of the face amount of
all Eligible Accounts Receivable that are more than thirty (30)
12
but fewer than sixty (60) days past due as of the Closing Date, and (iii) zero
percent (0%) of the full amount of Eligible Accounts Receivable that are sixty
(60) or more days past due as of the Closing Date, it being understood and
agreed that all amounts owed by customers shall be discounted by the percentage
discount applicable to the most aged Eligible Account Receivable attributable to
such customer. "Eligible Accounts Receivable" shall mean accounts receivable
resulting from Seller's provision of cable television service prior to the
Closing Date to the Systems' subscribers. For purposes of making "past due"
calculations under this paragraph, the monthly billing statements of Seller
shall be deemed to be due and payable on the first day of the period during
which the service for which such billing statements relate is provided.
(b) Advance Payments and Deposits. Buyer shall be entitled to a credit in
-----------------------------
an amount equal to the aggregate of (i) all deposits of customers and
subscribers of the Systems and the Business, and all interest, if any, required
to be paid thereon as of the Closing Date, for converters, decoders, and similar
items, and (ii) the appropriate portion of all payments received by Seller for
services to be rendered by Buyer including services to subscribers of the
Systems, after the Closing Date, or for other services to be rendered by Buyer
to other third parties after the Closing Date for cable television commercials,
channel leasing, or other services or rentals, to the extent the obligations of
Seller relating thereto are assumed by Buyer at Closing.
(c) Expenses. As of the Closing Date, expenses of a recurring nature that
--------
are incurred to benefit the Business and are incurred in the ordinary course of
business (the "Expenses"), including those set forth below, shall be prorated,
in accordance with GAAP, so that all such Expenses for periods prior to the
Closing Date shall be for the account of Seller, and all such expenses for
periods after the Closing Date shall be for the account of Buyer:
(i) all Expenses under any of the Franchises, the Licenses, or the
Contracts;
(ii) Taxes levied or assessed against any of the Assets or payable
with respect to cable television service and related sales to the Systems'
subscribers or otherwise in connection with the Business;
(iii) Expenses for utilities, municipal assessments, rents and service
charges, and other goods or services furnished to the Business; and
13
(iv) copyright fees based on signal carriage by the Systems.
Provided, however, that Seller and Buyer shall not prorate any Expense payable
under or with respect to any Excluded Asset, or any expense for capital
expenditures actually incurred or contracted for prior to the Closing Date, all
of which shall remain and be solely for the account of Seller.
SECTION 2.7 PURCHASE PRICE AND CLOSING ADJUSTMENTS.
(a) The Initial Adjustment Certificate. No later than fifteen (15)
----------------------------------
Business Days prior to the Closing Date, Seller shall deliver to Buyer
Seller's certificate estimated as of the Closing Date ("Initial Adjustment
Certificate") setting forth the number and calculation of EBU's and all
adjustments including the Current Items Amount and Subscriber Adjustment,
if any, proposed to be made at the Closing as of the Closing Date. Prior to
Closing, Seller shall provide Buyer or Buyer's representative with copies
of all books and records as Buyer may reasonably request for purposes of
verifying the Initial Adjustment Certificate and shall meet with Buyer's
accountants and other representatives, but without limiting Seller's
obligations hereunder to certify the Initial Adjustment Certificate.
At the Closing, all adjustments will be made on the basis of the
Initial Adjustment Certificate, provided Buyer has not given notice to
Seller that, in Buyer's opinion, the proposed adjustments are materially
incorrect. If Buyer gives notice that in its opinion, the proposed
adjustments are materially incorrect, and if the parties have not been able
to resolve the matter prior to the Closing Date, any disputed amounts shall
be paid by the party to be charged with a disputed adjustment, into escrow,
and shall be held by the Escrow Agent in accordance with the Escrow
Agreement until the Closing Adjustments are finally determined pursuant to
Section 2.7(c), at which time Seller and Buyer shall deliver a joint
written notice to the Escrow Agent setting forth appropriate instructions
as to the disposition from escrow of such disputed amounts deposited
thereunder, in accordance with the Escrow Agreement.
(b) Subscriber Adjustment. The Purchase Price shall be reduced by an
---------------------
amount equal to $1,250 times the difference between the number of Required
EBU's and the number of EBU's actually delivered on the Closing Date (the
"Subscriber Adjustment").
(c) Trueup of Current Items Amount. As soon as practicable after the
------------------------------
Closing Date, and in any event within one hundred twenty (120) days after
the Closing Date, Buyer
14
shall deliver to Seller a final calculation calculated as of the Closing
Date, of the Current Items Amount, the Subscriber Adjustment, if any, and
the number of EBU's, together with such supporting documentation as Seller
may reasonably request, in a certificate (the "Final Adjustment
Certificate"), which shall evidence in reasonable detail the nature and
extent of each calculation. The Final Adjustment Certificate shall be final
and conclusive unless objected to
by Seller in writing within thirty (30) days after delivery. Seller and
Buyer shall attempt jointly to reach agreement as to the amount of the
Current Items Amount and Subscriber Adjustment within forty-five (45) days
after receipt by Buyer of such written objection by Seller, which
agreement, if achieved, shall be binding upon both parties to this
Agreement and not subject to dispute or review. If Seller and Buyer cannot
reach agreement as to the amount of the closing adjustments within such
forty-five (45) day period, Seller and Buyer agree to submit promptly any
disputed adjustment to arbitration in accordance with Section 12.12 hereof.
Any amounts due Buyer or Seller for closing adjustments shall be paid by
the party owing such amount (or, to the extent disputed amounts are held by
the Escrow Agent, shall be paid by the Escrow Agent pursuant to joint
written instructions of Buyer and Seller in accordance with such final
resolution) not later than five (5) Business Days after such amounts shall
have become final and conclusive.
ARTICLE III
RELATED MATTERS
---------------
SECTION 3.1 HSR ACT COMPLIANCE. Buyer and Seller each agrees that the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, does not require
either party to make any filings or take any other action thereunder in
connection with the transactions contemplated hereby insofar as the aggregate
consideration payable hereunder by Buyer to Seller shall in no event equal or
exceed $15,000,000.
SECTION 3.2 NONCOMPETITION AGREEMENT. Seller and R. Michael Kruger each
agrees to execute and deliver to Buyer at Closing a five-year noncompetition and
confidentiality agreement in the form of Exhibit 3.2 (the "Noncompetition
-----------
Agreement"). A portion of the Purchase Price, not to exceed $75,000.00, shall
be allocated as compensation for the Noncompetition Agreement.
SECTION 3.3 BULK SALES. Buyer and Seller each waives compliance by the
other with all bulk sales Legal Requirements applicable to the transactions
contemplated hereby.
15
SECTION 3.4 USE OF NAMES AND LOGOS. For a period of one-hundred twenty
(120) days after Closing, Buyer shall be entitled to use the trademarks, trade
names, service marks, service names, logos, and similar proprietary rights of
Seller to the extent incorporated in or on the Assets.
SECTION 3.5 TRANSFER TAXES. Seller and Buyer each shall be liable for one-
half of all sales, use, transfer, and similar Taxes (other than income taxes)
arising from or payable by reason of the transactions contemplated by this
Agreement, and each party shall indemnify and hold the other party harmless from
and against all Losses arising from Taxes for which it is liable hereunder.
ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES
--------------------------------------
Buyer represents and warrants to Seller, as of the date of this Agreement
and as of Closing, as follows:
SECTION 4.1 ORGANIZATION OF BUYER. Buyer is a limited liability company
duly organized, validly existing, and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to own and lease
the properties and assets it currently owns and leases and to conduct its
activities as such activities are currently conducted. Buyer is qualified to do
business and will be in good standing in California and on or prior to the
Closing Date will be qualified to do business and in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary.
SECTION 4.2 AUTHORITY. Buyer has all requisite limited liability company
power and authority to execute, deliver, and perform this Agreement and the
other Transaction Documents to which it is a party and consummate the
transactions contemplated by this Agreement and the other Transaction Documents
to which it is a party. The execution, delivery, and performance of this
Agreement and each other Transaction Documents to which it is a party and the
consummation of the transactions contemplated by this Agreement and each
transaction Documents to which Buyer is a party have been duly and validly
authorized by all necessary limited liability company action on the part of
Buyer. This Agreement has been, and the other Transaction Documents to which
Buyer is a party will be on or prior to the Closing, duly and validly executed
and delivered by Buyer, and this Agreement and each of the other Transaction
Documents to which Buyer is a party constitutes and will constitute on or prior
to Closing the valid and binding obligation of Buyer, enforceable against Buyer
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
16
SECTION 4.3 NO CONFLICT; REQUIRED CONSENTS. Except as set forth in Schedule
--------
4.3 or except as will not have a material adverse effect on the ability of Buyer
- ---
to perform its obligations hereunder, the execution, delivery, and performance
by Buyer of this Agreement and the other Transaction Documents to which it is a
party do not and will not (a) conflict with or violate any provision of the
articles of organization or operating agreement of Buyer, (b) violate any
provision of any Legal Requirement, (c) conflict with, violate, result in a
breach of, or constitute a default under any agreement to which Buyer is a party
or by which Buyer or the assets or properties owned or leased by it are bound or
affected, or (d) require any consent, approval, or authorization of, or filing
of any certificate, notice, application, report, other document with, any
Governmental Authority or other Person.
SECTION 4.4 LITIGATION. Except for any Litigation as may affect the cable
television industry (national or regional) generally, there is no Litigation
pending or, to Buyer's knowledge, threatened by, against, affecting, or relating
to Buyer or any of its Affiliates in any court or before any Governmental
Authority or any arbitrator that, if adversely determined, would restrain or
materially hinder or delay the consummation of the transactions contemplated by
this Agreement or cause any of such transactions to be rescinded.
SECTION 4.5 FINDERS AND BROKERS. Buyer has not employed any financial
advisor, broker, or finder, or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission, for which Seller
will in any way have any liability in connection with the transactions
contemplated by this Agreement.
SECTION 4.6 FULL ACCESS. Buyer's representatives have received access to
Seller's books and records and to the facilities and the Assets of the Systems
to the extent requested by Buyer, and Seller has cooperated with Buyer to the
end that Buyer has been able to conduct its own inspection and investigation of
the Systems and the Assets to Buyer's satisfaction and has independently
investigated, analyzed and appraised the condition, value, prospects and
profitability thereof and performed such other presigning due diligence in
connection with the transactions contemplated by this Agreement in accordance
with the normal practice of Buyer. Notwithstanding the foregoing, Buyer's
investigation shall not limit or effect any of the representations or warranties
of the Seller contained in this Agreement.
SECTION 4.7 TAXPAYER IDENTIFICATION NUMBER. Buyer's U.S. Taxpayer
Identification Number is as set forth in the introductory paragraph of this
Agreement.
17
ARTICLE V
SELLER'S REPRESENTATIONS AND WARRANTIES
---------------------------------------
Seller represents and warrants to Buyer, as of the date of this Agreement
and as of Closing, as follows:
SECTION 5.1 ORGANIZATION AND QUALIFICATION OF SELLER. Seller is a limited
partnership duly organized and validly existing under the laws of the State of
Colorado, and has all requisite partnership power and authority to own, lease
and use the properties and assets it currently owns, leases and uses and to
conduct its activities as such activities are currently conducted. Seller is
duly qualified to do business and validly existing as a foreign limited
partnership in California and is not required to be qualified or licensed in any
other jurisdiction. Seller's general partner is Western Cablesystems III, Inc.,
which is a corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado, which is duly qualified to do business
as a foreign corporation and is in good standing in California, and which has
all requisite corporate power and authority to own all its assets and to carry
on its business as now conducted. Seller has delivered to Buyer a true and
complete copy of the limited partnership agreement of Seller together with all
amendments and modifications thereto. Other than the management of the Business
by Western Cablesystems, Inc., an Affiliate of Seller, Seller has not conducted
the Business through, and none of the Assets are held or owned by, any
subsidiary, Affiliate or other entities.
SECTION 5.2 AUTHORITY. Seller has all requisite partnership power and
authority to execute, deliver, and perform this Agreement and each other
Transaction Document to which it is a party and consummate the transactions
contemplated hereby and thereby. The execution, delivery, and performance of
this Agreement and each other Transaction Document to which it is a party and
the consummation of the transactions contemplated by this Agreement and each
other Transaction Document to which Seller is a party have been duly and validly
authorized by all necessary partnership action on the part of Seller. This
Agreement and each other Transaction Document to which it is a party has been or
will be on or prior to the Closing, duly and validly executed and delivered by
Seller, and this Agreement and each other Transaction Document to which it is
the party constitute and will constitute on or prior to the Closing, the legal,
valid, and binding obligation of Seller, enforceable against Seller in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
SECTION 5.3 NO CONFLICT; REQUIRED CONSENTS.
18
(a) Except for (i) the Required Consents and (ii) filings, waivers,
approvals, actions, authorization, qualifications and consents which, if
not made or obtained, would not, individually or in the aggregate, have a
material adverse effect on the Assets, the Systems, the Business, Seller's
ability to perform its obligations under this Agreement or the other
Transaction Documents to which it to a party or, to the best of Seller's
knowledge, Buyer's ability to conduct the Business after the Closing in
substantially the same manner in which it is currently conducted by Seller,
no consent, waiver, approval, action or authorization of, or filing,
registration or qualification with, any Governmental Authority is required
to be made or obtained by Seller in connection with the execution, delivery
and performance of this Agreement or the other Transaction Documents to
which it is a party.
(b) Except as described on Schedule 5.3, the execution, delivery, and
------------
performance by Seller of this Agreement and each other Transaction Document
to which it is a party do not and will not (a) conflict with or violate any
provision of the limited partnership agreement of Seller; (b) violate any
provision of any Legal Requirement; (c) (i) conflict with, violate, result
in a breach of, or constitute a default under (without regard to
requirements of notice, passage of time or elections of any Persons), (ii)
permit or result in the termination, suspension or modification of, (iii)
result in the acceleration of (or give any Person the right to accelerate)
the performance of Seller under, any Contract, agreement, or understanding
to which Seller is a party or by which Seller or any of the Assets is bound
or affected or (d) result in the creation or imposition of any Lien or
other encumbrance of any nature whatsoever against or upon any of the
Assets; provided that, with respect to (c) and (d) of this Section 5.3,
such prohibition shall not apply to a conflict, violation, breach, default,
consent or filing that would not impair the ability of Seller to perform
hereunder or that would not have an adverse effect on any of the Assets or
the financial condition or business of any of the Systems or the Business.
Except as described on Schedule 5.3, no approval, application, filing,
------------
registration, contract or other action of any Person is required to enable
Seller to take advantage of the rights and privileges intended to be
conferred by any License or Franchise.
SECTION 5.4 TITLE TO ASSETS; SUFFICIENCY. Except for Permitted Liens,
Seller has good and marketable title to (or, in the case of Assets that are
leased, valid leasehold interests in) and possession of all of the Assets, free
and clear of all Liens. Upon Closing, Buyer will have good and marketable title
to and possession of the Assets, free and clear of all Liens (except for
Permitted Liens other than those designated Permitted Liens
19
described on Schedule 5.4, which will be terminated, released, removed or
------------
satisfied by the Closing Date). Except for the Excluded Assets and except for
the absence of various easements, apartment access agreements and/or commercial
service agreements permitting Seller to locate cable on real property owned by
third parties which individually or in the aggregate does not and will not have
a material adverse effect on any of the Assets, the operation of any System or
the financial condition or business of any System, the Assets constitute all
property and rights, real and personal, tangible and intangible, necessary or
required to operate the Business as currently operated and conducted and to
prepare and render complete and accurate invoices to the subscribers of the
Systems and customers of the Business as currently prepared and rendered. Except
as set forth on Schedule 5.4, Seller has not signed any Uniform Commercial Code
------------
financing statement or any security agreement or mortgage or similar agreement
authorizing any Person to file any financing statement or claim any security
interest or lien with respect to any of the Assets. Seller has no properties or
assets used or held for use in the Business that are not included in the Assets,
other than the Excluded Assets; and except for the Excluded Assets, the Assets
to be transferred to Buyer at the Closing include all Equipment, Contracts,
Franchises, Licenses and other property and assets necessary for the conduct of
the Business in the ordinary course of business in substantially the same manner
as conducted prior to the Closing Date.
SECTION 5.5 FRANCHISES, LICENSES AND CONTRACTS. Seller has delivered to
Buyer true and complete copies of each of the Franchises, Licenses, and
Contracts (including without limitation all Contracts with bulk or commercial
service accounts of any System) and all amendments, assignments and consents
thereto. Except for the Contracts that are Excluded Assets, Seller is not bound
or affected by any other material contract, agreement or understanding that
relates to the Business. Except as described on Schedule 5.5, other than the
------------
Franchises and the Licenses, Seller requires no franchise, license or permit
from any Governmental Authority to enable it to operate the Business as
currently operated. To Seller's knowledge, except as described in Schedule 5.5,
------------
each of the Franchises, Licenses, and Contracts is in full force and effect, is
valid, binding and enforceable in accordance with its terms and is valid under
and complies in all respects within all applicable Legal Requirements. Except as
described on Schedule 5.5, there has not occurred any default by Seller nor, to
------------
Seller's knowledge, by any other Person under any of the Franchises, Licenses,
or Contracts. Seller has not received from any Governmental Authority a notice
of default under any Franchise or License that would require it (in order to
preserve its right to assert that a Governmental Authority has waived a default)
to provide written notice to a Governmental Authority of its failure or
inability to cure a default under such Franchise or License.
20
SECTION 5.6 EMPLOYEE BENEFITS. Neither Seller nor any Employee Benefit Plan
(as defined in the Employer Retirement Income Security Act of 1974, as amended
("ERISA"), maintained by Seller or by its general partner is in violation of the
provisions of ERISA; no reportable event, within the meaning of Sections
4043(c) (1), (2), (3), (5), (6), (7), (10) or (13) of ERISA has occurred and is
continuing with respect to any such Employee Benefit Plan; and no prohibited
transaction within the meaning of Title I of ERISA has occurred with respect to
any such Employee Benefit Plan. Buyer is not required under ERISA, the Code or
any collective bargaining agreement to establish, maintain or continue any
Employee Benefit Plan maintained by Seller or any of Seller's Affiliates or
Partners.
SECTION 5.7 EMPLOYEES.
(a) Except as set forth in Schedule 5.7, there are no collective
------------
bargaining agreements applicable to any Person employed by Seller that
renders services in connection with the Systems or the Business, and Seller
has no duty to bargain with any labor organization with respect to any such
Person. There are not pending any unfair labor practice charges against
Seller, nor is there any demand for recognition or any other request or
demand from a labor organization for representative status with respect to
any Person employed by Seller that renders services in connection with the
Systems or the Business.
(b) Seller is in substantial compliance with all applicable Legal
Requirements respecting employment conditions and practices, has withheld
and paid all amounts required by any applicable Legal Requirements or
Contracts to be withheld from the wages or salaries of its employees, and
is not liable for any arrears of wages or any Taxes (other than wages and
Taxes that have not become due or payable) or penalties for failure to
comply with any of the foregoing.
(c) Seller has not engaged in any unfair labor practice within the
meaning of the National Labor Relations Act and has not violated any Legal
Requirement prohibiting discrimination on the basis of race, color,
national origin, sex, religion, age, marital status, or handicap in its
employment conditions or practices. There are no pending or, to Seller's
knowledge, threatened unfair labor practice charges or discrimination
complaints relating to race, color, national origin, sex, religion, age,
marital status, or handicap against Seller before any Governmental
Authority.
(d) There are no existing or, to Seller's knowledge, threatened labor
strikes, disputes, grievances, or other labor controversies affecting the
Business. There are no pending or, to Seller's knowledge, threatened
representation
21
questions respecting Seller's employees. There are no pending or, to
Seller's knowledge, threatened arbitration proceedings under any
Contracts.
(e) Except as set forth on Schedule 5.7, Seller is not a party to any
------------
employment agreement, commitment, arrangement or understating, written or
oral, relating to employees or consultants of the Business.
(f) Schedule 5.7 sets forth a true and complete list of the names,
------------
social security numbers, titles, job descriptions, and rates of
compensation of all of the employees of the Business, including the length
of time such employee has been employed with the Seller, whether such
employee is full time or part time, and any bonus or other direct or
indirect compensation and employee benefits.
SECTION 5.8 LITIGATION. Except as set forth on Schedule 5.8 and any
------------
Litigation or Judgment affecting the cable television industry generally, there
is no Litigation or Judgment outstanding or pending or, to Seller's knowledge,
threatened, involving or affecting the Systems, the Assets or the Business. To
Seller's knowledge, no facts or circumstances exist that could reasonably be
expected to give rise to any such Litigation or Judgment that will have a
material adverse effect on the financial condition or operation of any of the
Systems, the Assets, the Business or the ability of Seller to perform its
obligations under this Agreement or the other Transaction Documents to which it
is a party, or that seeks or could result in the modification, revocation,
termination, suspension, or other limitation of any of the Franchises, Licenses
or Contracts.
SECTION 5.9 TAX RETURNS; OTHER REPORTS. Seller has as of the date hereof,
and will have as of the Closing Date, timely filed in proper form all Tax
Returns and all other reports that reasonably may affect Buyer's rights to and
ownership of the Assets, the Systems or the Business that are required to be
filed as of the date hereof, or which are required to be filed on or before the
Closing Date, as the case may be, and all such Tax Returns were prepared in good
faith and are accurate and complete in all material respects, and, to the best
of Seller's knowledge, there is no basis for assessment of any addition to any
Taxes shown thereon. Except as set forth on Schedule 5.9, all Taxes due or
------------
payable by Seller and the Partners on or before the date hereof or the Closing
Date, as the case may be, the non-payment of which could result in a lien upon
the Assets, any of the Systems or the Business (including any Taxes, liabilities
or amounts owing resulting from liability of Seller as the transferee of the
assets of, or successor to, any other corporation or entity or resulting by
reason of Seller having been a member of any group of corporations filing a
consolidated, combined or unitary Tax Return) have been or will be timely paid,
except to the extent any
22
such Taxes (as set forth as of the date hereof on Schedule 5.9) are being
------------
contested in good faith by appropriate proceedings by Seller and for which
adequate reserves for any disputed amounts shall have been established in
accordance with GAAP. Except as set forth on Schedule 5.9, as of the date
------------
hereof, there has been no Tax examination, audit, proceeding or investigation of
Seller, or with respect to the Assets, the System or the Business, by any
relevant Taxing Authority, and Seller does not have any outstanding Tax
deficiency or assessment. Except as set forth on Schedule 5.9, there are no
------------
pending or, to the best of Seller's knowledge, threatened actions, audits,
examination, proceedings or investigations, by any relevant Taxing Authority
with respect to Seller, the Assets, the Systems, or the Business. There is no
outstanding request for an extension of time within which to pay any Taxes with
respect to Seller, the Assets, the Systems or the Business. Seller has withheld
and paid in a timely manner to all relevant Taxing Authorities all payments for
withholding Taxes, unemployment insurance and other amounts required to be
withheld and paid. All Taxes of or with respect to Seller, the Assets, the
Systems and the Business relating to the period prior to the Closing shall be
the responsibility of Seller.
SECTION 5.10 SYSTEM COMPLIANCE.
(a) Except as otherwise expressly provided herein and in the
Schedules hereto, Seller's operation of each of the Systems and the
Business is in material compliance with all applicable Legal Requirements,
including without limitation, the Communications Act, the Copyright Act,
the Cable Act, the Occupational Safety and Health Act, and the rules and
regulations of the FCC, the United States Copyright Office, and the Equal
Employment Opportunity Commission including, without limitation, rules and
laws governing system registration, use of aeronautical frequencies and
signal carriage, equal employment opportunity, cumulative leakage index
testing and reporting, signal leakage, and subscriber privacy, except to
the extent that the failure to so comply with any of the foregoing could
not (either individually or in the aggregate) reasonably be expected to
have a material adverse effect on the Assets, the Systems or the Business.
Without limiting the generality of the foregoing except to the extent that
the failure to comply with any of the following could not (either
individually or in the aggregate) reasonably be expected to have a material
adverse effect on the Assets, the Systems or the Business and except as set
forth in Schedule 5.10 hereto:
-------------
(i) the Franchises have been registered with the FCC;
(ii) all of the annual performance tests on each of the Systems
required under the rules and regulations of the
23
FCC have been performed to 330 MHZ, and the results of such tests demonstrate
satisfactory compliance with the applicable requirements being tested in all
material respects;
(iii) each of the Systems concurrently meet or exceed the technical
standards set forth in the rules and regulations of the FCC, including, without
limitation, the leakage limits contained in 47 C.F.R. Section 76.605 (a) (11);
(iv) each of the Systems is being operated in compliance with the
provisions of 47 C.F.R. Sections 76.610 through 76.619 (mid-band and super-band
signal carriage), including 47 C.F.R. Section 76.611 (compliance with the
cumulative signal leakage index) to the extent applicable;
(v) each of the Systems is presently being operated in compliance
with such authorizations and all required certificates, permits and clearances
from governmental agencies, including the FAA, with respect to all towers, CARS
station licenses, business radios and frequencies utilized and carried by the
Systems have been obtained; and
(vi) all notices to subscribers of the Systems required by the rules
and regulations of the FCC have been provided.
(b) All notices, statements of account, supplements and other documents
required under Section 111 of the Copyright Act and under the rules of the
Copyright Office with respect to the carriage of off-air signals by the Systems
have been duly filed, and the proper amount of copyright fees have been paid on
a timely basis (except as to potential copyright liability arising from the
performance, exhibition or carriage of any music on the Systems which applies to
or affects the cable television industry generally), and the Systems qualify for
the compulsory license under Section 111 of the Copyright Act, except to the
extent that the failure to so file or pay could not (either individually or in
the aggregate) reasonably be expected to have an adverse effect on the Assets,
the Systems or the Business.
(c) The carriage of all television station signals (other than satellite
super stations) by the Systems is permitted by valid transmission consent
agreements or by must-carry elections by broadcasters.
(d) Seller is in compliance with its obligations with regard to protecting
the privacy rights of any past or present customers of the Systems except to the
extent that failure to so comply could not (either individually or in the
24
aggregate) reasonably be expected to have an adverse effect on the Assets,
the Business or the Systems.
(e) To the best of Seller's knowledge, the Assets are adequate and
sufficient for all of the current operations of the Systems except as set
forth in this Agreement and as described in the Schedules attached hereto.
(f) Except to the extent that a Governmental Authority regulates
rates pursuant to the Rate Regulation Rules, Seller is not aware of any
reason that the Seller cannot continue to charge its current programming
rates in connection with the Seller's operation of the Systems in
compliance with the Cable Act and the Rate Regulation Rules.
(g) To Seller's knowledge, no reduction of rates or refunds to
subscribers is required as of the date hereof.
(h) Seller is in compliance with its obligations under 47 C.F.R. Part
17 concerning the construction, marking and lighting of antenna structures
used by Seller in connection with the operation of each of the Systems.
SECTION 5.11 SYSTEMS INFORMATION.
(a) As of June 1, 1996, the Systems include not less than 2,800 homes
passed by energized cable (i.e., homes (including apartments and commercial
----
units) for which cable service may be provided solely by the installation
of a drop line without addition of trunk or feeder cable), and not more
than 135 miles of energized cable plant, of which not more than 60 miles
are of underground construction. There are no pending rate complaints (as
defined pursuant to FCC Legal Requirements) filed by subscribers or other
users of the Systems with any Governmental Authority.
(b) Schedule 5.11 sets forth with reasonable accuracy and
-------------
completeness the following information as of June 30, 1996 with respect to
each of the Systems and the Business:
(i) a description of the Systems' physical plant and bandwith
capacity;
(ii) coordinates of locations, and System central point
coordinates and radius for FCC purposes;
(iii) inventory of plant materials;
(iv) a summary of services, the number of subscribers to each,
and the rate charged currently and for the prior three (3) years, a summary
of bulk subscribers and revenues, and a calculation, without duplication,
of EBU's,
25
including, without limitation, the number of residential and bulk
subscribers in each System and revenue thereof in each System;
(v) a listing of communities served, for FCC purposes, by the
Systems;
(vi) for each headend, a list of video channels and frequencies
used, content, and source
(vii) installation charges;
(viii) a description of Seller's past and current marketing
programs and practices, including those which are expected to be continued
or implemented prior to the Closing Date;
(ix) Seller's 1994 annual statement of Customer Policies and
Required Notices, and Notice of Protection of Subscriber Privacy;
(x) a description of Seller's repair, manufacturing and
equipment enhancement activities; and
(xi) a list of free and courtesy connections.
SECTION 5.12 ENVIRONMENTAL.
(a) To Seller's knowledge, none of the Real Property is listed on the
National Priorities Lists or the Comprehensive Environmental Response,
Compensation, Liability Information System ("CERCLIS"), or is the subject
of any "Superfund" evaluation or investigation, or any other investigation
or proceeding of any Governmental Authority evaluating whether any remedial
action is necessary to respond to any release of Hazardous Substances on or
in connection with the Real Property.
(b) To Seller's knowledge, except as described on Schedule 5.12, no
-------------
surface impoundments or underground storage tanks are located in or on the
Real Property. Any such tanks have been duly registered with all
appropriate Governmental Authorities in accordance with all applicable
Legal Requirements.
(c) To the knowledge of Seller, Seller is in compliance in all
material respects with, and holds all permits, licenses and authorizations
required under, all Legal Requirements with respect to pollution or
protection of the environment, including Legal Requirements relating to
actual or threatened emissions, discharges, or releases of Hazardous
Substances into the ambient air, surface water, ground water,
26
land, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Substances. Seller has received no notice of, and currently Seller does not
have knowledge of any past or present condition, circumstance, activity,
practice or incident (including without limitation, the presence, use,
generation, manufacture, disposal, release or threatened release of any
Hazardous Substances from or on the Real Property) that could reasonably be
expected to interfere materially with, prevent continued substantial
compliance with, or result in any Losses pursuant to any Legal Requirement
with respect to pollution or protection of the environment or that is
reasonably likely to give rise to any material liability, based upon or
related to the processing, distribution, use, treatment, storage, disposal,
transport, or handling, or the emission, discharge, release, or threatened
release into the environment of any Hazardous Substance on, from or
attributable to the Real Property.
(d) For these purposes, the term "Hazardous Substances" includes any
substance heretofore or hereafter designated as "hazardous" or "toxic,"
including, without limitation, petroleum and petroleum related substances,
or having characteristics identified as "hazardous" or "toxic" under any
Legal Requirement including, without limitation, the Comprehensive
Environmental Response Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
-- ---
Section 6901, et seq., the Federal Water Pollution Control Act, 33 U.S.C.
-- ---
Section 1247, et seq., the Clean Air Act, 42 U.S.C. Section 2001, et seq.,
-- --- -- ---
and the Community Right to Know Act, 42 U.S.C. Section 11001, et seq., all
-- ---
as amended.
SECTION 5.13 FINANCIAL AND OPERATIONAL INFORMATION. Seller has delivered to
Buyer correct and complete copies of the Business's audited balance sheet and
related statements of operations, income, changes in financial position and
statements of income and cash flows for the years ended December 31, 1993, 1994
and 1995, and an unaudited balance sheet and statements of profit and loss and
cash flow of the Business for the six months ending June 30, 1996 (the
"Business's Financial Statements"). The Business's Financial Statements have
been prepared in the ordinary course of business, are based on the books and
records of the Seller, were prepared in accordance with GAAP consistently
applied and present fairly the financial condition and results of operations of
the Business as of the dates and for the periods indicated, with no material
differences between such financial statements and the financial records
maintained by Seller. Upon the reasonable request of Buyer setting forth a
description of the items requested, Seller will make available to Buyer, correct
and complete copies of all filings made to Governmental Authorities with respect
to the Business.
27
SECTION 5.14 NO ADVERSE CHANGE; OPERATIONS OF THE BUSINESS. Except for
conditions affecting the cable television industry as a whole, (i)) there has
been no material adverse change in, and no event has occurred which, so far as
reasonably can be foreseen, is likely, individually or in the aggregate to
result in any material adverse change in the Assets, the Business, liabilities,
financial condition, operations, earnings or business prospects of the Business;
(ii) the Assets or the operations of the Business have not been materially and
adversely affected as a result of any fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation, act of God, public force or
otherwise or any theft, damage, removal of property, destruction or other
casualty loss; (iii) Seller has not made any sale, assignment, lease or other
transfer of any of the properties relating to the Business other than in the
normal and ordinary course of business; (iv) Seller has continued the pricing
policies and has conducted the promotional, advertising and other business and
operational activities with respect to the Business (including, without
limitation, billing, collection, subscriber relations, and construction and
joint trenching activities) substantially and materially in the normal and
ordinary course of business consistent with past practices and cable television
industry practices; (v) there has been no amendment or termination of any
License, Franchise or any Contract; (vi) there has been no waiver or release of
any material right or claim against any third party relating to the Business;
(vi) there has been no material labor dispute or union activity with respect to
or by Seller's employees which affects the operation of the Business; and (vii)
there has been no agreement by Seller to take any of the actions described in
the preceding clauses (i) through (vi), except as contemplated by this
Agreement.
SECTION 5.15 TAXPAYER IDENTIFICATION NUMBER. Seller's U.S. Taxpayer
Identification Number is as set forth in the introductory paragraph of this
Agreement.
SECTION 5.16 INTANGIBLES. Seller neither uses nor holds any copyrights,
trademarks, trade names, service marks, service names, logos, licenses, permits
or other similar intangible property rights and interests ("Intangibles") in the
operations of the Business that does not incorporate the name "Valley Center,"
or variations thereof. In the operation of the Business, Seller is not aware
that it is infringing upon or otherwise acting adversely to the intangible
property rights and interests owned by any other Persons, and there is no claim
or action pending or, to Seller's knowledge, threatened with respect thereto.
Schedule 5.16 contains a true, correct and complete list of all Intangibles
- -------------
which are material to the operation of the Business.
SECTION 5.17 ACCOUNTS RECEIVABLE. The Accounts Receivable have not been
assigned to or for the benefit of any Person and are actual and bona fide
receivables representing obligations for
28
the total dollar amount thereof shown on the books of Seller, resulting from the
ordinary course of Seller's business. The Accounts Receivable are fully
collectible in accordance with their terms, subject to no offset or reduction of
any nature except for a reserve for uncollectible accounts consistent with the
reserve established by Seller in its most recent balance sheet delivered to
Buyer in accordance with Section 5.13 and statutory rights of offset which may
be asserted against amounts held as deposits.
SECTION 5.18 BONDS. Except as set forth on Schedule 5.18, there are no
-------------
franchise, construction, fidelity, performance, or other bonds posted by Seller
in connection with the Business.
SECTION 5.19 EXCLUSIVITY. Except for nationally distributed satellite
services and as set forth on Schedule 5.19, (i) Seller is currently the only
-------------
Person providing wireline or wireless cable television services or similar video
programming or related services within all or part of the geographic areas
served by the Systems; (ii) no Person other than Seller has been granted a
presently valid franchise or has a pending application for a franchise in the
communities or unincorporated areas presently served by the Systems; (iii)
Seller has no knowledge of any Person currently intending to apply for such a
franchise; (iv) no construction programs have been undertaken, or to Seller's
knowledge, are proposed or threatened to be undertaken, by any municipality or
other cable television, multichannel multipoint distribution systems or
multipoint distribution system provider or operator in any area served by the
Systems. Seller is not, nor is an Affiliate of Seller, a party to any agreement
restricting the ability of a third party to operate cable television systems in
the areas of the Systems.
SECTION 5.20 RIGHTS IN ASSETS. Except as set forth in Schedule 5.20, no
-------------
Person (including any Governmental Authority) has any right to acquire an
interest in any of the Systems or any of the Assets or the Business (including
any right of first refusal or similar right), other than rights of condemnation
or eminent domain afforded by law (none of which has been exercised and no
proceedings therefor have been commenced). Each Person that has such a right of
first refusal or similar right arising as a result of the proposed sale of the
Business as contemplated hereby has expressly declined to exercise such right
and has no further legal or contractual ability to hinder or prevent Seller's
performance in accordance with the terms of this Agreement.
SECTION 5.21 TRANSACTIONS WITH AFFILIATES AND EMPLOYEES. Except as set
forth in Schedule 5.21, there is no lease, sublease, indebtedness, contract,
-------------
agreement, understanding, or other arrangement of any kind entered into by
Seller with respect to the Business with any employee, Affiliate or Partner of
the Seller which will be an Assumed Obligation and Liability.
29
SECTION 5.22 DISCLAIMER OF WARRANTY. Seller shall not be liable for or
bound in any manner by, and Buyer has not relied upon, any express or implied,
oral or written information, warranty, guaranty, promise, statement, inducement
or representation pertaining to the Business (including projections as to income
from and expense of any System, or the uses which can be made of, or the value,
prospects or profitability of such System), except as is expressly set forth in
this Agreement, in the Schedules attached to this Agreement or in the Business's
Financial Statements.
SECTION 5.23 REAL PROPERTY. Schedule 2.1(b) sets forth a list and
--------------
description of all Leased Real Property, and is true, complete and accurate in
all respects. There is no Owned Real Property owned or used by Seller in
connection with the Business. Seller is holding, or shall hold at Closing, the
leasehold interests to all Leased Real Property, including any Leased Real
Property hereafter acquired, in each case free and clear of any Liens, except
for Permitted Liens. At the Closing, Seller shall have and shall transfer to
Buyer its leasehold interests in and to all Leased Real Property, free and clear
of any and all Liens (except for Permitted Liens). There are not pending or, to
the best of Seller's knowledge, threatened, any condemnation actions or special
assessments or any pending proceedings for changes in the zoning with respect to
such Real Property or any part thereof and Seller has not received any notice of
the desire of any public authority or other entity to take or use any Real
Property or any part thereof. To Seller's knowledge, there is no material defect
in any of the structures on the Real Property which would interfere with the
current use of such structures or Buyer's ability to utilize such structures in
substantially the same manner in which they are currently used by Seller. Each
parcel of Real Property has access to all public roads, utilities, and other
services necessary for the operation of the relevant System with respect to such
parcel and except for the absence of various easements, apartment access
agreements and/or commercial service agreements permitting Seller to locate
cable on real property owned by third parties which individually or in the
aggregate does not and will not have a material adverse effect on any of the
Assets, the operation of any System or the financial condition or business of
any System, Seller has complied with or otherwise resolved to the satisfaction
of the relevant Government Authority, all notices or orders to correct
violations of Legal Requirements issued by any Governmental Authority having
jurisdiction against or affecting any of the Real Property. All leases and
subleases pursuant to which any of the Real Property is occupied or used are set
forth on Schedule 2.1(b) and such leases and subleases are valid, subsisting,
--------------
binding and enforceable in accordance with their respective terms and there are
no existing defaults thereunder or events that with notice or lapse of time or
both would constitute defaults thereunder. Seller has not nor, to the best of
Seller's knowledge, has any other party to any contract,
30
lease or sublease relating to any Leased Real Property given or received notice
of termination, and, to the best of Seller's knowledge, subject to the receipt
of any Required Consents, the consummation of the transactions contemplated by
this Agreement will not result in any such termination. Subject to the receipt
of Required Consents, Seller is not nor will it be, as a result of the
transactions contemplated by this Agreement, with the giving of notice or the
passage of time or both, in breach of any provision of any contract, lease or
sublease relating to any Real Property. All easements, rights-of-way and other
rights which are necessary for Seller's current use of any Real Property are
valid and in full force and effect, and Seller has not received any notice with
respect to the termination or breach of any of such easements, rights-of-way or
other similar rights.
SECTION 5.24 EQUIPMENT. Schedule 2.1(a) contains a list of all Equipment
--------------
used or held for use by Seller in the operation of the Business. To the best of
Seller's knowledge, except as set forth on Schedule 5.24, all of the tools, test
-------------
equipment, office equipment and office furniture listed on Schedule 2.1(a) are
--------------
and will be at Closing in good operating condition and repair (reasonable wear
and tear excepted) and fit for the purpose they are being used.
SECTION 5.25 NO OTHER CONSENTS. Seller has obtained and is in material
compliance with all consents, approvals, authorizations, waivers, orders,
licenses, certificates, permits and franchises from, and has made all filings
with, any Governmental Authority and other Persons required for the operation of
the Systems and the Business as presently operated, all of which are in full
force and effect and enforceable in accordance with their respective terms and
comply with all applicable Legal Requirements, except for such failures which do
not or could not, individually or in the aggregate, be expected to have a
material adverse effect on the Systems or the Business. Except as set forth on
Schedule 5.25, no consent, authorization, approval, waiver, order, license,
- -------------
certificate or permit of or from or declaration or filing with any Governmental
Authority or other Person is necessary to preclude any cancellation, suspension,
termination or reformation of any Contract, other than such consents,
authorizations, approvals, waivers, orders, licenses, certificates or permits
which do not or could not, individually or in the aggregate, have a material
adverse effect on the Systems or the Business.
SECTION 5.26 NO UNDISCLOSED LIABILITIES. Except as and to the extent set
forth on Schedule 5.26, Seller does not have any liability or obligation (direct
-------------
or indirect, absolute, fixed, contingent or otherwise) arising out of the Assets
or conduct of the Business which was not reflected or reserved on the Business'
Financial Statements, and Seller has not incurred any such liability or
obligation since the last day of the last Business'
31
Financial Statement, other than in the ordinary course of business.
SECTION 5.27 LIABILITIES TO SUBSCRIBERS. There are no obligations or
liabilities to subscribers of the Systems except with respect to (i) prepayments
or deposits made by such subscribers or customers in the ordinary course of
business consistent with past practices as set forth in the Business's Financial
Statements or, since the last day of the monthly financial statements of the
Business delivered to Buyer and (ii) the obligation to supply services to
subscribers in the ordinary course of business in accordance with and pursuant
to the terms of the Licenses, Franchises and Contracts.
SECTION 5.28 RESTORATION. No property of any Person has been damaged,
destroyed, disturbed or removed in the process of construction or maintenance of
the Business, which has not been, or will not be, prior to the Closing,
repaired, restored or replaced, or as to which an adequate reserve has not been
established by Seller.
SECTION 5.29 CERTAIN PROGRAMMING ARRANGEMENTS AND RELATIONSHIPS. Except
as set forth on Schedule 5.29, Seller is not a party to any programming contract
-------------
with any Person providing for any exclusive arrangement with respect to the
provision of programming to Seller or the Systems. Except as set forth on
Schedule 5.29, neither Seller nor any of its Affiliates has any affiliation with
- -------------
(other than on a third party basis), equity interest in, profit participation
in, contractual right to acquire any such interest or participation, or any
other relationship with any Person that provides programming to the Systems.
Seller has not entered into any arrangement with any community groups or similar
third parties restricting or limiting the types of programming which may be
shown on the Systems.
SECTION 5.30 FINDERS; BROKERS AND ADVISORS. Except for the engagement of
Waller Capital Corporation, with respect to which Seller shall have sole
responsibility for the payment of all amounts owed, Seller has not employed any
financial advisory, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by its Agreement and Seller is not aware of any
claim or basis for any claim for payment of, or any unpaid liability to any
Person for any fees or commissions or like payments with respect to the
negotiations leading to this Agreement or the consummation of any of the
transactions contemplated by this Agreement.
SECTION 5.31 DISCLOSURE. No representation or warranty by Seller
contained in this Agreement (including the exhibits and schedules hereto), and
no statement contained in any document, certificate or other instrument
furnished to Buyer by or on behalf
32
of Seller (excluding drafts of any thereof) pursuant hereto contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. Except for matters affecting the cable television
industry generally, there is no fact known to Seller which could reasonably be
expected to materially adversely affect the Business, any of the Systems or the
Assets which has not been set forth in this Agreement.
ARTICLE VI
COVENANTS
---------
SECTION 6.1 CERTAIN AFFIRMATIVE COVENANTS OF SELLER REGARDING THE
SYSTEMS. Except as Buyer may otherwise consent in writing, between the date of
this Agreement and Closing, Seller shall:
(a) (i) operate the Business in the ordinary course of business
consistent with Seller's past practices; (ii) perform all of its
obligations under all of the Franchises, Licenses, and Contracts without
breach or default; (iii) operate the Business in substantial compliance
with all applicable Legal Requirements; (iv) continue the pricing,
marketing, advertising, promotion and other activities with respect to the
Business and each System (including without limitation billing, collection,
subscriber, and construction and joint trenching matters) substantially and
materially in the normal and ordinary course of business consistent with
Seller's past practices; and (v) use its Commercially Reasonable Best
Efforts to (A) preserve the current business organization of the Business
intact, including preserving existing relationships with Persons having
business with the Business, (B) keep available the services of its
employees providing services in connection with the Business, and (C)
maintain inventories of equipment and supplies at historic levels and
consistent with good industry practices;
(b) provide Buyer and its counsel, lenders, accountants, and other
representatives access to the Business, the employees of the Business, the
Leased Real Property, the other Assets and Seller's books and records
relating to the Business during normal business hours, provided that such
access shall not unreasonably disrupt the normal business operations of the
Business, and provided further, that no investigation by Buyer shall affect
or limit the scope of any representations and warranties of Seller herein
or otherwise limit liability for any breach of such representations and
warranties of Seller;
33
(c) as soon as practicable after the date of this Agreement, and at
its expense, make all filings, and exercise Commercially Reasonable Best
Efforts to obtain in writing as promptly as practicable all approvals,
authorizations and consents described on Schedule 5.3 and deliver to Buyer
------------
copies thereof promptly upon receiving them;
(d) promptly deliver to Buyer copies of any monthly and quarterly
financial statements for the Business and other reports with respect to the
operation of the Business regularly prepared by Seller at any time from the
date hereof until Closing;
(e) promptly inform Buyer in writing of any material adverse change
in the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of the Business or the Assets, including, without
limitation, (a) any damage, destruction, loss (whether or not covered by
insurance) or other event materially affecting any of the Assets, the
Systems or the Business, (b) any notice of violation, forfeiture or
complaint under any Licenses or Franchises, or (c) anything which, if not
corrected prior to the Closing Date, will prevent Seller from fulfilling
any condition to Closing described herein;
(f) continue to carry and maintain in full force and effect its
existing bonds and casualty and liability insurance with respect to the
Business through and including the Closing Date;
(g) maintain its books, records and accounts with respect to the
Assets and the operation of the Business in the usual, regular and ordinary
manner on a basis consistent with past practices and pay, consistent with
past practices, all accounts payable and other debts, liabilities and
obligations relating to the Business;
(h) maintain the Assets, including the plant and Equipment related
thereto, in accordance with past practices and in compliance with the terms
of this Agreement, fulfill installation requests in the normal course of
business, and make routine capital expenditures in accordance with past
practices and good industry practice which are necessary to maintain the
normal operations of the Systems and the Business, including, but not
limited to, completing ongoing line extensions, placing conduit or cable in
new developments, fulfilling installation requests; and continuing work on
existing construction projects;
(i) continue to implement its procedures for disconnection and
discontinuance of service to System
34
subscribers whose accounts are delinquent in accordance with those in
effect on the date of this Agreement;
(j) report and write off Accounts Receivable in accordance with past
practices;
(k) withhold and pay when due all Taxes relating to employees of the
Business, the Assets, and/or the System;
(l) maintain service quality of the Systems at a level at least
consistent with past practices;
(m) file with the FCC all reports required to be filed under
applicable FCC rules and regulations, and otherwise comply with all Legal
Requirements with respect to the Business; and
(n) effect and facilitate the transition of the operation of the
Systems from Seller to Buyer as contemplated by this Agreement.
SECTION 6.2 CERTAIN NEGATIVE COVENANTS OF SELLER. Except as Buyer may
otherwise consent in writing, which consent may be withheld at Buyer's sole
discretion, or as otherwise contemplated by this Agreement, between the date
hereof and Closing, Seller shall not do or cause to be done any of the
following:
(a) enter into, modify, terminate, renew, suspend, or abrogate any
Franchise, License or material Contract other than in the ordinary course
of business, provided that for purposes of this clause (a) a material
Contract shall mean a Contract pursuant to which Seller would incur either
monetary liabilities which, after the Closing Date, would exceed $5,000
individually or liabilities in the aggregate in excess of $15,000 or a
material non-monetary obligation;
(b) enter into, modify, or renew any retransmission consent agreement
other than an agreement which contains materially the same terms as such
retransmission consent agreement which is indicated on Schedule 2.1(e)
---------------
contains (after offset of any cost savings to the System if the cost per
EBU per month for the carriage of Prime Sports Network pursuant to Section
6.5 hereof shall be less than $1.40), provided that if Buyer does not
participate in the negotiations of any new, modified or renewed
retransmission agreement or if Buyer does not approve the terms of any such
agreement, Buyer has the right to terminate this Agreement by written
notice to the Seller. Seller shall not be entitled to recover any damages
from the Buyer in connection with a termination pursuant to this Section
6.2(b);
35
(c) sell, assign, lease or otherwise dispose of any of the Assets,
unless such Assets are consumed or disposed of in the ordinary course of
business or in conjunction with the acquisition of replacement property of
equivalent kind and value, or are no longer used or useful in the business
or operation of the Systems;
(d) create, assume, or permit to exist any Lien upon any Asset other
than Permitted Liens;
(e) except as provided elsewhere herein (i) change customer rates
for Basic Service or charges for remotes or installations, (ii) implement
any tiering, re-tiering or repackaging of cable television programming
offered by such System or make any other change in the programming services
or channel positions (including the addition or deletion of any channels)
of such System, or (iii) take any other action that would subject the
rates for any tier of service to regulation;
(f) seek amendments or modifications to existing Licenses,
Franchises, or Contracts or accept or agree to accede to any modification
or amendment to, or any condition to the transfer of, any of the Licenses,
Franchises, Contracts or Real Property that may adversely affect Buyer;
(g) enter into any transaction or permit the taking of any action or
omit taking any action that would result in any of Seller's representations
and warranties contained in this Agreement not being true and correct when
made or at Closing;
(h) increase the number of employees in the Business, increase the
compensation or change any benefits available to employees of Seller who
work in the Business except as required pursuant to the existing written
agreements indicated on Schedule 5.7 or as otherwise expressly described on
------------
Schedule 5.7; and
------------
(i) except as set forth in Section 6.5(b), not implement any new
marketing program, policy or practice, or implement any rate change,
retiering or repackaging.
SECTION 6.3 FCC APPROVAL; FORMS 394.
(a) Promptly after the execution of this Agreement, but no later than
the twentieth (20th) Business Day after the date hereof, Seller shall, at
its sole expense, make application to the FCC for the consent and approval
of the FCC to the transfer of the ownership and operation of all FCC
Licenses of the Systems from Seller to Buyer.
36
(b) If not previously submitted, on or prior to the expiration of the
fifteenth (15th) Business Day after the date of this Agreement, Seller and
Buyer shall, each at its own expense, prepare and file properly prepared
Applications for Franchise Authority consent to Assignment or Transfer of
Control of Cable Television Franchise FCC 394 ("Forms 394") with the local
Governmental Authorities that have issued franchises to Seller, and shall
file all additional information required by such franchises or applicable
local Legal Requirements or that the Governmental Authorities deem
necessary or appropriate in connection with their consideration of the
request of Seller or Buyer that such authority approve of the transfer of
the Franchises to Buyer.
SECTION 6.4 RELEASE OF CERTAIN LIENS, LITIGATION AND OTHER OBLIGATIONS.
Seller shall take all necessary actions, including without limitation the
discharging or other satisfaction of related claims and obligations, to cause
the termination, release, removal or satisfaction on or prior to the Closing
Date, of (i) all designated Permitted Liens listed on Schedule 5.4, and (ii)
------------
all other outstanding liabilities and obligations relating to the Business other
than subscriber and customer deposits and prepaid subscriber and customer fees,
in each case without incurring any obligations on the part of Buyer or otherwise
adversely affecting Buyer.
SECTION 6.5 CERTAIN OTHER COVENANTS OF SELLER. Seller shall use
Commercially Reasonable Best Efforts to make arrangements for carriage by the
Systems of Prime Sports Network which arrangements shall be, at Sellers sole
option, either by satellite, or the San Diego County Feed by microwave and
cable, in either case at a total cost not to exceed $1.40 per EBU per month for
all facilities needed for signal delivery.
SECTION 6.6 EMPLOYEE MATTERS.
(a) Seller shall terminate all of its employees who primarily perform
services with respect to the operations of the Systems immediately prior to
Closing. Seller shall be responsible for and shall cause to be discharged
and satisfied in full all amounts owed to any employee of Seller through
the Closing Date, including wages, salaries, accrued vacation, any
employment, incentive, compensation or bonus agreements, or other benefits
or payments on account of termination, and shall indemnify and hold Buyer
harmless from any Losses thereunder. Seller shall retain liability for all
workers' compensation claims made by employees of the Business and the
Systems filed on or before the Closing Date. Seller shall also retain
liability for all workers' compensation claims filed by such employees
after the Closing Date to the extent that such claims relate to any
compensable injuries incurred prior to the Closing Date.
37
(b) Buyer shall not assume or have any liability under any agreement
with any individual related to such individual's employment in the Business
at or prior to the Closing Date or bonus, incentive or other employee
benefit plans maintained by Seller, including, without limitation, phantom
stock plans, stock incentive plans, opportunity pay plans, long term cash
and incentive compensation plans, covering persons employed by or who at
any time prior to the Closing Date were employed in the Business. Seller
shall take such actions as are necessary to ensure the preservation and
delivery of all benefits accrued through the Closing Date, whether payable
presently or at some future date, to employees of the Business in respect
of any such bonus or incentive plans. Seller shall be responsible for and
shall pay all amounts payable to all of its employees in connection with
the termination of employment of any such employee on or before the Closing
Date in connection with the transactions contemplated hereby, or otherwise,
and also shall be responsible for all health insurance, vacation pay and
other benefits payable to such employees for all periods prior to and
including the Closing Date.
(c) Seller shall be responsible for compliance with the notice and
continuation coverage requirements of Section 4980B of the Code that arise
with respect to the former employees of Seller and the Affected Employees
(as defined in ERISA), on account of the transactions contemplated by this
Agreement, if any.
(d) Seller's long term disability plan shall be responsible for
payment of any and all covered benefits, payable with respect to employment
on or before the Closing Date and for thirty days thereafter, regardless of
whether payment is required to be made after the Closing Date, for: (i)
any individual who is currently receiving such benefits as of the Closing
Date, (ii) any individual who becomes disabled prior to the Closing Date
and who remains disabled for the length of any qualifying disability
period, and (iii) any individual described in (i) and (ii) above whose
disability ceases after the Closing Date and who subsequently becomes
disabled prior to the expiration of ninety (90) days of active employment
with Buyer, where such subsequent disability is a continuation of such
prior disability for which benefits were due under Seller's or the System's
welfare plan.
(e) Except as otherwise provided in this Agreement, Seller shall
retain, and Buyer shall not assume, any liabilities or obligations of
Seller or any of its Affiliates to employees with respect to claims
incurred and employment prior to the Closing Date.
38
(f) Prior to or as of the Closing Date, Seller shall have made
arrangements reasonably satisfactory to Buyer for termination of all
deferred compensation, pension, 401 (k), or other similar employee
benefits plans, which arrangements shall not create any liability or
obligation for Buyer after Closing.
(g) Buyer may offer (but is not obligated to offer) employment to any
or all of the employees of Seller who primarily perform services with
respect to the operations of the Systems as of the Closing Date. Buyer
shall recognize the term of service with Seller of any employee of Seller
hired by Buyer in determining such employee's vacation benefits under
Buyer's vacation plan. Buyer also shall permit any former employee of
Seller hired by Buyer to participate in Buyer's group health plan without
imposing any waiting periods so long as such employee was covered by
Seller's health plan immediately prior to the Closing. To the extent that
accrued vacation time is included in the Current Items Amount, Buyer either
shall permit any former employee of Seller who is hired by Buyer to take
any such accrued vacation at whatever times the employee would have been
entitled to take such vacation had the employee not left the employ of
Seller, or shall pay such employee for any such accrued vacation time that
such employee is not able to take under Buyer's vacation plan. Nothing in
this statement of intent shall be construed to create any third party
beneficiary rights in favor of any person not a party to this Agreement or
to constitute an offer of employment, employment agreement or condition of
employment for any of the employees of the Business.
SECTION 6.7 WARN ACT. Seller shall give all notices required to be given
under the Federal Workers Adjustment and Retraining Notification Act ("WARN
Act") by any party related to or as a result of the transactions contemplated by
this Agreement, and shall indemnify and hold Buyer harmless for any liability
resulting from the failure of Seller and the Systems to do so. On the Closing
Date, Seller shall deliver to Buyer a written description of any "employment
loss," as defined in the WARN Act, which occurs at any time within the ninety
(90) days prior to the Closing Date. For purposes of the WARN Act and this
Section 6.7, "Closing Date" shall mean the "effective date" of the transactions
contemplated by this Agreement, as defined in the WARN Act.
SECTION 6.8 EXCLUSIVITY. Between the date of this Agreement and the
earlier of the termination of this Agreement in accordance with its terms and
the Closing Date, Seller shall not, and shall cause its Partners, officers,
directors, employees, agents and representatives (including, without limitation,
Waller Capital Corporation, any investment banker, attorney or accountant
retained by Seller) not to, initiate, solicit or encourage,
39
directly or indirectly, any inquiries or the making of any proposal with respect
to the Business, engage in any negotiations concerning, or provide to any other
Person any information or data relating to the Business, any of the Systems, the
Assets, or Seller for the purposes of, or have any discussions with any Person
relating to, or otherwise cooperate in any way with or assist or participate in,
facilitate or encourage, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any effort or attempt by
any other Person to seek or effect a sale of all or substantially all of the
Assets, the Systems or the Business.
SECTION 6.9 TITLE INSURANCE. [Intentionally Omitted].
SECTION 6.10 CONFIDENTIALITY. Any non-public information that either
party ("Recipient Party") may obtain from the other ("Disclosing Party") in
connection with this Agreement with respect to the Disclosing Party or the
Systems shall be confidential and, unless and until Closing shall occur,
Recipient Party shall not disclose any such information to any third party
(other than its directors, officers, Partners and employees, and representatives
of its advisers and lenders whose knowledge thereof is necessary in order to
facilitate the consummation of the transactions contemplated hereby) or use such
information to the detriment of Disclosing Party; provided that (a) Recipient
may use and disclose any such information once it has been publicly disclosed
(other than by Recipient Party in breach of its obligations under this Section)
or that rightfully has come into the possession of Recipient Party (other than
from Disclosing Party), and (b) to the extent that Recipient Party may become
compelled by Legal Requirements to disclose any of such information, Recipient
Party may disclose such information if it shall have made all reasonable
efforts, and shall have afforded Disclosing Party the opportunity, to obtain an
appropriate protective order, or other satisfactory assurance of confidential
treatment, for the information compelled to be disclosed. If this Agreement is
terminated, Recipient Party shall use all reasonable efforts to cause to be
delivered to Disclosing Party, and retain no copies of, any documents, work
papers and other materials obtained by or on the behalf of Recipient Party from
Disclosing Party, whether so obtained before or after the execution hereof. The
rights and obligations of Buyer and Seller under this Section shall survive
Closing or the termination of this Agreement. Notwithstanding the foregoing, the
following will not constitute a part of the information for the purposes of this
Section:
(i) information that a party can show was known by the Recipient
Party prior to the disclosure thereof by the Disclosing Party;
(ii) information that is or becomes generally available to the public
other than as a result of a disclosure directly
40
or indirectly by the Recipient Party in breach of this Section 6.10;
(iii) information that is independently developed by the Recipient
Party; or
(iv) information that is or becomes available to the Recipient Party
on a non-confidential basis from a source other than the Disclosing Party,
provided that such source is not known by the Recipient Party to be bound
by any obligation or confidentiality in relation thereto.
SECTION 6.11 SUPPLEMENTS TO SCHEDULES. Each of Seller and Buyer shall,
from time to time prior to Closing, supplement the Schedules to this Agreement
with additional information that, if existing or known to it on the date of this
Agreement, would have been required to be included in such Schedules. For
purposes of determining the satisfaction of any of the conditions to the
obligations of Buyer and Seller in Sections 7.1 and 7.2 and the liability of
Seller or of Buyer following Closing for breaches of its representations and
warranties under this Agreement, the Schedules to this Agreement shall be deemed
to include only (a) the information contained therein on the date of this
Agreement and (b) information added to the Schedules by written supplements to
such Schedules delivered prior to Closing by the party making such amendment
that (i) are accepted in writing by the other party or (ii) reflect actions
expressly permitted by this Agreement to be taken prior to Closing.
Notwithstanding any information contained in the Schedules, all liabilities and
obligations arising out of or relating to the operation of the Systems prior to
the Closing Date shall be the responsibility of the Seller.
SECTION 6.12 NOTIFICATION OF CERTAIN MATTERS. Each party will promptly
notify the other party in writing of any fact, event, circumstance, action or
omission (i) that, if known at the date of this Agreement, would have been
required to be disclosed in or pursuant to this Agreement, or (ii) the existence
or occurrence of which would cause any of such party's representations or
warranties under this Agreement not to be true in any material respect, and with
respect to clause (ii) the party responsible thereof or pursuant to this
Agreement shall use commercially reasonable best efforts to remedy the same.
SECTION 6.13 COMMERCIALLY REASONABLE BEST EFFORTS. Each party shall use
Commercially Reasonable Best Efforts to take all steps within its power, and
will cooperate with the other party, to cause to be fulfilled those of the
conditions to the other party's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions, and to
execute and deliver such instruments and take such other commercially reasonable
best actions as may be necessary to carry out the
41
intent of this Agreement and consummate the transactions contemplated hereby.
SECTION 6.14 CLOSING DATE FINANCIAL STATEMENTS. Seller shall promptly
deliver to Buyer after Closing a true and complete copy of the unaudited balance
sheet for the Business as of the Closing Date and the unaudited statements of
profit and loss and cash flow of the Business for the period then ended, in each
case the report format shall be that in which the Business's Financial
Statements are presented. Not later than ninety (90) days after December 31,
1996, Seller shall deliver to Buyer an audited balance sheet and statements of
income and cash flow of the Business for the period commencing January 1, 1996
and ending on the Closing Date.
SECTION 6.15 CUSTOMER NOTIFICATION. As soon as reasonably practicable
after execution of this Agreement and in accordance with Section 12.9, the
parties shall jointly announce to the general public the transactions
contemplated hereby. All reasonable additional costs and expenses actually
incurred and related to mail notification of subscribers shall be borne and paid
by Seller. Other means of notifying subscribers may be employed by either party,
at the expense of the initiating party, but in no event shall any notification
be initiated without the prior consent of the other party (which consent shall
not be unreasonably withheld).
SECTION 6.16 CONSENTS.
(a) Seller will use Commercially Reasonable Best Efforts to obtain,
at its own cost and expense as soon as practicable, the Required Consents,
in form and substance reasonably satisfactory to Buyer. Seller and Buyer
will use Commercially Reasonable Best Efforts to obtain, as soon as
practicable, the Consents of Governmental Authorities; provided, that
Commercially Reasonable Best Efforts for this purpose shall not require
Buyer to agree to any change in any Contract or as a condition to obtaining
any Consent, the effect of which is to make such Contract more burdensome
to Buyer.
(b) Following the Closing, Buyer will deliver promptly to the
Governmental Authorities for those Governmental Permits transferred at
Closing all bonds, letters of credit, indemnity agreements, or certificates
of deposit required by such Governmental Authorities and will use its
Commercially Reasonable Best Efforts to cooperate with Seller to obtain a
release by such Governmental Authorities of Seller's bonds, letters of
credit, indemnity agreements, and certificates of deposit.
42
SECTION 6.17 RISK OF LOSS; CONDEMNATION.
(a) Seller will bear the risk of any loss or damage to the Assets
resulting from fire, theft or other casualty at all times prior to the
Closing. If any such loss or damage is so substantial as to prevent normal
operation of any portion of the Systems within five days after the
occurrence of the event resulting in such loss or damage, Seller shall
immediately notify Buyer of that fact and Buyer, at any time within ten
days after receipt of such notice, may elect by written notice to Seller
either (i) to waive such defect and proceed toward consummation of the
acquisition of the Assets in accordance with this Agreement or (ii) to
terminate this Agreement. If Buyer elects to consummate the acquisition of
the Assets notwithstanding such loss or damage and does so, at Buyer's
election (i) there will be an adjustment in the aggregate consideration to
be paid for the Assets under Article II on account of such loss or damage
and Seller shall be entitled to all insurance proceeds paid as a result of
such loss or damage or (ii) all insurance proceeds paid or payable as a
result of the occurrence of the event causing such loss or damage will be
delivered by Seller to Buyer at the Closing or the rights to such proceeds
will be assigned by Seller to Buyer at the Closing if not yet paid over to
Seller.
(b) If, prior to Closing, any portion of the System is taken or
condemned as a result of the exercise of the power of eminent domain, or if
a Governmental Authority having such power informs Seller or Buyer that it
intends to condemn any portion of any System (such event being referred to
herein, in either case, as a "Taking"), then Buyer may terminate this
Agreement. If Buyer does not so elect to terminate this Agreement then (i)
if the Closing occurs, Buyer shall have the sole right, in the name of
Seller, if Buyer so elects, to negotiate for, claim, contest and (if the
Closing occurs) receive all damages with respect to the Taking, (ii) Seller
shall be relieved of its obligation to convey to Buyer the Asset or
interests that are the subject of the Taking and (iii) at the Closing
Seller shall assign to Buyer all of Seller's rights (including the right to
receive payment of damages) with respect to such Taking and shall pay to
Buyer all damages previously paid to Seller with respect to the Taking.
SECTION 6.18 [INTENTIONALLY OMITTED].
SECTION 6.19 UCC SEARCHES. Seller shall reimburse Buyer, no later than
ten (10) Business Days following receipt of the invoice therefor from Buyer, for
the actual costs (other than attorney review in connection therewith) incurred
by Buyer in obtaining Uniform Commercial Code lien, judgment and tax searches on
the
43
Assets, the Seller and the general partner of Seller prior to Closing and a
bringdown certificate with respect thereto as of the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT
--------------------
SECTION 7.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligations of Buyer
to consummate the transactions contemplated by this Agreement shall be subject
to the following conditions, any one or more of which may be waived by Buyer, in
its sole discretion.
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Seller in this Agreement shall be true and accurate in
all material respects at and as of Closing with the same effect as if made
at and as of Closing, except for changes contemplated under this Agreement
and except for representations and warranties made only at and as of a
certain date.
(b) Performance of Agreements. Seller shall have performed all
-------------------------
obligations and agreements and complied with all covenants in this
Agreement to be performed and complied with by it at or before Closing, and
no event which would constitute a breach of the terms of this Agreement on
the part of Seller shall have occurred or be continuing. Notwithstanding
the generality of the preceding sentence, Seller shall have strictly
performed its obligations and agreements and strictly complied with its
covenants set forth in Section 6.5.
(c) Officer's Certificate. Buyer shall have received a certificate
---------------------
executed by an executive officer of the general partner of Seller, dated as
of Closing, reasonably satisfactory in form and substance to Buyer,
certifying that the conditions specified in Sections 7.1(a) and (b) have
been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement, and no
-----------------
Judgment shall have been entered and not vacated by any Governmental
Authority of competent jurisdiction in any Litigation relating to any Legal
Requirement, that enjoins, restrains, makes illegal, or prohibits
consummation of the transactions contemplated by this Agreement, and there
shall be no Litigation pending or threatened that seeks or that, if
successful, would have the effect of any of the foregoing.
(e) Opinion of Seller's Counsel. Buyer shall have received an
---------------------------
opinion of Krys Boyle Freedman & Scott, P.C.,
44
counsel to Seller, dated as of Closing, substantially in the form of
Exhibit 7.1(e).
-------------
(f) Opinion of Seller's FCC Counsel. Buyer shall have received an
-------------------------------
opinion of Cole, Raywid & Braverman, special communications counsel to
Seller, dated as of Closing, substantially in the form of Exhibit 7.1(f).
-------------
(g) Consents. Buyer shall have received evidence, in form and
--------
substance reasonably satisfactory to it, that all consents, approvals and
authorizations identified on Schedule 5.3 as Required Consents have been
------------
obtained and remain in full force and effect; provided, however, that to
the extent such Required Consents relate to consents by the FCC to
assignments of Licenses, this condition shall be deemed met if such
consents to assignment have been requested prior to Closing and Buyer is
entitled to operate the Systems under such Licenses pursuant to conditional
use authorizations from the FCC until the FCC's consent is received.
(h) Noncompetition Agreement. Seller, R. Michael Kruger, Jerry
------------------------
Schwartz and Kathy Marie Schwartz shall each have delivered to Buyer the
Noncompetition Agreement duly executed by Seller, R. Michael Kruger, Jerry
Schwartz and Kathy Marie Schwartz, respectively.
(i) Liens, Litigation and Other Obligations. Seller shall have
---------------------------------------
delivered evidence satisfactory to Buyer that all Liens, Litigation and
other obligations or liabilities of the Systems that are to be terminated,
released, removed, satisfied or waived prior to or as of the Closing Date
under Section 6.4 have been so terminated, released, removed, satisfied or
waived, or will be terminated, released, removed, satisfied or waived
simultaneously with the Closing.
(j) No Material Adverse Change. There shall not have been any
--------------------------
material adverse change in the Assets, liabilities, financial condition,
earnings or business prospects of the Systems or the Business, other than
any change due to an event (other than an event described in the following
proviso) that affects the cable television industry in general; provided,
however, that for purposes of this Agreement, the actual regulation by any
Governmental Authority of rates, charges or fees charged to the subscribers
of any System shall be deemed to be a material adverse change in the
financial condition and business prospects of such System.
(k) Systems. The Systems shall include not less than 2,800 homes
-------
passed by energized cable (i.e., homes (including apartments and commercial
----
units) for which cable service may be provided solely by the installation
of a drop line without
45
addition of trunk or feeder cable or electronic components), and not more
than 135 miles of energized cable plant, of which not more than 60 miles
are of underground construction.
(l) Transfer Documents. Seller shall have delivered to Buyer
------------------
customary bills of sale, general warranty deeds, assignments and other
instruments of transfer sufficient to convey good and marketable title to
the Assets in accordance with the terms of this Agreement and otherwise in
form and substance reasonably satisfactory to Buyer and its counsel.
(m) Other Documents. All other documents and certificates and other
---------------
items required to be delivered under this Agreement by Seller to Buyer at
or prior to Closing shall have been delivered or shall be tendered at the
Closing.
(n) Material Adverse Change. The financial institutions providing
-----------------------
financing to Buyer to consummate the transactions contemplated by this
Agreement shall not have exercised the Material Adverse Change clause under
the financing commitment letters provided to Buyer.
(o) No franchising authority, other than San Diego County, shall have
certified with the FCC to regulate the Systems under the Cable Act or the
1992 Telecommunications Act.
(p) The franchising authority for San Diego County shall not have
obtained the consent of the FCC to regulate the Systems under the Cable Act
or the 1992 Telecommunications Act.
(q) Seller shall have made arrangements for carriage by the Systems
of Prime Sports Network either by satellite or the San Diego County feed by
microwave and cable, in either case at a total cost not to exceed $1.40 per
EBU per month for all facilities needed for signal delivery.
SECTION 7.2 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of Seller
to consummate the transactions contemplated by this Agreement shall be subject
to the following conditions, any one or more of which may be waived by Seller,
in its sole discretion:
(a) Accuracy of Representations. The representations and warranties
---------------------------
of Buyer in this Agreement shall be true and accurate in all material
respects at and as of Closing with the same effect as if made at and as of
Closing except for changes contemplated under this Agreement and except for
representations and warranties made only at and as of a certain date.
46
(b) Performance of Agreements. Buyer shall have performed in all
-------------------------
material respects all obligations and agreements and complied in all
material respects with all covenants in this Agreement to be performed and
complied with by it at or before Closing, and no event that would
constitute a material breach of the terms of this Agreement on the part of
Buyer shall have occurred or be continuing.
(c) Officer's Certificate. Seller shall have received a certificate
---------------------
executed by an executive officer of Buyer, dated as of Closing, reasonably
satisfactory in form and substance to Seller, certifying that the
conditions specified in Sections 7.2(a) and (b) have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement, and no
-----------------
Judgment shall have been entered and not vacated by any Governmental
Authority of competent jurisdiction in any Litigation relating to any Legal
Requirement, that enjoins, restrains, makes illegal, or prohibits
consummation of the transactions contemplated hereby, and there shall be no
Litigation pending or threatened that seeks or that, if successful, would
have the effect of any of the foregoing.
(e) Opinion of Buyer's Counsel. Seller shall have received an
--------------------------
opinion of Cooperman Levitt Winikoff Lester & Newman, P.C., general counsel
to Buyer, dated as of Closing, substantially in the form of Exhibit 7.2(e).
--------------
(f) Other Documents. All other documents certificates, and other
---------------
items required to be delivered under this Agreement by Buyer to Seller at
or prior to Closing shall have been delivered or shall be tendered at the
Closing.
ARTICLE VIII
CLOSING
-------
SECTION 8.1 CLOSING; TIME AND PLACE.
(a) Subject to the terms and conditions of this Agreement, the
closing of the transactions contemplated by this Agreement ("the Closing")
shall be held at the offices of Cooperman Levitt Winikoff Lester & Newman,
P.C., 800 Third Avenue, 30th Floor, New York, New York 10022, at 10:00
a.m., local time, on November 30, 1996, or at such earlier or later date as
may be agreed upon by Seller and Buyer (the "Closing Date"). Seller and
Buyer shall, without modifying or expanding their obligations hereunder,
exercise their diligent, good faith efforts to cause the Closing to occur
as quickly as reasonably possible.
47
(b) If at any time prior to the scheduled Closing Date, all of the
conditions contained in Article VII have been met or waived, Buyer may give
notice to Seller of the Closing. Such notice shall state a date and time,
not less than ten Business Days from the date of such notice, for Closing
to occur.
(c) If on November 30, 1996, all of the conditions contained in
Article VII have not been met or waived, then the Closing shall be deferred
until all such conditions have been met or waived but not to a date later
that December 31, 1996. Upon the last of the conditions being so met or
waived, Seller or Buyer may give notice to the other of the Closing, which
notice shall state a date and time, not less than ten Business Days from
the date of such notice, for the Closing to occur.
SECTION 8.2 SELLER'S OBLIGATIONS. At Closing, Seller shall deliver or
cause to be delivered to Buyer the following:
(a) Bill of Sale. Executed counterparts of a Bill of Sale and
------------
Assignment and Assumption Agreement relating to the Assets in the form of
Exhibit 8.2(a) (the "Bill of Sale");
-------------
(b) Officer's Certificate. The certificate described in Section
---------------------
7.1(c);
(c) Evidence of Authorizing Actions. Evidence reasonably satisfactory
-------------------------------
to Buyer that Seller has taken all action necessary to authorize the
execution of this Agreement and the consummation of the transactions
contemplated hereby;
(d) Opinion of Seller's Counsel. The opinion described in Section
---------------------------
7.1(e);
(e) Opinion of Seller's FCC Counsel. The opinion described in Section
-------------------------------
7.1(f);
(f) Vehicle Titles. Title certificates to all vehicles that
--------------
constitute Assets, endorsed for transfer of title to Buyer, and any
separate bills of sale and other vehicle title transfer documentation
required by the laws of the State of Arizona or such county or other state
in which such vehicles are titled;
(g) Documents and Records. All (i) existing blueprints, schematics,
---------------------
working drawings, plans, specifications, projections, statistics,
engineering records, original plant records, construction, and as-built
maps relating to the Systems, (ii) customer lists, files and records used
by the Seller in connection with the operation of the Systems, including
lists of all pending subscriber
48
hook-ups, disconnects and all repair orders, supply orders and any other
records pertinent to the operation of the Systems, and (iii) personnel
files and records relating to the employees of the Systems who have
accepted Buyer's offer of employment after the Closing Date. Delivery of
the foregoing shall be deemed made to the extent such lists, files, and
records are located as of the Closing Date at any of the offices included
in the Owned Real Property or the Leased Real Property;
(h) Noncompetition Agreements. The Noncompetition Agreements, duly
-------------------------
executed by each of Seller, R. Michael Kruger, Jerry Schwartz and Kathy
Marie Schwartz;
(i) Incumbency. An incumbency certificate of Seller and the general
----------
partner of Seller evidencing the authority of the entitles and individuals
who are signatories to this Agreement and each other Transaction Documents
to which Seller it is a party; and
(j) Other. Such other documents and instruments, including, but not
-----
limited to, such documents or instruments evidencing satisfaction of the
conditions set forth in Section 7.1(i) hereof, as shall be necessary to
effect the intent of this Agreement and consummate the transactions
contemplated hereby.
SECTION 8.3 BUYER'S OBLIGATIONS. At Closing, Buyer shall deliver or cause
to be delivered to Seller the following:
(a) Purchase Price and Current Items Amount. The Purchase Price plus
---------------------------------------
or minus the Current Items Amount, the Subscriber Adjustment and Escrow, as
determined in accordance with the provisions of Section 2.7(a);
(b) Bill of Sale. Executed counterparts of the Bill of Sale in the
------------
form of Exhibit 8.2(a);
(c) Officer's Certificate. The certificate described in Section
---------------------
7.2(c);
(d) Evidence of Authorizations. Evidence reasonably satisfactory to
--------------------------
Seller that Buyer has taken all action necessary to authorize the execution
of this Agreement and the consummation of the transactions contemplated
hereby;
(e) Incumbency. An incumbency certificate of Buyer evidencing the
----------
authority of the entities and individuals who are signatories to this
Agreement and each other Transaction Documents to which Buyer is a party;
49
(f) Opinion of Buyer's Counsel. The opinion described in Section
--------------------------
7.2(e); and
(g) Other. Such other documents and instruments as shall be necessary
-----
to effect the intent of this Agreement and consummate the transactions
contemplated hereby.
ARTICLE IX
TERMINATION
-----------
SECTION 9.1 TERMINATION EVENTS. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned as follows:
(a) At any time, by the mutual agreement of Buyer and Seller;
(b) By either Buyer or Seller upon written notice to the other, if
the other is in material breach or default of its respective covenants,
agreements, or other obligations herein, or if any of its representations
herein are not true and accurate in all material respects when made or when
otherwise required by this Agreement to be true and accurate, and such
breach, default or failure is not cured by the earlier of (i) thirty (30)
days of receipt of notice that such breach, default or failure exists or
has occurred, or (ii) December 31, 1996;
(c) By either Buyer or Seller upon written notice to the other, if
any conditions to its obligations set forth in Sections 7.1 and 7.2,
respectively, shall not have been satisfied on or before the Closing Date
for any reason other than a breach or default by such party of its
respective covenants, agreements, or other obligations hereunder, or any of
its representations herein not being true and accurate when made or when
otherwise required by this Agreement to be true and accurate; or
(d) As otherwise provided herein.
SECTION 9.2 EFFECT OF TERMINATION. If this Agreement shall be terminated
pursuant to Section 9.1, all obligations of the parties hereunder shall
terminate, except for the obligations set forth in Sections 6.10, 10.1, 10.2,
12.1, and 12.8. Termination of this Agreement pursuant to Section 9.1(b) shall
not limit or impair any remedies that Buyer or Seller may have with respect to a
breach or default by the other of its covenants, agreements or obligations
hereunder.
SECTION 9.3 FINANCING CONTINGENCY. Buyer shall have the right to terminate
this Agreement without any monetary penalty to
50
Buyer (other than the forfeiture by Buyer of the Earnest Money Payment paid to
Seller pursuant to Section 2.4(b) hereof) upon the occurrence of either of the
following events: (a) Buyer shall provide written notice to Seller on or before
the later of forty-five (45) Business Days from the date hereof or September 15,
1996 that Buyer is not able to obtain sufficient financing to consummate the
purchase and sale contemplated by this Agreement, or (b) Buyer shall provide
written notice to Seller at any time before the Closing Date that Buyer has
received written notification from its senior lender for this transaction that
there has been a material adverse change in either the Systems or the cable
television business generally that is sufficient to cause such lender to refuse
to finance Buyer's purchase of the Systems from Seller (in which event a copy of
such written notification from Buyer's lender shall accompany Buyer's written
notification to Seller).
ARTICLE X
REMEDIES
--------
SECTION 10.1 DEFAULT BY BUYER. If Buyer shall default in the performance
of its obligations under this Agreement in any material respect or if, as a
result of Buyer's breach of its obligations pursuant to this Agreement, the
conditions precedent to Seller's obligation to close specified in Section 7.2
are not satisfied, and Seller shall not then be in default in the performance of
its obligations hereunder in any material respect, Seller shall be entitled, as
its sole remedy, to terminate this Agreement by written notice to Buyer and to
recover its actual out-of-pocket costs and expenses (including reasonable
attorneys and other professional fees) incurred in connection with the execution
of this Agreement and the satisfaction of its obligations hereunder, but not
including consequential, punitive or exemplary damages, or any other damages.
Seller agrees that such damages shall not exceed the amount of the Escrow
Amount.
SECTION 10.2 DEFAULT BY SELLER. If Seller shall default in the performance
of its obligations under this Agreement in any material respect or if, as a
result of Seller's breach of its obligations pursuant to this Agreement, the
conditions precedent to Buyer's obligation to close specified in Section 7.1 are
not satisfied, and Buyer shall not then be in default in the performance of its
obligations hereunder in any material respect, Buyer shall be entitled, at
Buyer's sole option, either:
(a) to require Seller to consummate and specifically perform the sale
in accordance with the terms of this Agreement, if necessary through
injunction or other court order or process, and to recover any damages,
costs and expenses incurred by Buyer in connection therewith; or
51
(b) to terminate this Agreement by written notice to Seller, and to
recover its out-of-pocket costs and expenses (including reasonable
attorneys and other professional fees) in connection with the execution of
this Agreement and the satisfaction of its obligations hereunder, but not
including consequential, punitive or exemplary damages, or any other
damages.
ARTICLE XI
INDEMNIFICATION
---------------
SECTION 11.1 INDEMNIFICATION BY SELLER. From and after Closing, Seller
shall indemnity and hold harmless Buyer from and against any and all Losses
arising out of or resulting from the following:
(a) Any representations and warranties made by Seller in this
Agreement not being true and accurate when made or when required by this
Agreement to be true and accurate, except for Losses that relate to any
circumstance, act or omission constituting a breach of any representation
or warranty by Seller or failure by Seller to comply with any of its
covenants, agreements or obligations hereunder of which Buyer has received
notice and which Buyer has waived in writing;
(b) Any breach or default by Seller in the performance of its
covenants, agreements, or obligations under this Agreement;
(c) Any liabilities relating to employees of Seller or any Partner
working for the Systems asserted under any Legal Requirement or otherwise
pertaining to any labor or employment matter arising out of conditions
existing or actions or events occurring prior to the Closing Date;
(d) Any liabilities and obligations arising out of or relating to the
operation of the Systems prior to the Closing Date, including, without
limitation, the Retained Liabilities and Obligations;
(e) Any claims made by creditors with respect to noncompliance with
any bulk sales law relating to this Agreement and the transactions
contemplated hereby; and
(f) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including without limitation,
legal fees and expenses, incident to any of the foregoing or incurred in
investigating or attempt to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
52
SECTION 11.2 INDEMNIFICATION BY BUYER. From and after Closing, Buyer shall
indemnify and hold harmless Seller and each Partner from and against any and all
Losses arising out of or resulting from the following:
(a) Any representations and warranties made by Buyer in this
Agreement not being true and accurate when made or when required by this
Agreement to be true and accurate, except for Losses that relate to any
circumstance, act or omission constituting a breach of any representation
or warranty by Buyer or failure by Buyer to comply with any of its
covenants, agreements or obligations hereunder of which Seller has received
notice and which Seller has waived in writing;
(b) Any breach or default by Buyer in the performance of its
covenants, agreements, or obligations under this Agreement;
(c) Any of the Assumed Obligations and Liabilities;
(d) Any liabilities relating to employees of Seller hired by Buyer
pursuant to Section 6.6 arising after the Closing Date asserted under any
federal, state or local law or regulation or otherwise pertaining to any
labor or employment matter arising out of conditions existing or actions or
events occurring subsequent to the Closing Date;
(e) Any liabilities and obligations arising out of or relating to the
operation of the Systems subsequent to the Closing Date; and
(f) Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including without limitation,
legal fees and expenses, incident to any of the foregoing or incurred in
investigating or attempt to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
SECTION 11.3 INDEMNIFIED THIRD PARTY CLAIM.
(a) If any Person not a party to this Agreement shall make any demand
or claim or file or threaten to file or continue any Litigation with respect
to which Buyer or Seller is entitled to indemnification pursuant to Sections
11.1 or 11.2, respectively, then within ten (10) days after notice (the
"Notice") by the party entitled to such indemnification (the "Indemnitee")
to the other (the "Indemnitor") of such demand, claim or Litigation, the
Indemnitor shall have the option, at its sole cost and expense, to retain
counsel for the Indemnitee (which counsel shall be reasonably satisfactory
to the Indemnitee), to defend any such
53
Litigation. Thereafter, the Indemnitee shall be permitted to participate in such
defense at its own expense, provided that, if the named parties to any such
Litigation (including any impleaded parties) include both the Indemnitor and the
Indemnitee or, if the Indemnitor proposes that the same counsel represent both
the Indemnitee and the Indemnitor and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them, then the Indemnitee shall have the right to retain its own counsel
at the cost and expense of the Indemnitor, unless the Indemnitor shall
acknowledge in writing its indemnity obligation, in which event the retention by
Indemnitee of its own counsel shall be at its cost and expense. If the
Indemnitor shall fail to respond within ten (10) days after receipt of the
Notice, the Indemnitee may retain counsel and conduct the defense of such
Litigation as it may in its sole discretion deem proper, at the sole cost and
expense of the Indemnitor.
(b) The Indemnitee shall provide reasonable assistance to the Indemnitor
and provide access to its books, records and personnel as the Indemnitor
reasonably requests in connection will the investigation or defense of the
indemnified Losses. The Indemnitor shall promptly upon receipt of reasonable
supporting documentation reimburse the Indemnitee for out-of-pocket costs and
expenses incurred by the latter in providing the requested assistance.
(c) In the event that Indemnitor desires to compromise or settle any such
claim, Indemnitee shall have the right to consent to such settlement or
compromise; provided, however, that if such compromise or settlement is for
money damages only and will include a full release and discharge of Indemnitee,
and Indemnitee withholds its consent to such compromise or settlement,
Indemnitor and Indemnitee agree that (1) Indemnitor's liability shall be limited
to the amount of the proposed settlement and Indemnitor shall thereupon be
relieved of any further liability with respect to such claim, and (2) from and
after such date, Indemnitee will undertake all legal costs and expenses in
connection with such claim and shall indemnify Indemnitor from any further
liability or obligation to such third party in connection with such claim in
excess of the amount of the proposed settlement. If Indemnitor fails to defend
any claim within a reasonable time, Indemnitee shall be entitled to assume the
defense thereof, and Indemnitor shall be liable to Indemnitee for its expenses
reasonably incurred, including attorney's fees and payment of any settlement
amount or judgment.
54
Section 11.4 DETERMINATION OF INDEMNIFICATION AMOUNTS AND RELATED MATTERS.
(a) In calculating amounts payable to an Indemnitee hereunder, the
amount of the indemnified losses shall be reduced by the amount of any
insurance proceeds paid to the Indemnitee for such Losses.
(b) Subject to the provisions of Section 11.3, all amounts payable by
the Indemnitor to the Indemnitee in respect of any Losses under Sections
11.1 or 11.2 shall be payable by the Indemnitor as incurred by the
Indemnitee.
(c) The provisions of Sections 11.3 and 11.4 shall be applicable to
any claim for indemnification made under any other provision of this
Agreement and all references in Sections 11.3 and 11.4 to Sections 11.1 and
11.2 shall be deemed to be references to such other provisions of this
Agreement.
SECTION 11.5 TIME AND MANNER OF CERTAIN CLAIMS. Except as otherwise
provided herein, the representations, warranties and covenants of Buyer and
Seller in this Agreement shall survive Closing for a period of twelve (12)
months except for representations, warranties and covenants (i) relating to
title, ownership, employee benefit matters, Copyright Act matters and Taxes,
which shall survive until the expiration of the applicable statute of
limitations and (ii) relating to environmental matters, which shall survive
until the third anniversary of the Closing Date, and Buyer's and Seller's rights
to make claims dated thereafter shall likewise expire and be extinguished on
such dates. Neither Seller nor Buyer shall have any liability under Sections
11.1(a) or 11.2(a), respectively, unless a claim for Losses for which
indemnification is sought thereunder is asserted by the party seeking
indemnification by written notice to the party from whom indemnification is
sought within the applicable survival period.
ARTICLE XII
MISCELLANEOUS
-------------
SECTION 12.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each of the parties shall pay its own expenses and the fees and
expenses of its counsel, accountants, and other experts in connection with this
Agreement.
SECTION 12.2 WAIVERS. No action taken pursuant to this Agreement,
including any investigation by or on behalf of any party hereto, shall be deemed
to constitute a waiver by the party taking the action of compliance with any
representation, warranty, covenant or agreement contained herein or in any
document
55
delivered pursuant hereto. The waiver by any party hereto of any condition or of
a breach of another provision of this Agreement shall not operate or be
construed as a waiver of any other condition or subsequent breach. The waiver by
any party of any of the conditions precedent to its obligations under this
Agreement shall not preclude it from seeking redress for breach of this
Agreement other than with respect to the condition so waived.
SECTION 12.3 NOTICES. All notices, requests, demands, applications,
services of process, and other communications which are required to be or may be
given under this Agreement shall be in writing and shall be deemed to have been
duly given if sent by facsimile transmission, delivered by overnight or other
courier service, or mailed, certified first class mail, postage prepaid, return
receipt requested, to the parties hereto at the following addresses:
To Seller: Valley Center Cablesystems, L.P.
c/o Western Cablesystems III, Inc.
513 Wilcox Street, Suite 230
Castle Rock, Colorado 80104
Attn: R. Michael Kruger, President
Telecopy: (203) 688-5001]
Copies (which shall not constitute notice) to:
Krys Boyle Freedman
& Scott, P.C.
Dominion Plaza, Suite 2700 South
600 Seventeenth Street
Denver, Colorado 80202-5427
Attn: Stanley F. Freedman, Esq.
Telecopy: (303) 893-2882
To Buyer: Mediacom California LLC
90 Crystal Run Road, Suite 406-A
Middletown, New York 10940
Attn: Rocco B. Commisso, Manager
Telecopy: (914) 692-9099
Copies (which shall not constitute notice) to:
Cooperman Levitt Winikoff
Lester & Newman, P.C.
800 Third Avenue, 30th Floor
New York, New York 10010
Attn: Robert L. Winikoff, Esq.
Telecopy: (212) 755-2839
or to such other address as any party shall have furnished to the other by
notice given in accordance with this Section. Such notice shall be effective,
(i) if delivered by courier service or
56
by facsimile transmission, upon actual receipt by the intended recipient, or
(ii) if mailed, upon the earlier of five (5) days after deposit with the U. S.
Postal Service or the date of delivery as shown on the return receipt therefor.
SECTION 12.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement embodies the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, oral or written,
with respect thereto. This Agreement may not be modified orally, but only by an
agreement in writing signed by the party or parties against whom any waiver,
change, amendment, modification, or discharge may be sought to be enforced.
SECTION 12.5 BINDING EFFECT; BENEFITS. This Agreement shall inure to the
benefit of and will be binding upon the parties hereto and their respective
heirs, legal representatives, successors, and permitted assigns. Neither Buyer
nor Seller shall assign this Agreement or delegate any of its duties hereunder
to any other Person without the prior written consent of the other, provided,
that Buyer may assign this Agreement to any Affiliate of Buyer without the prior
written consent of Seller. Nothing in this Agreement, express or implied, is
intended to confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies or obligations
under or by reason of this Agreement.
SECTION 12.6 HEADINGS, SCHEDULES, AND EXHIBITS. The section and other
headings contained in this Agreement are for reference purposes only and will
not affect the meaning or interpretation of this Agreement. Reference to
schedules and exhibits shall, unless otherwise indicated, refer to the schedules
or exhibits attached to this Agreement, which shall be incorporated in and
constitute a part of this Agreement by such reference.
SECTION 12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together will be deemed to be one and the same instrument.
SECTION 12.8 PUBLICITY. Seller and Buyer shall consult with and cooperate
with the other with respect to the content and timing of all press releases and
other public announcements, and any oral or written statements to Seller's
employees concerning this Agreement and the transactions contemplated hereby.
Neither Seller nor Buyer shall make any such release, announcement, or
statements without the prior written consent of the other, which shall not be
unreasonably withheld or delayed; provided, however, that Seller or Buyer may at
any time make any announcement required by Legal Requirements so long as such
party, promptly upon learning of such requirement, notifies the other of such
57
requirement and consults with the other in good faith with respect to the
wording of such announcement.
SECTION 12.9 GOVERNING LAW. The validity, performance, and enforcement of
this Agreement and all transaction documents, unless expressly provided to the
contrary, shall be governed by the laws of the State of California without
giving effect to the principles of conflicts of law of such state. Each party
hereby submits to the jurisdiction of the appropriate courts of the State of
California and agrees to be served with legal process from any of such courts.
Each party hereby irrevocably waives, to the fullest extent permitted by law,
any objection that it may have, whether now or in the future, to the laying of
venue in, or to the jurisdiction of, any and each of such courts for the purpose
of any such suit, action, proceeding or judgment and further waives any claim
that any such suit, action, proceeding or judgment has been brought in an
inconvenient forum.
SECTION 12.10 THIRD PARTIES; JOINT VENTURES. This Agreement constitutes an
agreement solely among the parties hereto, and, except as otherwise provided
herein, is not intended to and will not confer any right, remedies, obligations,
or liabilities, legal or equitable, including any right of employment on any
Person (including but not limited to any employee or former employee of Seller)
other than the parties hereto and their respective successors or assigns, or
otherwise constitute any Person a third party beneficiary under or by reason of
this Agreement. Nothing in this Agreement, expressed or implied, is intended to
or shall constitute the parties hereto partners or participants in a joint
venture.
SECTION 12.11 CONSTRUCTION. This Agreement has been negotiated by Buyer and
Seller and their respective legal counsel, and legal or equitable principles
that might require the construction of this Agreement or any provision of this
Agreement against the party drafting this Agreement shall not apply in any
construction or interpretation of this Agreement.
SECTION 12.12 ARBITRATION. Except for claims for injunctive relief under
Section 6.10, claims for damages or specific performance pursuant to Section
10.1 or 10.2 and third-party claims by one party against the other in any action
or proceeding commenced by unaffiliated persons or firms, all claims, disputes
and differences hereunder shall be determined by arbitration under the rules
then obtaining of the American Arbitration Association in Arizona. If $50,000 or
more is at issue, the matter shall be heard by a panel of three arbitrators. In
such case, Seller and Buyer shall each designate one disinterested arbitrator,
and the two arbitrators so designated shall select the third arbitrator. Buyer
and Seller agree that in any dispute submitted for arbitration in connection
herewith, the "non-prevailing" party shall pay all fees and expenses of the
arbitration proceedings
58
incurred by the "prevailing" party if the amount of award granted to the
"prevailing" party is in excess of the award, if any, granted to the "non-
prevailing" party; otherwise each party shall pay its own fees and expenses and
one-half of the arbitration fees and expenses.
SECTION 12.13 FURTHER ACTS. Buyer and Seller shall, without further
consideration, execute and deliver such further instruments and documents and do
such other acts and things as the other may reasonably request in order to
confirm the transactions contemplated by this Agreement. Without limiting the
foregoing, Seller shall deliver to Buyer any and all checks, drafts or other
forms of payment received in respect of any of the Accounts Receivable acquired
by Buyer pursuant to the terms of this Agreement and any of the Accounts
Receivable subsequent to the Closing Date derived from the operations of the
Business.
[Remainder of this page intentionally left blank;
Signatures to follow]
59
IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of the
date first written above.
BUYER:
MEDIACOM CALIFORNIA LLC
By: Mediacom LLC, a Member
By: /s/ Rocco B. Commisso
--------------------------------
Name: Rocco B. Commisso
Title: Manager
SELLER:
VALLEY CENTER CABLESYSTEMS, L.P.
By: Western Cablesystems III, Inc.,
its General Partner
By: ________________________________
Name: R. Michael Kruger
Title: President
SOLELY FOR PURPOSES
OF SECTION 3.2:
_________________________________
R. Michael Kruger
60
IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement as of the
date first written above.
BUYER:
MEDIACOM CALIFORNIA LLC
By: Mediacom LLC, a Member
By: ________________________________
Name: Rocco B. Commisso
Title: Manager
SELLER:
VALLEY CENTER CABLESYSTEMS, L.P.
By: Western Cablesystems III, Inc.,
its General Partner
By: /s/ R. Michael Kruger
--------------------------------
Name: R. Michael Kruger
Title: President
SOLELY FOR PURPOSES
OF SECTION 3.2:
/s/ R. Michael Kruger
- ------------------------------
R. Michael Kruger
60
EXHIBIT 2.4
LOWER DELAWARE/MARYLAND
================================================================================
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN CABLE TV INVESTORS 5, LTD.
AND
MEDIACOM LLC
DATED AS OF
DECEMBER 24, 1996
================================================================================
TABLE OF CONTENTS
PAGE
----
ARTICLE I................................................................... 1
I. Definitions............................................................ 1
Accountants............................................................ I
Accounts Receivable.................................................... 1
Ad Insertion Agreement................................................. 1
Adjustment Time........................................................ 1
Affiliate.............................................................. 1
Alternative Transaction................................................ 1
Angola Consent......................................................... 2
Assets................................................................. 2
Assumed Liabilities.................................................... 2
Basic Services......................................................... 2
Basic Subscriber Rate.................................................. 2
Best of Seller's Knowledge............................................. 2
Business............................................................... 2
Business Day........................................................... 2
Buyer.................................................................. 2
Buyer Financial Statement.............................................. 3
Cable Act.............................................................. 3
Closing................................................................ 3
Closing Date........................................................... 3
Code................................................................... 3
Communications Act..................................................... 3
Commitment............................................................. 3
Consents............................................................... 3
Copyright Act.......................................................... 3
Deposit................................................................ 3
Employer............................................................... 3
Employer Plans......................................................... 3
Encumbrance............................................................ 3
Environmental Law...................................................... 3
Equipment.............................................................. 4
Equivalent Basic Subscribers........................................... 4
ERISA.................................................................. 4
Escrow Agent........................................................... 4
Escrow Agreement....................................................... 4
Exchange Act........................................................... 5
Excluded Assets........................................................ 5
Excluded Liabilities................................................... 5
i
PAGE
----
Exhibits............................................................... 5
Expanded Basic Services................................................ 5
FCC.................................................................... 5
Final Adjustments Report............................................... 5
Franchise Areas........................................................ 5
GAAP................................................................... 5
General Partner........................................................ 5
Governmental Authority................................................. 5
Governmental Permits................................................... 5
Hazardous Substances................................................... 6
Homes Passed........................................................... 6
HSR Act................................................................ 6
Initial Termination Date............................................... 6
Intangibles............................................................ 6
IRS.................................................................... 6
Legal Requirement...................................................... 6
Limited Partners....................................................... 6
Management Agreement................................................... 6
Material Adverse Change in the Financial Markets....................... 7
Ocean Pines Consent.................................................... 7
Partnership Agreement.................................................. 7
Pay TV................................................................. 7
Permitted Encumbrances................................................. 7
Person................................................................. 7
Preliminary Adjustments Report......................................... 7
Prime Rate............................................................. 7
Purchase Price......................................................... 7
Real Property.......................................................... 7
Regulatory Requirement................................................. 8
Remediation............................................................ 8
Required Consents...................................................... 8
Schedules.............................................................. 8
Sea Colony Consent..................................................... 8
SEC.................................................................... 8
Securities Act......................................................... 8
Seller................................................................. 8
Seller Contracts....................................................... 8
Seller Financial Statements............................................ 8
Service Area........................................................... 8
System................................................................. 8
Taking................................................................. 8
Tax Return............................................................. 9
Taxes.................................................................. 9
ii
PAGE
----
TCI.................................................................... 9
Telecom Act............................................................ 9
Termination Date....................................................... 9
Tunnell Properties Consent............................................. 9
Units.................................................................. 9
WARN Act............................................................... 9
ARTICLE II.................................................................. 9
2. Purchase and Sale of Assets............................................ 9
2.1 Purchase and Sale of Assets.................................. 9
2 2 Time and Place of Closing.................................... 10
ARTICLE III................................................................. 10
3. Consideration.......................................................... 10
3.1 Consideration for the Assets................................. 10
3.2 Purchase Price Prorations.................................... 10
3.3 Purchase Price Adjustments................................... 11
3.4 Preliminary and Final Settlements............................ 17
3.5 Disputed Liabilities......................................... 18
3.6 Allocation of Purchase Price................................. 19
ARTICLE IV.................................................................. 19
4. Assumed Liabilities and Excluded Assets................................ 19
4.1 Assignment and Assumption.................................... 19
4.2 Excluded Assets.............................................. 20
ARTICLE V................................................................... 20
5. Representations and Warranties of Seller............................... 20
5.1 Organization and Qualification............................... 20
5.2 Authority and Validity....................................... 21
5.3 Consents and Approvals; No Violation......................... 21
5.4 Complete Systems............................................. 22
5.5 Title........................................................ 22
5.6 Real Property................................................ 22
5.7 Environmental Matters........................................ 23
5.8 Compliance with Law; Governmental Permits.................... 24
5.9 Seller Contracts............................................. 25
5.10 Copyright Compliance......................................... 25
5.11 Financial Statements......................................... 25
iii
PAGE
----
5.12 Legal Proceedings............................................ 26
5.13 Employment Matters........................................... 26
5.14 System Information........................................... 27
5.15 Finders and Brokers.......................................... 28
5.16 Tax Matters.................................................. 28
5.17 Inventory.................................................... 28
5.18 Insurance.................................................... 28
5.19 Accounts Receivable.......................................... 28
5.20 Restoration.................................................. 28
5.21 Equipment.................................................... 28
5.22 Microwave Replacement........................................ 28
ARTICLE VI.................................................................. 29
6. Buyer's Representations and Warranties................................. 29
6.1 Organization and Qualification............................... 29
6.2 Authority and Validity....................................... 29
6.3 No Breach or Violation....................................... 29
6.4 Litigation................................................... 30
6.5 Financial Statements......................................... 30
6.6 Adequate Financing........................................... 30
6.7 Finders and Brokers.......................................... 30
6.8 Qualification of Buyer....................................... 30
ARTICLE VII................................................................. 31
7. Additional Covenants................................................... 31
7.1 Access to Premises and Records............................... 31
7.2 Continuity and Maintenance of Operations; Financial
Statements................................................... 31
7.3 Employee Matters............................................. 33
7.4 Franchise Extensions......................................... 34
7.5 Environmental Report......................................... 34
7.6 Consents..................................................... 35
7.7 HSR Notification............................................. 36
7.8 Notification of Certain Matters.............................. 36
7.9 Risk of Loss; Condemnation................................... 37
7.10 Adverse Changes.............................................. 37
7.11 Action by Limited Partners................................... 37
7.12 No Solicitation.............................................. 38
7.13 Sales and Transfer Taxes and Fees............................ 39
7.14 Commercially Reasonable Efforts.............................. 39
7.15 Title Insurance.............................................. 39
7.16 Non-Competition.............................................. 39
iv
PAGE
----
7.17 Financing Commitment......................................... 40
7.18 Forms 394.................................................... 40
7.19 UCC Lien and Judgment Searches............................... 40
7.20 Seller Financial Statements.................................. 40
7.21 Ad Insertion Agreement....................................... 41
ARTICLE VIII................................................................ 41
8. Conditions Precedent to Obligations of Buyer........................... 41
8.1 HSR Act...................................................... 41
8.2 Governmental or Legal Action................................. 41
8.3 Accuracy of Representations and Warranties................... 41
8.4 Performance of Agreements.................................... 41
8.5 No Material Adverse Change................................... 41
8.6 Consents and Extensions...................................... 42
8.7 Transfer Documents........................................... 42
8.8 Opinions of Seller's Counsel................................. 42
8.9 Discharge of Liens........................................... 42
8.10 Extension of Ad Insertion Agreement.......................... 42
8.11 Opinion of Seller's FCC Counsel.............................. 42
8.12 Additional Documents and Acts................................ 42
8.13 Certificates................................................. 42
ARTICLE IX.................................................................. 43
9. Conditions Precedent to Obligations of Seller.......................... 43
9.1 HSR Act...................................................... 43
9.2 Governmental or Legal Actions................................ 43
9.3 Accuracy of Representations and Warranties................... 43
9.4 Performance of Agreements.................................... 43
9.5 Consents..................................................... 43
9.6 Opinions of Buyer's Counsel.................................. 43
9.7 Limited Partner Approval..................................... 43
9.8 Payment of Purchase Price.................................... 44
9.9 Assumption of Liabilities.................................... 44
9.10 Closing of Another System.................................... 44
9.11 Additional Documents and Acts................................ 44
9.12 Certificates................................................. 44
9.13 Fairness Opinion............................................. 44
v
PAGE
----
ARTICLE X................................................................... 44
10. Termination............................................................ 44
10.1 Events of Termination........................................ 44
10.2 Manner of Exercise........................................... 46
10.3 Effect of Termination........................................ 46
10.4 Liquidated Damages........................................... 48
ARTICLE XI.................................................................. 48
11. Nature and Survival of Representations, Warranties and Agreements...... 48
11.1 Nature of Representations, Warranties and Agreements......... 48
11.2 Survival of Representations and Warranties................... 48
11.3 Time Limitations............................................. 48
11.4 Limitations as to Amount..................................... 49
ARTICLE XII................................................................. 49
12. Indemnification........................................................ 49
12.1 Rights to Indemnification.................................... 49
12.2 Procedure for Indemnification................................ 50
12.3 Deposit...................................................... 51
ARTICLE XIII................................................................ 51
13. Miscellaneous.......................................................... 51
13.1 Parties Obligated and Benefitted............................. 51
13.2 Press Releases and Confidentiality........................... 51
13.3 Notices...................................................... 52
13.4 Waiver....................................................... 53
13.5 Captions..................................................... 53
13.6 CHOICE OF LAW................................................ 53
13.7 Nonrecourse.................................................. 53
13.8 Terms........................................................ 53
13.9 Rights Cumulative............................................ 53
13.10 Further Actions.............................................. 53
13.11 Time......................................................... 54
13.12 Expenses..................................................... 54
13.13 Specific Performance......................................... 54
13.14 Additional Remedies.......................................... 54
13.15 Waiver of Remedies........................................... 54
13.16 Schedules.................................................... 55
13.17 Counterparts................................................. 55
vi
13.18 Entire Agreement............................................ 55
13.19 Severability................................................ 55
CONTENTS OF OMITTED EXHIBITS
Exhibit A Geographic Areas of Seller's Business
Exhibit B Escrow Agreement
Exhibit C Form of Engagement Letter
Exhibit D Form for Opinion of Seller's Counsel
Exhibit E Form for Opinion of Buyer's Counsel
Exhibit F Form of Opinion of Seller's FCC Counsel
CONTENTS OF OMITTED SCHEDULES
Schedule 1.1 Subscriber Rates
Schedule 1.2 Consents
Schedule 1.3 Equipment
Schedule 1.4 Franchise Areas
Schedule 1.5 Governmental Permits
Schedule 1.6 Permitted Encumbrances
Schedule 1.7 Real Property
Schedule 1.8 Seller Contracts
Schedule 1.9 System
Schedule 4.2 Excluded Assets
Schedule 5.3(b) Violations of Partnership Agreement and Legal Requirements
Schedule 5.4 Complete Systems
Schedule 5.5 Encumbrances on Seller's Title
Schedule 5.9 Seller Contracts
Schedule 5.12 Legal Proceedings
Schedule 5.13(c) Employment Matters
Schedule 5.13(d) Employees
Schedule 5.13(e) Employer Plans
Schedule 5.14 System Information
Schedule 5.16 Taxes
Schedule 6.3(a) Consents to be Obtained or Waived by Closing Date
Registrants agree to furnish supplementally a copy of such Exhibits and
Schedules to the Commission upon request.
vii
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement ("AGREEMENT") is made as of the 24th day
of December, 1996, by and between AMERICAN CABLE TV INVESTORS 5, LTD., a
Colorado limited partnership ("SELLER"), and MEDIACOM LLC, a New York limited
liability company ("BUYER").
RECITALS
--------
A. Seller is engaged in the business of providing cable television
service to subscribers in and around the geographic areas set forth on Exhibit
A.
B. Buyer desires to purchase and Seller desires to sell the assets
of Seller designated in this Agreement used or held for use in connection with
that business, upon the terms and subject to the conditions set forth in this
Agreement.
Accordingly, the parties agree as follows:
ARTICLE I
1. DEFINITIONS.
"ACCOUNTANTS" shall have the meaning set forth in Section 3.4.
"ACCOUNTS RECEIVABLE" shall mean all accounts receivable of Seller
representing amounts earned by Seller in connection with its operation of the
Business through the Adjustment Time.
"AD INSERTION AGREEMENT" shall have the meaning set forth in Section
7.21.
"ADJUSTMENT TIME" shall have the meaning set forth in Section 3.2.
"AFFILIATE" shall mean, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"ALTERNATIVE TRANSACTION" shall mean any transaction which could
result in the transfer of control over, or ownership of, all or substantially
all the Assets, including (a) any merger or consolidation of Seller in which
another Person or group of Persons acquires 50% or
more of the partnership interests in Seller or the equity interests of the
surviving entity, as the case may be, (b) any tender offer or exchange offer for
partnership interests in Seller which, if consummated, would result in a Person
or group of Persons (other than the existing partners in such entities as of the
date of this Agreement) owning 50% or more of the partnership interests in
Seller or (c) any sale or other disposition of all or substantially all the
Assets.
"ANGOLA CONSENT" shall mean the consent of Angola-by-the-Bay Property
Owners Association Inc. (or any successor thereto) to permit the transfer to
Buyer of the Agreement to Construct, Maintain and Operate a Cable Television
System, dated September 8, 1975, between Angola-by-the-Bay Property Owners
Association Inc. and CATV Sussex Limited Partnership, as assigned to Seller.
"ASSETS" shall mean all properties, privileges, rights, interests and
claims, real and personal, tangible and intangible, of every type and
description that are owned, leased, used or held for use in the Business in
which Seller has any right, title or interest or in which Seller acquires any
right, title or interest on or before the Closing Date, including Accounts
Receivable, Governmental Permits, Intangibles, Seller Contracts, Equipment and
Real Property but excluding any Excluded Assets and any Assets disposed of by
Seller in the ordinary course of business prior to the Closing Date.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 4.1.
"BASIC SERVICES" shall mean the lowest tier of cable television
programming sold to subscribers of the System for which a subscriber served by
the System pays a fixed monthly fee to Seller, excluding Expanded Basic
Services, Pay TV and any charges for additional outlets and installation fees
and revenues derived from the rental of converters, remote control devices and
other like charges for equipment.
"BASIC SUBSCRIBER RATE" shall mean, for the System, the predominant
monthly fees and charges derived from the provision of Basic Services to single
family households, as of June 30, 1996, as set forth on SCHEDULE 1.1.
"BEST OF SELLER'S KNOWLEDGE" shall mean the actual knowledge of Seller
after reasonable inquiry of Marvin Jones, Ramona Whitman and David Kane.
"BUSINESS" shall mean the cable television business conducted by
Seller through the System in and around the Franchise Areas.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday or a day
on which banking institutions in Denver, Colorado or New York, New York are
required or authorized to be closed.
"BUYER" shall mean the Person identified as such in the preamble to
this Agreement.
2
"BUYER FINANCIAL STATEMENT" shall have the meaning set forth in
Section 6.5.
"CABLE ACT" shall have the meaning set forth in Section 5.8.
"CLOSING" shall mean the consummation of the transactions contemplated
by this Agreement, as described in Article II.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMUNICATIONS ACT" shall have the meaning set forth in Section
5.8(c).
"COMMITMENT" shall have the meaning set forth in Section 7.17.
"CONSENTS" shall mean any registration with, consent or approval of,
notice to, or action by any Person or Governmental Authority required to permit
the transfer of the Assets to Buyer or permit Seller to perform any of its other
obligations under this Agreement, as set forth on SCHEDULE 1.2.
"COPYRIGHT ACT" shall mean Title 17 of the United States Code, as
amended, and all rules and regulations thereunder.
"DEPOSIT" shall have the meaning set forth in Section 3.1.
"EMPLOYER" shall have the meaning set forth in Section 5.13(a).
"EMPLOYER PLANS" shall have the meaning set forth in Section 5.13(e).
"ENCUMBRANCE" shall mean any mortgage, lien, security interest,
security agreement, conditional sale or other title retention agreement,
limitation, pledge, option, charge, assessment, restrictive agreement,
restriction, encumbrance, adverse interest, restriction on transfer or any
exception to or defect in title or other ownership interest (including
reservations, rights of way, possibilities of reverter, encroachments,
easements, rights of entry, restrictive covenants, leases and licenses).
"ENVIRONMENTAL LAW" shall mean any Legal Requirement relating to
pollution or protection of public health, safety or welfare or the environment,
including those relating to emissions, discharges, releases or threatened
releases of Hazardous Substances into the environment (including ambient air,
surface water, ground water or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
3
"EQUIPMENT" shall mean all electronic devices, trunk and distribution
coaxial and optical fiber cable, amplifiers, power supplies, conduit, vaults and
pedestals, grounding and pole hardware, subscriber's devices (including
converters, encoders, transformers behind television sets and fittings), headend
hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and other tangible personal property owned,
leased, used or held for use by Seller in connection with the Business,
including the items described on SCHEDULE 1.3.
"EQUIVALENT BASIC SUBSCRIBERS" shall mean, with respect to each
Franchise Area, as of any date, the number of active customers for Basic
Services either in a single household, a commercial establishment or a multi-
unit dwelling (including a hotel unit); provided, however, that the number of
customers in a commercial establishment or multi-unit dwelling that obtain
service on a "bulk-rate" basis shall be determined for each Franchise Area by
dividing the gross bulk-rate billings for Basic Services and Expanded Basic
Services (but excluding billings from a la carte tiers or premium services,
installation or other non-recurring charges, converter rental or any outlet or
connection other than the first outlet or connection, pass-through charges for
sales taxes, line-itemized franchise fees, fees charged by the FCC and the like)
attributable to such commercial establishment or multi-unit dwelling during the
most recent billing period ended prior to the date of calculation (but excluding
billings in excess of a single month's charge) by the rate charged at the date
of determination to individual households for the highest level of Basic
Services and Expanded Basic Services offered in the Franchise Area, such rate
not to be less than the rate for such Franchise Area set forth on SCHEDULE 1.1
(excluding billings from a la carte tiers or premium services, installation or
other non-recurring charges, converter rental, pass-through charges for sales
taxes, line-itemized franchise fees, fees charged by the FCC and the like). For
purposes of this definition, (i) an "active customer" shall mean, as of any
date, any person, commercial establishment or multi-unit dwelling that is paying
for and receiving Basic Services from the System in that Franchise Area who has
an account that is not more than 60 days past due (except for past due amounts
of $10.00 or less, provided such account is otherwise current) but excluding any
person, commercial establishment or multi-unit dwelling that as of the date of
calculation has not paid in full the charges for at least one month of the
services ordered or who has been obtained as a subscriber by offers made,
promotions conducted or discounts given outside of the ordinary course of
business, or whose account has been compromised or written off other than in the
ordinary course of business consistent with past practices for reasons such as
interrupted service but not for the purpose of making it qualify as an "active
customer," and (ii) the number of days a customer account is past due shall be
calculated from the first day of the period for which the applicable billing
relates.
"ERISA" shall have the meaning set forth in Section 5.13(b).
"ESCROW AGENT" shall have the meaning set forth in Section 3.1.
"ESCROW AGREEMENT" shall have the meaning set forth in Section 3.1.
4
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as
amended.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 4.2.
"EXCLUDED LIABILITIES" shall have the meaning set forth in Section
4.1(b).
"EXHIBITS" shall mean the exhibits prepared and delivered pursuant to
this Agreement.
"EXPANDED BASIC SERVICES" shall mean any video programming provided
over the System, regardless of service tier, other than Basic Services, any new
product tier and video programming offered on a per channel or per program
basis, for which a subscriber served by the System pays a fixed monthly fee to
Seller, excluding Pay TV and any charges for additional outlets and installation
fees and revenues derived from the rental of converters, remote control devices
and other like charges for equipment.
"FCC" shall have the meaning set forth in Section 5.8(c).
"FINAL ADJUSTMENTS REPORT" shall have the meaning set forth in Section
3.4(b).
"FRANCHISE AREAS" shall mean those areas in which Seller is authorized
under one or more Governmental Permits issued by the applicable franchising
authorities to provide cable television service to subscribers located in such
areas through the ownership and operation of the System, as set forth on
SCHEDULE 1.4.
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States of America on the date of this Agreement.
"GENERAL PARTNER" shall mean IR-TCI Partners V, L.P., the general
partner of Seller.
"GOVERNMENTAL AUTHORITY" shall mean any of the following: (a) the
United States of America; (b) any state, commonwealth, territory or possession
of the United States of America and any political subdivision thereof (including
counties, municipalities and the like); or (c) any agency, authority or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.
"GOVERNMENTAL PERMITS" shall mean all franchises, authorizations,
permits, licenses, easements, registrations, leases, variances and similar
rights obtained from any Governmental Authority which authorize or are required
in connection with the operation of the Business, as described on SCHEDULE 1.5.
5
"HAZARDOUS SUBSTANCES" shall mean any pollutant, contaminant,
chemical, industrial, toxic, hazardous or noxious substance or waste which is
regulated by any Governmental Authority, including, but not limited to (a) any
petroleum or petroleum compounds (refined or crude), flammable substances,
explosives, radioactive materials or any other materials or pollutants which
pose a hazard or potential hazard to the Real Property or to Persons in or about
the Real Property or cause the Real Property to be in violation of any Legal
Requirement of any Governmental Authority, (b) asbestos or any asbestos-
containing material of any kind or character, (c) polychlorinated biphenyls
("PCBS"), as regulated by the Toxic Substances Control Act, 15 U.S.C. (S) 2601
et seq., (d) any materials or substances designated as "hazardous substances"
- -- ---
pursuant to the Clean Water Act, 33 U.S.C. (S) 1251 et seq., (e) "chemical
-- ---
substance," "new chemical substance" or "hazardous chemical substance or
mixture" as defined in the Toxic Substances Control Act, referred to above, (f)
"hazardous substances" pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. (S) 9601 et seq. and (g) "hazardous
-- ---
waste" pursuant to the Resource Conservation and Recovery Act, 42 U.S.C. (S)
6901 et seq.
-- ---
"HOMES PASSED" shall mean, with respect to the System and as of June
30, 1996, the total of (a) the number of single family residences capable of
being serviced without further line construction, (b) the number of units in
multi-family residential buildings capable of being serviced without further
line construction and not then governed by bulk-service agreements and (c) the
number of bulk service agreements regardless of the number of units serviced or
the equivalent billing units.
"HSR ACT" shall have the meaning set forth in Section 7.6.
"INITIAL TERMINATION DATE" shall mean June 30, 1997.
"INTANGIBLES" shall mean all general intangibles, including subscriber
lists, claims (excluding any claims relating to Excluded Assets), patents,
copyrights and goodwill, if any, owned, used or held for use by Seller in
connection with the Business.
"IRS" shall mean the Internal Revenue Service.
"LEGAL REQUIREMENT" shall mean any statute, ordinance, code, law,
rule, regulation, order or other requirement, standard or procedure enacted,
adopted or applied by any Governmental Authority, including judicial decisions
applying common law or interpreting any other Legal Requirement.
"LIMITED PARTNERS" shall mean the Persons who own or hold units of
limited partnership interests in Seller.
"MANAGEMENT AGREEMENT" shall mean the agreement related to the
operation of the System and the other cable systems owned by Seller between
Seller and TCI Cablevision Associates, Inc. (formerly known as Daniels &
Associates, Inc.).
6
"Material Adverse Change in the Financial Markets" shall mean
a change in the U.S. financial markets that has a material adverse effect,
generally, on the ability to obtain debt or equity financing.
"Ocean Pines Consent" shall mean the consent of Ocean Pines
Association (or any successor thereto) to permit the transfer to Buyer of the
Agreement for the Construction and Operation of a Cable Television System, dated
February 1, 1978, between Triad CATV, Inc. and Ocean Pines Association, as
assigned to Seller.
"Partnership Agreement" shall mean the Amended and Restated
Limited Partnership Agreement of Seller, dated as of January 1, 1987, by and
between IR-TCI Partners V, L.P. (formerly known as IR-Daniels Partners V, L.P.),
as the general partner, and David B. Beyth, as the initial limited partner.
"Pay TV' shall mean premium programming services selected by
and sold to subscribers of the System for monthly fees in addition to the fee
for Basic Services.
"Permitted Encumbrances" shall mean the following: (a) liens
for taxes, assessments and governmental charges not yet due and payable; (b)
zoning laws and ordinances and similar Legal Requirements; (c) rights reserved
to any Governmental Authority to regulate the affected property; (d) as to
leased Assets, interests of lessors and Encumbrances affecting the interests of
the lessors; (e) the Encumbrances described on Schedule 1.6; and (0 any liens,
easements, rights-of-way, servitudes, permits, leases, restrictions and
imperfections or irregularities in title that do not in any material respect,
individually or in the aggregate, affect or impair the value or use of the
affected Asset as it is currently being used by Seller.
"Person" shall mean any natural person, corporation,
partnership, trust, unincorporated organization, association, limited liability
company, Governmental Authority or other entity.
"Preliminary Adjustments Report" shall have the meaning set
forth in Section 3.4(a).
"Prime Rate" shall mean the rate of interest quoted from time
to time in The Wall Street Journal as the prime rate.
"Purchase Price" shall have the meaning set forth in Section
3.1.
"Real Property" shall mean all Assets consisting of interests
in real property (including, to the extent applicable, improvements, fixtures
and appurtenances), including fee and leasehold interests, as described on
Schedule 1.7.
7
"Regulatory Requirement" shall mean any filing required
pursuant to the Securities Act, the Exchange Act, the HSR Act, state securities
laws (including, but not limited to, state "blue sky" laws) and state corporate
laws (including, but not limited to, takeover statutes).
"Remediation" shall have the meaning set forth in Section 7.5.
"Required Consents" shall mean the Consents designated as such
on Schedule 1.2 by an asterisk.
"Schedules" shall mean the schedules prepared and delivered
pursuant to this Agreement.
"Sea Colony Consent" shall mean an agreement between Seller
and Sea Colony Associates, Inc. (or any successor thereto), assignable to Buyer,
to provide Basic Services to the Units with an expiration date no earlier than
the second anniversary of the Closing Date.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Seller" shall mean the Person indicated as such in the
preamble to this Agreement.
"Seller Contracts" shall mean all contracts, agreements and
leases, other than those that are Governmental Permits, to which Seller is a
party and pertain to the ownership, operation or maintenance of the Assets or
the Business, including those described on Schedule 1.8.
"Seller Financial Statements" shall have the meaning set forth
in Section 5.11.
"Service Area" shall mean any area within a Franchise Area
where businesses, residences, multi-family dwellings, hotels, motels, trailers
and other users are capable of being serviced with terrestrial cable television
services without further line construction as of the Closing Date excluding
those areas where TCI is providing terrestrial cable television services by
means of cable, microwave, fiber optics, satellite receivers or broadcasts as of
the Closing Date.
"System" shall mean a cable television reception and
distribution system operated in the conduct of the Business, consisting of one
or more headends, subscriber drops and associated electronic and other
equipment, and which is, or is capable of being without modification, operated
as an independent system without interconnections to other systems, as set forth
on Schedule 1.9.
"Taking" shall have the meaning set forth in Section 7.7(b).
8
"Tax Return" shall mean any return, report, information return
or other document (including any related or supporting information) filed or
required to be filed with any taxing authority in connection with the
determination, assessment, collection, administration or imposition of any
Taxes.
"Taxes" shall mean all taxes, charges, fees, liens, imposts,
duties or other assessments including, but not limited to, income, withholding,
excise, employment, property, sales, franchise, use and gross receipt taxes,
imposed by the United States or any state, county, local or foreign government
or any subdivision thereof. Such term shall also include any interest, penalties
or additions attributable to such assessments.
"TCI" shall mean TCI Communications, Inc., a Delaware
corporation.
"Telecom Act" shall have the meaning set forth in Section
5.8(e).
"Termination Date" shall mean July 22, 1997; provided however,
Seller shall have the right upon five days notice to Buyer, to extend the
Termination Date to a date designated in such notice, which date shall in no
event be later than September 22, 1997; provided further, Seller shall have the
right, upon five days notice to Buyer to further extend the Termination Date to
a date designated in such notice, which date shall in no event be later than
December 19, 1997.
"Tunnell Properties Consent" shall mean the consent of
Pot-Nets, Inc. (or any successor thereto) to permit the transfer to Buyer of the
Agreement Granting a Cable Television Franchise, dated as of November 20, 1973,
by and between CATY Sussex Company and Pot-Nets, Inc., as assigned to Seller.
"Units" shall mean the number of Equivalent Basic Subscribers
attributable to the units of Sea Colony determined in accordance with the
definition of "Equivalent Basic Subscribers".
"WARN Act" shall mean the Worker Adjustment and Retraining
Notification Act.
ARTICLE II
2. Purchase and Sale of Assets.
2.1 Purchase and Sale of Assets. Subject to the satisfaction
of the conditions to each party's obligations set forth in Articles VIII and IX
(or, with respect to any condition not satisfied, the waiver thereof by the
party or parties for whose benefit the condition exists), Seller shall sell,
assign, transfer and deliver to Buyer all of Seller's right, title and interest
in, and Buyer shall purchase, acquire, accept and pay for, the Assets.
9
2.2 Time and Place of Closing. Subject to the terms and
conditions of this Agreement, the Closing shall take place at 10:00 a.m. New
York City time on a date specified by notice from Seller or Buyer to the other
(but shall not in any event be prior to the satisfaction or waiver of the
conditions to Closing as set forth in Articles VIII and IX or no later than ten
Business Days after satisfaction or waiver of all conditions to Closing as set
forth in Articles VIII and IX), in New York, New York at the offices of Kaye,
Scholer, Fierman, Hays & Handler, LLP. or at such other time or place as the
parties may agree; provided, however, the date specified in such notice shall
not be less than 10 nor more than 30 days after the date of such notice (unless
the Termination Date would occur within such 10-day period, in which event
Seller or Buyer shall have the right to designate any date prior to the
Termination Date as the date of Closing); provided, further, that if Seller
gives Buyer notice designating a date for Closing prior to June 23, 1997 and
Buyer has not yet obtained the Commitment, Buyer shall have the right to
designate the date for Closing, which shall be on or prior to June 23, 1997.
ARTICLE III
3. Consideration.
3.1 Consideration for the Assets. The aggregate
consideration for the Assets shall consist of (i) an amount equal to
$43,100,000, subject to proration as set forth in Section 3.2 and adjustment as
set forth in Section 3.3 (the "Purchase Price") and (ii) the assumption by Buyer
of the Assumed Liabilities. The Purchase Price shall be payable as follows: (a)
$1,077,500 (the "Deposit"), payable concurrently with the execution and delivery
of this Agreement in cash by means of wire or interbank transfer in immediately
available funds to the account of The Chase Manhattan Bank (the "Escrow Agent"),
to be held, administered and distributed for the respective benefits of the
parties hereto in accordance with the terms of this Agreement and the Escrow
Agreement among Seller, Buyer and the Escrow Agent dated the date of this
Agreement (the "Escrow Agreement") in the form set forth as Exhibit B attached
hereto, and (b) $42,022,500, as adjusted by the prorations and adjustments set
forth in the Preliminary Adjustments Report but subject to Sections 3.3(c), (d)
and (e) and to the last sentence of Section 3.4(a), payable by Buyer to Seller,
or Seller's designee, at Closing in cash by means of wire or interbank transfer
in immediately available funds. At Closing, Seller and Buyer shall direct the
Escrow Agent to release any interest, earnings and gains then accrued on the
Deposit to Buyer, or Buyer's designee, in accordance with the terms of the
Escrow Agreement and Escrow Agent shall retain the Deposit, in accordance with
the terms of the Escrow Agreement, for the satisfaction of indemnification
claims by Buyer against Seller, if any, pursuant to Article XII.
3.2 Purchase Price Prorations. (a) All revenues (other than
Accounts Receivable being purchased by Buyer hereunder) and all expenses arising
from the operations of the Business up until 12:01 a.m. on the Closing Date (the
"Adjustment Time"), including, but not limited to, pole rental fees, rental or
other charges payable in respect of the Seller Contracts, sales and use taxes
payable with respect to cable television service and equipment (which shall not
include sales or use taxes arising out of the consummation of the transaction
contemplated
10
hereunder), power and utility charges, real and personal property taxes and
assessments levied against the Assets, applicable franchise, copyright or other
fees, sales and service charges, wages, payroll taxes and payroll expenses
(including accrued vacation pay except to the extent a Purchase Price adjustment
in Buyer's favor is made under Section 3.3) of employees of Employer who
primarily perform services in connection with the operation of the Business who
are employed by Buyer as of the Closing, and other prepaid and deferred items
shall be prorated between Buyer and Seller as of the Adjustment Time in
accordance with GAAP and the principle that Seller shall receive all revenues
(other than Accounts Receivable being purchased by Buyer hereunder) and shall be
responsible for all expenses, costs and liabilities allocable to the period
prior to the Adjustment Time and Buyer shall receive all revenues and shall be
responsible for all expenses, costs and liabilities allocable to the period
after the Adjustment Time.
(b) The amount of each item of revenue prorated under
subsection (a) above, to a party which has not received, and under the terms of
this Agreement will not receive, such revenue shall be deemed a charge against
the other party. The amount of any item of cost or expense prorated under
subsection (a) above to a party which has not paid, and under the terms of this
Agreement will not pay, such cost or expense shall be deemed a charge against
such party. If the aggregate charges allocated to Seller as set forth in this
Section 3.2(b) exceed the aggregate charges allocated to Buyer as set forth in
this Section 3.2(b), the Purchase Price shall be decreased by an amount equal to
the difference between the aggregate charges allocated to Seller and the
aggregate charges allocated to Buyer. If the aggregate charges allocated to
Buyer as set forth in this Section 3.2(b) exceed the aggregate charges allocated
to Seller as set forth in this Section 3.2(b), the Purchase Price shall be
increased by an amount equal to the difference between the aggregate charges
allocated to Buyer and the aggregate charges allocated to Seller.
3.3 Purchase Price Adjustments. (a) The Purchase Price shall
be increased by an amount equal to the aggregate of the following:
(i) (a) 100% of the face amount of all Accounts
Receivable which, as of the Closing Date, are outstanding for a period of not
more than 30 days after their respective invoice dates and (b) 85% of the face
amount of all Accounts Receivable which, as of the Closing Date, are outstanding
for a period of more than 30 days but not more than 60 days after their
respective invoice dates; and
(ii) to the extent not included in the
prorations to the Purchase Price as set forth in Section 3.2, the dollar amount
of all advance payments to, or deposits with, third parties relating to the
Business which, as of the Closing Date, are for the account of Seller or are
security for Seller's performance of its obligations under any agreement
relating to the Business or any Assets, including, but not limited to, deposits
made with lessors and deposits for utilities.
(b) The Purchase Price shall be decreased by an amount
equal to the sum of (i) the dollar amount of the remaining balance, as of the
Closing Date, of all advance payments to, or monies of third parties on deposit
with, Seller relating to the Business, including
11
advance payments and deposits by customers served by the Business for
converters, encoders, decoders, cable service and related sales, (ii) the dollar
amount of accrued vacation pay of employees of Employer identified on Schedule
5.13(d) who are employed by Buyer as of the Closing and (iii) if the average of
the aggregate number of Equivalent Basic Subscribers served by the System
(excluding the Units) as of the Closing Date and as of the first day of the
month for the eleven months prior to the month during which the Closing occurs
(the "Subscriber Average") is less than 27,582, an amount equal to (x) the
difference between 27,582 and the Subscriber Average times (y) $1,507.
(c)(i) If as of the Closing Date Seller has obtained
the Sea Colony Consent, then no adjustment shall be made to the Purchase Price
other than as provided for in Sections 3.2 and 3.3(a) and (b); provided,
however, that if the weighted average rate charged under such agreement for the
provision of Basic Services (the "Closing Rate") is less than $13.09 per unit of
Sea Colony per month, the Purchase Price shall be decreased by an amount equal
to (x) $1,534,126 (the "Sea Colony Adjustment") minus (y) the Units calculated
using the Closing Rate times $1,507.
(ii) If as of the Closing Date, (x) Seller has not
obtained the Sea Colony Consent and (y) Seller has received written notice from
Carl M. Freeman Associates, Inc. (or any successor thereto) that Buyer will not
be permitted to provide Basic Services to the Units after the Closing Date (a
"Sea Colony Notice"), then the Purchase Price shall be decreased by an amount
equal to the Sea Colony Adjustment.
(iii) If as of the Closing Date Seller (x) has not
obtained the Sea Colony Consent, (y) has not received a Sea Colony Notice and
(z) is not providing Basic Services to the Units, then the Purchase Price shall
be decreased by an amount equal to the Sea Colony Adjustment and at Closing
Buyer shall place into escrow an amount equal to the Sea Colony Adjustment.
(iv) If as of the Closing Date Seller (x) has not
obtained the Sea Colony Consent, (y) has not received a Sea Colony Notice and
(z) is providing Basic Services to the Units, then at Closing Seller shall place
into escrow a portion of the Purchase Price equal in amount to the Sea Colony
Adjustment.
(v) Any funds placed into escrow pursuant to
paragraph (iii) or (iv) of this Section 3.3(c) shall be released (together with
any interest earned thereon) as follows:
(x) if Buyer does not provide, or ceases to provide, Basic Services to
the Units prior to the first anniversary of the Closing Date and does not
commence or recommence providing such services for a continuous period of 180
days, then on the 181st day:
(i) to Seller, an amount equal to 50% of any revenue
attributable to the provision of cable services to the Units for the period from
the Closing Date to the date Buyer ceases providing such services; and
12
(ii) the balance to Buyer;
provided, that if within 180 days after the first date on which Buyer does not
provide, or ceases to provide, Basic Services to the Units, Buyer commences or
recommences providing such services to the Units, then on the fifth Business Day
after Buyer commences or recommences providing such services:
(A) to Buyer, an amount equal to 50% of any loss in revenue
to Buyer attributable to cable services to the Units for the period from the
date Buyer does not provide or ceases to provide Basic Services to the Units to
the date of commencement of such services based on an amount per month equal to
the average monthly revenue received or accrued (in accordance with GAAP) by
Seller for the Units for the twelve months prior to Closing (the "Units
Revenue"); and
(B) the balance to Seller;
provided, further, that if the rate charged by Buyer for the provision of Basic
Services (the "New Rate") is less than $13.09 per unit of Sea Colony per month,
then on the fifth Business Day after such agreement:
(1) to Buyer, an amount equal to 50% of any loss in revenue
attributable to cable services to the Units for the period from the date Buyer
does not provide or ceases to provide Basic Services to the Units to the date of
commencement of such services based on an amount per month equal to the Unit
Revenue plus an amount equal to (a) the Sea Colony Adjustment minus (b) the
Units calculated using the New Rate times $1,507; and
(2) the balance to Seller;
(y) if Buyer enters into a written agreement to provide Basic Services
to the Units, then on the fifth Business Day after such agreement:
(i) to Buyer, an amount equal to 50% of any loss in revenue
to Buyer attributable to cable services to the Units for the period from the
date Buyer does not provide or ceases to provide Basic Services to the Units to
the date of commencement of such services based on an amount per month equal to
the Units Revenue; and
(ii) the balance to Seller;
provided, however, that if the New Rate charged under Buyer's agreement for the
provision of Basic Services is less than $13.09 per unit of Sea Colony per
month, then on the fifth Business Day after such agreement:
(A) to Buyer, an amount equal to 50% of any loss in revenue
attributable to cable services to the Units for the period from the date Buyer
does not provide or ceases to provide
13
Basic Services to the Units to the date of commencement of such services based
on an amount per month equal to the Units Revenue plus an amount equal to (a)
the Sea Colony Adjustment minus (b) the Units calculated using the New Rate
times $1,507; and
(B) the balance to Seller; or
(z) if Buyer commences or recommences providing Basic Services to the
Units without having entered into an agreement therefor and, on the first
anniversary of the Closing Date, is regularly so providing such services, then,
on the first anniversary of the Closing Date:
(i) to Buyer, an amount equal to 50% of any loss in revenue
to Buyer attributable to cable services to the Units for the period from the
date Buyer does not provide or ceases to provide Basic Services to the Units to
the date of commencement or recommencement of such services based on an amount
per month equal to the Units Revenue; and
(ii) the balance to Seller;
provided, however, that if the New Rate actually charged by Buyer for the
provision of Basic Services is less than $13.09 per Unit of Sea Colony per
month, then
(A) to Buyer, 50% of any loss in revenue to Buyer
attributable to cable services to the Units for the period from the date Buyer
does not provide or ceases to provide Basic Services to the Units to the date of
commencement or recommencement of such services based on an amount per month
equal to the Units Revenue, plus an amount equal to (a) the Sea Colony
Adjustment minus (b) the Units calculated using the New Rate times $1,507; and
(B) the balance to Seller.
(vi) If the Subscriber Average calculated as of the
earlier of the Closing Date and April 30, 1997 is greater than 27,582, then any
adjustment to the Purchase Price and any amount to be placed into escrow by
Seller or Buyer pursuant to paragraphs (iii) and (iv) of this Section 3.3(c)
shall be decreased by an amount equal to the difference between 27,582 and the
Subscriber Average calculated as of the earlier of the Closing Date and April
30, 1997, times $1,507.
(vii) If (A) the Purchase Price is adjusted pursuant
to paragraph (ii) of this Section 3.3(c) or any portion of the escrow funds are
released to Buyer pursuant to Section 3.3(c)(v)(x)(ii) and (B)(i) on or prior to
the first anniversary of the Closing Date Buyer enters into a written agreement
to commence or recommence providing Basic Services to the Units or (ii) on the
first anniversary of the Closing Date Buyer is in fact regularly providing such
services (whether or not pursuant to an agreement), then Buyer shall pay to
Seller an amount equal to (i)(a) the amount of the Sea Colony Adjustment or (b)
if the New Rate is less than $13.09 per unit of Sea Colony per month, an amount
equal to the Units calculated using the New Rate times $1,507 minus (ii) 50% of
any loss in revenue to Buyer attributable to cable services to the Units
14
for the period from the date Buyer does not provide or ceases to provide Basic
Services to the Units to the date of commencement of such services based on an
amount per month equal to the Units Revenue; such payment shall be made to
Seller in cash (by means of interbank transfer in immediately available funds)
within 10 Business Days of commencement of such services but in no event later
than the first anniversary of the Closing Date.
(d) If as of the Closing Date Seller has not
obtained the Tunnell Properties Consent, then at Closing Seller shall place into
escrow a portion of the Purchase Price equal to (a) the average number of
Equivalent Basic Subscribers that are the subject of the Tunnell Properties
Consent included in the Subscriber Average times (b) $1,507 (the "Tunnell
Properties Adjustment"). The Tunnell Properties Adjustment shall be released
from escrow (together with any interest earned thereon) as follows:
(x) if Buyer does not provide, or ceases to provide, Basic Services to
the Tunnell Properties Subscribers and does not commence or recommence providing
such services for a continuous period of 45 days, then on the 46th day:
(i) to Seller, an amount equal to 50% of any revenue
attributable to the provision of cable services to the subscribers that are the
subject of the Tunnell Properties Consent (the "Tunnell Properties Subscribers")
from the Closing Date to the date Buyer ceases providing such services; and
(ii) the balance to Buyer;
(y) if Seller obtains the Tunnell Properties Consent or Buyer enters
into a written agreement to provide Basic Services to the Tunnell Properties
Subscribers, then on the fifth Business Day after the date of such agreement:
(i) to Buyer, an amount equal to 50% of any loss in revenue
attributable to cable services to the Tunnell Properties Subscribers for the
period from the date Buyer does not provide or ceases to provide Basic Services
to the Tunnell Properties Subscribers to the date of commencement of such
services based on an amount per month equal to the average monthly revenue
received or accrued (in accordance with GAAP) by Seller for the Tunnell
Properties Subscribers for the twelve months prior to Closing (the "Tunnell
Revenue") and
(ii) the balance to Seller; or
(z) if not theretofor released, then on the date which is the first
anniversary of the Closing, to Seller.
If (A) any portion of the Tunnell Properties Adjustment is released from escrow
to Buyer pursuant to Section 3.3(d)(x)(ii) and (B)(i) on or prior to the first
anniversary of the Closing Buyer enters into a written agreement to commence
providing Basic Services to the Tunnell Properties Subscribers or (ii) on the
first anniversary of the Closing Date Buyer is in fact
15
regularly providing such services (whether or not pursuant to an agreement),
then Buyer shall pay to Seller an amount equal to (i) the Tunnell Properties
Adjustment minus (ii) 50% of any loss of revenue attributable to cable services
to the Tunnell Properties Subscribers for the period from the date Buyer does
not provide or ceases to provide such services to the date of commencement or
recommencement of such services based on an amount per month equal to the
Tunnell Revenue.
(e) If as of the Closing Date Seller has not
obtained the Angola Consent, then at Closing Seller shall place into escrow a
portion of the Purchase Price equal to (a) the average number of Equivalent
Basic Subscribers that are the subject of the Angola Consent included in the
Subscriber Average times (b) $1,507 (the "Angola Adjustment"). The Angola
Adjustment shall be released from escrow (together with any interest earned
thereon) as follows:
(x) if Buyer does not provide, or ceases to provide, Basic Services to
the Angola Subscribers and does not commence or recommence providing such
services for a continuous period of 45 days, then on the 46th day:
(i) to Seller, an amount equal to 50% of any revenue
attributable to the provision of cable services to the subscribers that are the
subject of the Angola Consent (the "Angola Subscribers") from the Closing Date
to the date Buyer does ceases providing such services; and
(ii) the balance to Buyer;
(y) if Seller obtains the Angola Consent or Buyer enters into a
written agreement to provide Basic Services to the Angola Subscribers, then on
the fifth Business Day after the date of such agreement:
(i) to Buyer, an amount equal to 50% of any loss in revenue
attributable to cable services to the Angola Subscribers for the period from the
date Buyer does not provide or ceases to provide Basic Services to the Angola
Subscribers to the date of commencement of such services based on an amount per
month equal to the average monthly revenue received or accrued (in accordance
with GAAP) by Seller for the Angola Subscribers for the twelve months prior to
Closing (the "Angola Revenue"); and
(ii) the balance to Seller; or
(z) if not theretofor released, then on the date which is the first
anniversary of the Closing, to Seller.
If (A) any portion of the Angola Adjustment is released from escrow to Buyer
pursuant to Section 3.3(e)(x)(ii) and (B)(i) on or prior to the first
anniversary of the Closing Buyer enters into a written agreement to commence
providing Basic Services to the Angola Subscribers or (ii) on or prior to the
first anniversary of the Closing Date Buyer is in fact regularly providing such
16
services (whether or not pursuant to an agreement), then Buyer shall pay to
Seller an amount equal to (i) the Angola Adjustment minus (ii) 50% of any loss
of revenue attributable to cable services to the Angola Subscribers for the
period from the date Buyer does not provide or ceases to provide such services
to the date of commencement or recommencement of such services based on an
amount per month equal to the Angola Revenue.
3.4 Preliminary and Final Settlements. Preliminary and final
adjustments to the Purchase Price will be determined as follows:
(a) At least ten Business Days prior to the Closing
Date, Seller will deliver to Buyer a report (the "Preliminary Adjustments
Report"), prepared in good faith and on a reasonable basis, setting forth in
reasonable detail Seller's estimate as of the Closing Date of the prorations set
forth in Section 3.2 and the adjustments set forth in Section 3.3. The
Preliminary Adjustments Report shall be certified by an authorized officer of
the general partner of the General Partner to have been prepared in good faith
and on a reasonable basis. Seller shall provide Buyer with such information as
Buyer may reasonably request to verify the proposed prorations and adjustments.
If Buyer gives notice to Seller that it reasonably believes that any of the
proposed prorations or adjustments are materially incorrect and the parties are
unable to resolve the dispute prior to Closing, the disputed amount shall be
deposited with the Escrow Agent, to be administered and distributed in
accordance with the terms of this Agreement and the Escrow Agreement, pending
final resolution of the adjustments pursuant to Section 3.4(b).
(b) Within 60 days after the Closing Date, Seller
will deliver to Buyer a report (the "Final Adjustments Report"), prepared in
good faith and on a reasonable basis, setting forth in reasonable detail the
final determination of the prorations set forth in Section 3.2 and the
adjustments set forth in Section 3.3. The Final Adjustments Report shall make
such changes to the Preliminary Adjustments Report as are necessary to cover
those prorations or adjustments which (i) were estimated or were not calculated
as of the Closing Date in the Preliminary Adjustments Report and (ii) were
adjusted in the Preliminary Adjustments Report and which require subsequent
adjustment. The Final Adjustments Report shall be certified by an authorized
officer of the general partner of the General Partner to be true, complete and
correct as of the date it is delivered.
Buyer shall provide Seller with reasonable access to all
records which Buyer has in its possession and which are necessary for Seller to
prepare the Final Adjustments Report. Seller shall provide Buyer with reasonable
access to all records which Seller has in its possession which are necessary for
Buyer to review and verify the Final Adjustments Report.
(c) Within 30 days after receipt of the Final
Adjustments Report, Buyer shall review the Final Adjustments Report and notify
Seller whether or not Buyer accepts all or any of the prorations and adjustments
set forth on the Final Adjustments Report. If Buyer accepts the Final
Adjustments Report with respect to all prorations and adjustments contained
therein, Buyer or Seller, as appropriate, shall, within ten Business Days of
such acceptance, make the following payments: (i) if the Purchase Price
calculated based on the Final Adjustments
17
Report is greater than the Purchase Price calculated based on the Preliminary
Adjustments Report, Buyer shall pay such difference to Seller in cash by wire or
interbank transfer in immediately available funds, or (ii) if the Purchase Price
calculated based on the Final Adjustments Report is less than the Purchase Price
calculated based on the Preliminary Adjustments Report, Seller shall pay such
difference to Buyer in cash by wire or interbank transfer in immediately
available funds. In the event any payment required by this Section 3.4(c) is not
made when due, Seller or Buyer, as appropriate, shall make the payment required
by this Section 3.4(c) with interest accruing from the date such payment was due
at the Prime Rate plus 5%.
(d) If Buyer in good faith objects to any prorations
and/or adjustments set forth on the Final Adjustments Report, Buyer shall give
notice thereof to Seller within 30 days after receipt of the Final Adjustments
Report, specifying in reasonable detail the nature and extent of such
disagreement and Buyer and Seller shall have a period of 30 days from Seller's
receipt of such notice in which to resolve such disagreement. If such notice of
objection is not received by Seller within 30 days after receipt of the Final
Adjustments Report, it shall be deemed that Buyer has accepted the Final
Adjustments Report with respect to all items set forth therein and within ten
Business Days after the expiration of such 30-day period Buyer or Seller, as
appropriate, shall make the payments described in Section 3.4(c). Any disputed
amounts which cannot be agreed to by the parties within 30 days from Seller's
receipt of Buyer's notice of objection to any of the adjustments set forth in
the Final Adjustments Report shall be determined by a nationally recognized
accounting firm selected by Buyer and Seller which has not been employed by
Buyer or Seller for two years prior to the date hereof (the "Accountants") in
accordance with the engagement letter set forth on Exhibit C attached hereto
with such changes as may be requested by the Accountants and approved by Seller
and Buyer. The engagement of and the determination by the Accountants shall be
binding on and shall be nonappealable by Seller and Buyer. In the event that (a)
the Purchase Price calculated based on the determination of the Accountants is
less than the Purchase Price calculated based on the Final Adjustments Report,
the fees and expenses payable to the Accountants shall be paid by Seller or (b)
the Purchase Price calculated based on the determination of the Accountants is
greater than or equal to the Purchase Price calculated based on the Final
Adjustments Report, the fees and expenses payable to the Accountants shall be
paid by Buyer. Within ten Business Days after the determination by the
Accountants of all disputed prorations and/or adjustments, Buyer or Seller, as
appropriate, shall make the payments described in Section 3.4(c) as if the
determinations of the Accountants were included in the Final Adjustments Report.
In the event any payment required by this Section 3.4(d) is not made when due,
Seller or Buyer, as appropriate, shall make the payment required by this Section
3.4(d) with interest accruing from the date such payment was due at the Prime
Rate plus 5%.
3.5 Disputed Liabilities. If a proration or adjustment to
the Purchase Price is made in Buyer's favor for any liability assumed by Buyer
but is in good faith being contested by Seller as of the Closing Date, and if
Buyer is relieved of this liability, Buyer shall pay to Seller or its designee
in cash (by means of wire or interbank transfer in immediately available funds)
an amount equal to the unpaid portion of this liability within five Business
Days after the date
18
Buyer receives written notice and such additional documentation as Buyer may
reasonably request, all in form and substance reasonably acceptable to Buyer,
that it is relieved of this liability. In the event any payment required by this
Section 3.5 is not made by Buyer when due, Buyer shall make the payment required
by this Section 3.5 with interest accruing from the date such payment was due at
the Prime Rate plus 5%.
3.6 Allocation of Purchase Price. The Purchase Price shall
be allocated among the classes of assets set forth in Section 1060 of the Code
and the regulations thereunder in the manner agreed to by the parties prior to
the Closing. After the Closing, Seller shall cooperate with Buyer in the
preparation, execution and filing with the IRS of all information returns and
supplements thereto required to be filed by the parties under Section 1060 of
the Code relating to the allocation of such consideration, and Seller and Buyer
agree to file Form 8594 (or any substitute therefor) when required by applicable
law.
ARTICLE IV
4. Assumed Liabilities and Excluded Assets.
4.1 Assignment and Assumption. (a) Seller will assign, and
Buyer will assume and perform, all liabilities and obligations of Seller arising
out of the conduct of the Business, but excluding the Excluded Liabilities
(collectively, the "Assumed Liabilities"). Without limiting the generality of
the foregoing, the Assumed Liabilities shall include the following liabilities
and obligations of Seller: (A) Seller's obligations to subscribers of the
Business for (i) refunds of subscriber deposits held by Seller as of the Closing
Date in respect of which a Purchase Price adjustment is made in Buyer's favor
under Section 3.3(b), (ii) refunds of subscriber advance payments held by Seller
as of the Closing Date for services to be rendered by the System after the
Closing Date, in respect of which a Purchase Price adjustment is made in Buyer's
favor under Section 3.3(b) and (iii) the delivery of cable television service to
customers of the System after the Closing Date in a manner consistent with past
practice; (B) obligations and liabilities in respect of which a Purchase Price
adjustment in Buyer's favor is made under Section 3.3 including, but not limited
to, accrued but unpaid real and personal property taxes related to the Assets
which correspond to a period of time prior to the Adjustment Time, expenses
accrued under Governmental Permits and Seller Contracts which correspond to a
period of time prior to the Adjustment Time and certain accrued vacation pay;
(C) obligations accruing and relating to periods on or after the Adjustment Time
under Governmental Permits and Seller Contracts; and (D) any taxes accrued from
or after the Adjustment Time in connection with the ownership of the Assets and
the ownership of the Assets and the operation of the Business.
(b) Buyer will not assume or have any responsibility
for any liabilities or obligations of Seller which arise out of, result from, or
relate to, (i) the Excluded Assets or (ii) the conduct of the Business prior to
the Adjustment Time (except to the extent a Purchase Price adjustment in Buyer's
favor was made under Section 3.3(b)) (collectively, the "Excluded Liabilities").
19
4.2 Excluded Assets. Excluded from the assets which will be
transferred from Seller to Buyer pursuant to this Agreement (collectively, the
"Excluded Assets") are all assets not specifically identified in this Agreement
as being transferred from Seller to Buyer. Without limiting the foregoing,
"Excluded Assets" shall include all Seller's right, title and interest in, to
and under the following: (a) all programming agreements relating to the
Business; (b) all insurance policies and rights and claims thereunder (except as
otherwise provided in Section 7.9(a)); (c) all bonds, letters of credit, surety
instruments and other similar items and any cash surrender value thereunder; (d)
all cash, cash equivalents and securities; (e) all trademarks, trade names,
service marks, service names, logos and similar proprietary rights used in the
Business, provided that Buyer shall have the right to use such proprietary
rights for the period commencing on the Closing Date and expiring 120 days after
the Closing Date; (f) any contracts, licenses, authorizations, agreements or
commitments which are not assumed by Buyer pursuant to this Agreement; (g) the
Management Agreement; (h) any asset or properties owned or leased by Seller that
are not used in the Business; (i) all subscriber deposits and advance payments
held by Seller as of the Closing Date in connection with the operation of the
Business for which a Purchase Price adjustment is made in Buyer's favor under
Section 3.3(b); (j) all claims, rights and interests in and to any refund for
federal, state or local franchise, income or other taxes or fees (including, but
not limited to copyright fees) of any nature relating to the operation of the
Business prior to the Closing Date; (k) the account books of original entry,
general ledgers and financial records used in connection with the Business,
provided that for a period of three years after the Closing Date, Buyer shall
have access to and the right to copy, at its expense, during usual business
hours upon reasonable prior notice to Seller, portions of such books and records
that are relevant to Buyer's ownership and operation of the System; (1) the
retransmission consent agreements relating to the carriage of WMAR, WBAL, WTTG
and WJZ; and (in) those properties, rights and interests set forth on Schedule
4.2.
ARTICLE V
5. Representations and Warranties of Seller.
Except with respect to Sections 5.1(b), 5.2(b) and 5.3(c), as
to which TCI and the General Partner, severally as to itself only, and not
Seller, represent and warrant to Buyer, Seller represents and warrants to Buyer
as follows:
5.1 Organization and Qualification. (a) Seller is a limited
partnership duly organized, validly existing and in good standing under the laws
of the state of Colorado and has all requisite partnership power and authority
to own, lease and use the Assets as they are currently owned, leased and used
and to conduct the Business as it is currently conducted. Seller is duly
qualified or licensed to do business and is in good standing under the laws of
each jurisdiction where the Assets are located and the Business is conducted,
except any such jurisdiction where the failure to be so qualified or licensed
and in good standing would not have a material adverse effect on the validity,
binding effect or enforceability of this Agreement, or on the ability of Seller
to perform its obligations under this Agreement.
20
(b) Each of TCI and the General Partner is a
corporation or limited partnership, as the case may be, duly organized, validly
existing and in good standing under the laws of its state of incorporation or
formation.
5.2 Authority and Validity. (a) Seller has full
partnership power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby by
Seller have been duly and validly authorized by all necessary action on the part
of Seller (other than, with respect to the sale of the Assets, the approval of
such transaction contemplated by this Agreement by the Limited Partners). The
General Partner has taken all necessary action so that it may recommend that the
Limited Partners approve the transactions contemplated by this Agreement. This
Agreement has been duly and validly executed and delivered by Seller and
constitutes a valid and binding obligation of Seller enforceable in accordance
with its terms. Except for the approval by the Limited Partners, no further
partnership action on the part of Seller is required in connection with the
consummation of the transactions contemplated by this Agreement.
(b) Each of TCI and the General Partner has all
requisite corporate or partnership, as the case may be, power and authority to
execute, deliver and perform its obligations under this Agreement. The execution
and delivery by each of TCI and the General Partner of, and the performance by
each of TCI and the General Partner of its respective obligations under, this
Agreement have been duly authorized by all requisite corporate or partnership
action, as the case may be, of TCI and the General Partner, as the case may be,
and no other corporate or partnership proceedings, as the case may be, on the
part of TCI or the General Partner, as the case may be, are necessary to
authorize the execution and delivery of this Agreement or the performance of
TCI's or the General Partner's respective obligations hereunder. This Agreement
has been duly and validly executed and delivered by each of TCI and the General
Partner and constitutes a valid and binding agreement of each of TCI and the
General Partner, enforceable in accordance with its terms.
5.3 Consents and Approvals; No Violation. (a) Except for
(i) the Consents, (ii) filings, consents or other actions which, if not made or
obtained, would not have a material adverse effect on any of the Assets material
to the Business, the System, the Business, Seller's ability to perform its
obligations under this Agreement or Buyer's ability to conduct the Business
after the Closing in substantially the same manner in which it is currently
conducted by Seller, (iii) the consent of the Limited Partners with respect to
the transactions contemplated by this Agreement and (iv) the Regulatory
Requirements, no consent, waiver, action, approval or authorization of, or
filing, registration or qualification with, any Person or Governmental Authority
is required to be made or obtained by Seller in connection with the execution,
delivery and performance of this Agreement by Seller.
(b) Except as set forth on Schedule 5.3(b), the
execution, delivery and performance of this Agreement by Seller do not and will
not: (a) violate or conflict with any provision of its Certificate of Limited
Partnership or the Partnership Agreement; (b) violate any
21
Legal Requirement; or (c) (i) violate, conflict with or constitute a breach of
or default under (without regard to requirements of notice, passage of time or
elections of any Person), (ii) permit or result in the termination, suspension
or modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Seller under, or (iv) result in the
creation or imposition of any Encumbrance under, any Seller Contract or any
other instrument evidencing any of the Assets or any instrument or other
agreement to which Seller is a party or by which Seller or any of its assets is
bound or affected, except such violations, conflicts, breaches, defaults,
terminations, suspensions, modifications, and accelerations which would not,
individually or in the aggregate, have a material adverse effect on the Assets,
taken as a whole, the System, the Business, or Seller's ability to perform its
obligations under this Agreement or Buyer's ability to conduct the Business
after the Closing in substantially the same manner in which it is currently
conducted by Seller.
(c) The execution, delivery and performance of this
Agreement by each of TCI and the General Partner do not and will not violate or
conflict with any provision of TCI's or the General Partner's respective
Certificate of Incorporation or By-Laws or Certificate of Limited Partnership or
partnership agreement, as the case may be.
5.4 Complete Systems. Except as set forth on Schedule
5.4, the Assets represent all assets, properties, franchises, licenses, permits,
consents, certificates, authorities, operating rights, leases, contracts (with
the exception of programming contracts and retransmission consents included in
the Excluded Assets which Buyer acknowledges may need to be replaced in order
for Buyer to continue to operate the Business), agreements, commitments and
arrangements owned or used by Seller in the Business and reasonably necessary
for the conduct of the Business in the ordinary course in the same manner as
that in which the Business is currently conducted by Seller.
5.5 Title. Except as set forth on Schedule 5.5 and for
the Permitted Encumbrances, Seller has, and on the Closing Date will have and
will transfer to Buyer, good and marketable title to the Assets. The Assets on
the Closing Date will be free and clear of all Encumbrances of any kind or
nature, other than Permitted Encumbrances.
5.6 Real Property. (a) All the Assets consisting of
interests in Real Property that are material to the conduct of the Business are
described on Schedule 1.7. Seller has valid leasehold interests in Real Property
leased by Seller under written leases or subleases, correct and complete copies
of which have been made available to Buyer.
(b) All easements, rights-of-way and other rights
which are necessary in any material respect for Seller's current use of any Real
Property are valid and in full force and effect, and, since July 1, 1992 and, to
the Best of Seller's Knowledge with respect to all periods prior thereto, Seller
has not received any written notice with respect to the termination or breach of
any of those rights.
22
(c) Seller has not given or received any written
notice of the termination of any lease for Real Property. All leases and
subleases pursuant to which any of the Real Property is occupied or used are
valid, subsisting, binding and enforceable in accordance with their respective
terms and there are no existing defaults thereunder or events that with notice
or lapse of time or both would constitute defaults thereunder. To the Best of
Seller's Knowledge, subject to the receipt of any necessary Consents, the
consummation of the transactions contemplated by this Agreement will not result
in any termination of any lease for Real Property.
(d) There is no condemnation, eminent domain,
expropriation or similar proceedings pending or, to the Best of Seller's
Knowledge, threatened against any of the Real Property which, if adversely
determined, would have a material adverse effect on the Assets, the Business or
the System.
(e) There are not pending or, to the Best of Seller's
Knowledge, threatened, any special assessments or any pending proceedings for
changes in the zoning with respect to the Real Property or any part thereof and
Seller has not received any notice of the desire of any public authority or
other entity to take or use any Real Property or any part thereof. All
structures on the Real Property are structurally sound and in good operating
condition and repair (reasonable wear and tear excepted). Each parcel of Real
Property has access (either direct or by an easement included among the Assets)
to all public roads, utilities, and other services necessary for the operation
of the System with respect to such parcel. Seller has complied with all notices
or orders to correct violations of Legal Requirements issued by any Governmental
Authority having jurisdiction against or affecting any of the Real Property.
5.7 Environmental Matters. (a) Except as set forth on
Schedule 5.7 and except for any adverse environmental condition(s) which may be
identified in any environmental report prepared and delivered pursuant to
Section 7.5, to the Best of Seller's Knowledge, Seller's use of the Real
Property complies in all material respects with all Environmental Laws. Seller
has not received written notice or, to the Best of Seller's Knowledge, oral
notice of any claim or investigation based on Environmental Laws which relates
to any Real Property or any operations conducted by Seller on such Real
Property.
(b) Seller has provided Buyer with complete and
correct copies of (i) all studies, reports, samplings, test results, surveys,
submissions, correspondence or other materials in the possession of Seller, TCI
or any of TCI's direct or indirect wholly-owned subsidiaries relating to the
presence or alleged presence of Hazardous Substances at, on or affecting the
Real Property, (ii) all notices or other materials in the possession of Seller,
or TCI or any of TCI's direct or indirect wholly-owned subsidiaries that were
received from any Governmental Authority having the power to administer or
enforce any Environmental Laws relating to current or past ownership, use or
operation of the Real Property or activities at the Real Property and (iii) all
materials in the possession of Seller, TCI or any of TCI's direct or indirect
wholly-owned subsidiaries relating to any claim, allegation or action by any
private third party under any Environmental Law.
23
(c) Except for any adverse environmental condition(s)
which may be identified in any Phase I environmental report prepared and
delivered pursuant to Section 7.5, Seller does not know or have any reason to
know of: (i) the presence, release or threatened release of any Hazardous
Substances in, on, to, from or under the Real Property; (ii) the use, treatment,
storage, disposal or transportation of Hazardous Substance in, on, to, from or
under the Real Property; (iii) any judicial or administrative proceedings
regarding Hazardous Substances or Environmental Laws in connection with the Real
Property or, to the Best of Seller's Knowledge, any threat thereof; or (iv) any
other matter relating to Hazardous Substances or threats to public health or the
environment in connection with the Real Property.
5.8 Compliance with Law; Governmental Permits. (a) Except
as set forth on Schedule 5.8, the ownership, leasing and use of the Assets as
they are currently owned, leased and used by Seller and the conduct of the
Business as it is currently conducted by Seller, do not violate any Legal
Requirement, which violation(s), individually or in the aggregate, reasonably
could be expected to have a material adverse effect on the Assets, taken as a
whole, the System or the Business. Seller has not received any notice claiming a
material violation by Seller or the Business of any Legal Requirement applicable
to Seller or the Business as it is currently conducted and, to the Best of
Seller's Knowledge, no basis exists for any person to claim that such a
violation exists.
(b) Schedule 1.5 lists all Governmental Permits that
are material to the conduct of the Business as it is currently conducted by
Seller. Complete and correct copies of all such Governmental Permits as
currently in effect have been, or prior to Closing will be, made available to
Buyer. All such Governmental Permits are currently in full force and effect.
There is no action, proceeding or investigation pending or, to the Best of
Seller's Knowledge, threatened, relating to the termination, suspension or
modification of any such Governmental Permit and Seller is in compliance in all
material respects with the terms and conditions of all Governmental Permits and
no other Governmental Permits are required in connection with the operation of
the Business in the manner in which it is currently conducted by Seller.
(c) The operation of the System has been, and is, in
compliance in all material respects with the Communications Act of 1934, as
amended (as so amended, the "Communications Act"), and the rules and regulations
of the Federal Communications Commission (the "FCC"), except that, as to any
rate regulation thereunder (other than with respect to the operation of the
System in Unincorporated Sussex County, Delaware) the foregoing is limited to
the Best of Seller's Knowledge. Seller has delivered, or prior to Closing will
deliver, to Buyer complete and correct copies of all reports and filings for the
past three years made or filed pursuant to the Communications Act or FCC rules
and regulations with respect to the Business.
(d) To the Best of Seller's Knowledge, the operation
of the System has been, and is, in compliance in all material respects with the
Cable Television Consumer Protection and Competition Act of 1992 (the "Cable
Act"), and the rules and regulations of the FCC promulgated thereunder.
24
(e) To the Best of Seller's Knowledge, the operation
of the System has been, and is, in compliance in all material respects with the
Telecommunications Act of 1996 (the "Telecom Act"), and the rules and
regulations of the FCC promulgated thereunder.
(f) With the exception of Delaware Public Service
Commission, as of the date of this Agreement no Governmental Authority has
notified Seller of its application to be certified to regulate rates or its
attempt to regulate rates with respect to the System.
(g) The rates charged by the System as of the date of
this Agreement are in compliance in all material respects with current FCC rate
regulations.
5.9 Seller Contracts. Schedule 1.8 lists each Seller
Contract, as of the date of this Agreement, that is (i) material to the conduct
of the Business as it is now conducted, (ii) involves annual payments in excess
of $l0,000 or (iii) is not terminable without material penalty on 90 days'
notice or less. Complete and correct copies of the Seller Contracts as currently
in effect have been made available to Buyer. Neither Seller nor, to the Best of
Seller's Knowledge, any other party to any Seller Contract is in any material
respect in breach of the performance of its obligations under any Seller
Contract. Except as set forth on Schedule 5.9, Seller has not received any
written notice with respect to termination of any Seller Contract that is
material to the conduct of the Business as it is now conducted.
5.10 Copyright Compliance. Seller has deposited with the
United States Copyright Office all statements of account and other documents and
instruments, and paid all royalties, supplemental royalties, fees and other sums
to the United States Copyright Office, required under the Copyright Act with
respect to the Business and operations of the System as are required to obtain,
hold and maintain the compulsory copyright license for cable television systems
prescribed in Section 111 of the Copyright Act and the rules and regulations of
the United States Copyright Office promulgated thereunder. Seller and the System
are in material compliance with the Copyright Act. Seller and the System are
entitled to hold and do now hold the compulsory copyright license described in
Section 111 of the Copyright Act, which compulsory copyright license is in full
force and effect and has not been revoked, canceled, encumbered or materially
adversely affected in any manner. Seller has made available to Buyer complete
and correct copies of all reports and filings, and all reports and filings for
the past three years, made or filed pursuant to the Copyright Act with respect
to the Business. Seller has not received any notice to the effect that the
conduct of the Business as currently conducted infringes on the rights of any
Person in any copyright or other intellectual property right, except as to
potential copyright liability arising from the performance, exhibition or
carriage of any music on the System relating to claims made by music licensing
organizations (such as ASCAP, BMI and SESAC) that operators of cable television
systems are responsible for payment of music performing rights license fees for
certain music cablecast on such systems.
5.11 Financial Statements. (a) Seller has delivered to
Buyer correct and complete copies of certain financial information for the
System for the years ended December 31, 1995 and December 31, 1994 and the nine-
month period ended September 30, 1996 (collectively,
25
the "Seller Financial Statements"). Except for the absence of footnote
disclosures, cash flow statements and statements of equity and except for
estimated, annualized or projected financial information, the Seller Financial
Statements fairly present, in all material respects, the results of operations
of the System for the respective periods ended on such dates, all in conformity
with GAAP consistently applied with full allocations of all costs, expenses and
overhead associated with operating the System, and with respect to the Seller
Financial Statements for the nine-month period ended September 30, 1996, subject
to normal year-end adjustments (none of which are expected to be material in
amount). Seller has delivered correct and complete copies of balance sheets and
capital expenditure reports for the System as of December 31, 1994, December 31,
1995 and September 30, 1996, each prepared in the ordinary course of business.
(b) Since the latest date of the Seller Financial
Statements (i) the Business has been operated only in the ordinary course and
(ii) there has been no material adverse change in, and no event has occurred
which, so far as reasonably can be foreseen, is likely, individually or in the
aggregate, to result in any material adverse change in the results of operations
of the Business, other than any change arising out of matters of a general
economic nature or matters (including, but not limited to, competition caused by
or arising from direct broadcast satellite, the Multichannel Multipoint
Distribution Service, legislation, rule making and regulation) affecting the
cable television industry (national or regional) in general.
5.12 Legal Proceedings. Except as set forth on Schedule
5.12, and except for any judgments, orders, actions, suits, proceedings or
investigations as may affect the cable television industry (national or
regional) generally, there is no judgment or order outstanding, or any action,
suit, proceeding or investigation by or before any Governmental Authority or any
arbitrator pending or, to the Best of Seller's Knowledge, threatened, involving
or affecting any of the Assets or the Business which, if adversely determined,
would have a material adverse effect on the Assets or the Business or would
materially impair the ability of Seller to perform its obligations under this
Agreement.
5.13 Employment Matters. (a) Seller does not employ any
individuals in connection with the operation of the Business and does not, and
is not obligated to, maintain or contribute to any employee benefit plan, as
defined in Section 3(3) of ERISA. All individuals managing the operations of the
Business are employees of TCI or its Affiliates (other than Seller) (the
"Employer"). The Employer is reimbursed for employee-related expenses relating
to the operations of the Business by Seller under the Management Agreement or
the Partnership Agreement.
(b) To the Best of Seller's Knowledge, Employer has
complied in all material respects with all Legal Requirements relating to the
employment of labor and those relating to wages, hours, collective bargaining,
unemployment compensation, worker's compensation, equal employment opportunity,
age and disability discrimination, immigration control and the payment and
withholding of taxes with respect to employees of Employer who primarily perform
services in connection with the operation of the Business.
26
(c) Employer is not a party to any contract with any
labor organization, and Employer has not recognized or agreed to recognize any
union or other collective bargaining unit with respect to employees of Employer
who primarily perform services in connection with the operation of the Business.
To the Best of Seller's Knowledge after reasonable inquiry of Employer, and
except as set forth on Schedule 5.13(c), no union or other collective bargaining
unit has been certified as representing any of the employees engaged in the
operation of the Business, and, to the Best of Seller's Knowledge after
reasonable inquiry of Employer, Employer has not received any request from any
party for recognition as a representative of employees engaged in the operation
of the Business for collective bargaining purposes. Neither Seller nor Employer
is party to any agreement, oral or written, express or implied, that would
require Buyer to employ any individual after the Closing Date.
(d) Schedule 5.13(d) sets forth a true and complete
list of all individuals employed by Employer who primarily perform services with
respect to the operation of the Business together with their position and salary
as of the date of this Agreement and their date of hire by Employer. Neither
Seller nor Employer is a party to any written employment contract, agreement,
commitment or arrangement with any individual identified on Schedule 5.13(d).
(e) Except for those plans described on Schedule
5.13(e) and in the TCI Employee Handbook dated February, 1995 (the "Employer
Plans"), which are sponsored by the Employer, or to which the Employer
contributes or is obligated to contribute, the employees of Employer who
primarily perform services with respect to the operation of the Business do not
receive benefits under any bonus, deferred compensation, pension,
profit-sharing, retirement, severance pay, insurance, stock purchase, stock
option, or other fringe benefit plan, arrangement or practice, or any other
employee benefit plan, as defined in Section 3(3) of ERISA.
(f) Seller has not incurred or taken any action, and
to the Best of Seller's Knowledge, no action or event has occurred, that could
cause Seller to incur any material liability (i) under Section 412 of the Code
or Title IV of ERISA with respect to any Employer Plan that is a single-employer
plan, within the meaning of Section 4001(a)(15) of ERISA, (ii) on account of a
partial or complete withdrawal from any Employer Plan that is a multiemployer
plan, within the meaning of Section 3(37) of ERISA, or on account of any unpaid
contributions to any such multiemployer plan, or (iii) for any tax or penalty
under Section 4975 of the Code or Section 502(i) of ERISA on account of any
prohibited transaction, within the meaning of Section 4975 of the Code or
Section 406 of ERISA, with respect to any Employer Plan.
5.14 System Information. The number of Equivalent Basic
Subscribers served by the System, the number of subscribers served by the System
taking Expanded Basic Services and the bandwidth of the System, the approximate
number of Homes Passed by the System and the approximate number of miles of
plant included in the Assets, each as of June 30, 1996, are as set forth on
Schedule 5.14. Approximately twenty-eight percent of miles of plant included in
the System are built to at least 450 MHz. As of the date of this Agreement,
there are no pending complaints by subscribers or other users of the System.
27
5.15 Finders and Brokers. Except for its engagement of
Daniels & Associates, L.P. to assist Seller in the solicitation of offers to
purchase the Assets and except for a disposition fee payable by Seller to an
Affiliate pursuant to its Partnership Agreement, Seller has not employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement.
5.16 Tax Matters. Except as set forth on Schedule 5.16,
(a) all Tax Returns required to be filed by Seller before the Closing with
respect to the Business or the Assets have been or will be filed on or before
the Closing and (b) all Taxes shown as due or payable before the Closing on such
Tax Returns have been or will be paid when required by law. To the Best of
Seller's Knowledge, there are no outstanding deficiencies or assessments of tax,
interest or penalties which could be imposed on Buyer or could reasonably be
expected to constitute or result in a lien on the Assets in Buyer's hands.
5.17 Inventory. The inventory of the System has been
maintained at adequate levels for the operation of the Business (for an ordinary
cycle of thirty days) consistent with the past practices of Seller.
5.18 Insurance. Seller has maintained insurance policies
in the ordinary course of business which when taken together provide insurance
coverage for the Assets and the operations of the Business as is customary for
similar businesses similarly situated.
5.19 Accounts Receivable. The Accounts Receivable arose
from bona fide transactions in the ordinary course of business and reflect
credit terms consistent with the past practices of Seller.
5.20 Restoration. No property of any Person has been
damaged, destroyed, disturbed or removed in the process of construction or
maintenance of the System, which has not been, or will not be, prior to the
Closing, repaired, restored or replaced and as to which an adequate reserve has
not been established by Seller.
5.21 Equipment. The Equipment is and will be at Closing in
adequate condition and repair to operate the business as currently conducted
(reasonable wear and tear excepted).
5.22 Microwave Replacement. As of the date of this
Agreement, Seller has completed the replacement of all AML microwave
transmissions with fiber plant.
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ARTICLE VI
6. Buyer's Representations and Warranties.
Buyer represents and warrants to Seller as follows:
6.1 Organization and Qualification. Buyer is a limited
liability company, duly organized, validly existing and in good standing under
the laws of its state of formation and has all requisite limited liability
company power and authority to carry on its business as currently conducted and
to own, lease, use and operate its assets. Buyer is duly qualified or licensed
to do business and is in good standing under the laws of each jurisdiction in
which the character of the properties owned, leased or operated by it or the
nature of the activities conducted by it makes such qualification necessary,
except where the failure to be so qualified or licensed and in good standing
would not have a material adverse effect on the validity, binding effect or
enforceability of this Agreement or the ability of Buyer to perform its
respective obligations under this Agreement.
6.2 Authority, and Validity. Buyer has all requisite
limited liability company power and authority to execute, deliver and perform
its obligations under this Agreement. The execution and delivery by Buyer of,
the performance by Buyer of its obligations under, and the consummation by Buyer
of the transactions contemplated by, this Agreement have been duly authorized by
all requisite limited liability company action of Buyer and no other limited
liability company proceedings on the part of Buyer are necessary to authorize
the execution and delivery of this Agreement or the performance of Buyer's
obligations hereunder. This Agreement has been duly and validly executed and
delivered by Buyer and constitutes a valid and binding agreement of Buyer
enforceable in accordance with its terms.
6.3 No Breach or Violation. (a) Except for (i) any
consents that will be obtained by Buyer or waived on or prior to the Closing
Date and are identified on Schedule 6.3(a), (ii) filings and consents which, if
not made or obtained, would not have a material adverse effect on Buyer's
ability to perform its obligations under this Agreement and (iii) the Regulatory
Requirements, no consent, waiver, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority is required to be
made or obtained by Buyer in connection with the execution, delivery and
performance of this Agreement by Buyer.
(b) The execution, delivery and performance of this
Agreement by Buyer do not and will not: (a) violate or conflict with any
provision of Buyer's Articles of Organization or operating agreement, (b)
violate any Legal Requirement; or (c) (i) violate, conflict with or constitute a
breach of or default under (without regard to requirements of notice, passage of
time or elections of any Person), (ii) permit or result in the termination,
suspension or modification of, (iii) result in the acceleration of (or give any
Person the right to accelerate) the performance of Buyer under, or (iv) result
in the creation or imposition of any Encumbrance under, any material contract,
agreement, arrangement, commitment or plan to which Buyer is a
29
party or by which Buyer or any of its assets is bound or affected, except such
violations, conflicts, breaches, defaults, terminations, suspensions,
modifications and accelerations as would not, individually or in the aggregate,
have a material adverse effect on Buyer's ability to perform its obligations
under this Agreement.
6.4 Litigation. (a) There are no claims, actions, suits,
proceedings or investigations pending or, to the best of Buyer's knowledge,
threatened, in any court or before any governmental agency or instrumentality,
or before any arbitrator, by or against or affecting or relating to Buyer or any
of its Affiliates which, if adversely determined, would restrain or enjoin the
consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
of such transactions to be rescinded.
(b) There are no judgments, injunctions, orders or
other judicial or administrative mandates outstanding against or affecting Buyer
or any of its Affiliates which would materially hinder or delay the consummation
of the transactions contemplated by this Agreement.
6.5 Financial Statements. Buyer has delivered to Seller
copies of its unaudited financial statements for the period March 12, 1996
through June 30, 1996 ("Buyer Financial Statement"). The Buyer Financial
Statement fairly present, in conformity with GAAP consistently applied except as
may be noted therein, the assets, liabilities and financial condition of Buyer
as of the date thereof and the results of operations and cash flows or changes
in financial position, as applicable, of Buyer for the period ended on such
date, subject to normal year-end adjustments (none of which are expected to be
material in amount), other adjustments noted therein and the absence of
footnotes.
6.6 Adequate Financing. Although as of the date of this
Agreement Buyer does not have a Commitment, Buyer has no reason to believe that
on or prior to June 23, 1997 it will not have received binding commitments
pursuant to which one or more lenders or investors will have agreed to loan or
contribute to Buyer, all funds necessary to satisfy all its obligations under
this Agreement and with respect to the transactions contemplated by this
Agreement, including its obligations to purchase the Assets and to pay the
Purchase Price to Seller.
6.7 Finders and Brokers. Buyer has not employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement for which Seller will in any way
have any liability.
6.8 Qualification of Buyer. Buyer knows of no reason why
it cannot be the transferee of the assignable licenses and permits from Seller
necessary for it to own and operate the Business in the manner in which it is
currently conducted by Seller.
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ARTICLE VII
7. Additional Covenants.
7.1 Access to Premises and Records. Between the date of
execution and delivery of this Agreement and the Closing Date, Seller will give
Buyer and its representatives (including its auditors, accountants, lenders and
potential investors), during normal business hours and with reasonable prior
notice, access to the books and records of the Business, the Assets, the manager
of the System and the employees of Employer listed on Schedule 5.13(d) and will
furnish to Buyer and its representatives such information regarding the Business
and the Assets as Buyer may from time to time reasonably request; provided, that
Buyer shall have access to the employees of Employer listed on Schedule 5.13(d),
other than the manager of the System, solely for purposes of determining which
employees Buyer intends to offer employment as of the Closing Date.
7.2 Continuity and Maintenance of Operations; Financial
Statements. Except as to actions which Buyer has been advised and to which it
has consented in writing and except as specifically permitted or required by
this Agreement or required by any Legal Requirement, Seller shall:
(a) Operate the Business in the ordinary course
consistent with past practices and will use commercially reasonable efforts to
cause Employer to keep available the services of the employees of the Employer
who are primarily involved in the operation of the Business and to preserve any
beneficial business relationships with customers, suppliers and others having
business dealings with Seller relating to the Business;
(b) Maintain the Assets in adequate condition to
operate the Business as currently conducted, subject to normal wear and tear,
consistent with past practice;
(c) Maintain adequate inventories of spare Equipment
consistent with past practice;
(d) Maintain all bonds and insurance as in effect on
the date of this Agreement;
(e) Keep all of its business books, records and files
in the ordinary course of business in accordance with past practices;
(f) Continue to implement its procedures for
disconnection and discontinuance of service to subscribers whose accounts are
delinquent in accordance with those in effect on the date of this Agreement;
(g) Not sell, transfer or assign any Assets other
than in the ordinary course of business;
31
(h) Use commercially reasonable efforts not to permit
any material amendment to, or cancellation of, any of the Governmental Permits
or Seller Contracts;
(i) Not enter into any contract or commitment for the
acquisition of goods or services relating to the System or the Business
involving an expenditure (i) less than or equal to $40,000 other than in the
ordinary course of business consistent with past practice or (ii) in excess of
$40,000 without Buyer's written consent which may not be unreasonably withheld;
provided, that Buyer shall be deemed to have consented thereto if Buyer has not
given Seller written notice of its refusal to give consent, setting forth the
reason for such refusal, within five Business Days of Buyer's receipt of
Seller's written request for consent;
(j) Not take or omit to take any action that would
cause Seller to be in breach of any of its representations or warranties in this
Agreement in any material respect, provided, however, that the foregoing shall
not preclude Seller from engaging a financial advisor to render an opinion as to
the fairness, from a financial point of view, of the transactions contemplated
by this Agreement;
(k) Pay, consistent with past practice, all accounts
payable and other debts, liabilities and obligations of the System and the
Business;
(1) Report and write off Accounts Receivable in
accordance with past practices;
(m) Not create, assume or permit to exist any
Encumbrance (other than Permitted Encumbrances);
(n) Comply in all material respects with all
applicable Legal Requirements;
(o) Maintain service quality of the Business at a
level at least consistent with past practices.
(p) Use commercially reasonable efforts to cause
Employer not to increase the compensation or change any benefits available to
employees who work in the Business except as required pursuant to existing
written agreements or except in the ordinary course of business consistent with
past practice;
(q) Use commercially reasonable efforts to cause
Employer to withhold and pay when due all Taxes relating to the employees of the
Business and shall withhold and pay when due all Taxes relating to the Assets,
the Business and/or the System;
(r) File with the FCC all reports required to be
filed under applicable FCC rules and regulations, and otherwise comply with all
Legal Requirements with respect to the System; and
32
(s) Not implement any new marketing program, policy
or practices, or implement any rate change, retiering or repackaging, except in
the ordinary course of business consistent with past practices.
Seller shall deliver to Buyer, promptly after such statements
and reports become available to Seller, correct and complete copies of unaudited
monthly and quarterly income statements and operating reports for the Business
that are prepared by or for Seller at any time between the date of this
Agreement and the Closing; provided, that Seller shall not be required to make
and shall not be deemed to make any representation or warranty concerning the
accuracy of the contents of any such information delivered to Buyer.
Seller shall deliver to Buyer, promptly after execution
thereof, correct and complete copies of each Seller Contract entered into by
Seller after the date of this Agreement; upon such delivery each such agreement
which has been entered into by Seller in compliance with the provisions of
Section 7.2(i) shall be deemed to be included on Schedule 1.8 for all purposes
of this Agreement; provided, however, that any contract or commitment for which
Buyer's consent is required pursuant to Section 7.2(i) shall not be deemed to be
included on Schedule 1.8 if Buyer has reasonably withheld its consent thereto.
Buyer shall deliver to Seller promptly after such statements
and reports become available to Buyer, correct and complete copies of Buyer's
audited financial statements for the fiscal year ended December 31, 1996, which
statements and the notes thereto shall fairly present the assets, liabilities
and financial condition of Buyer as of the date thereof and the results of
operations and cash flows or changes in financial position, as applicable, of
Buyer for the period ended on such date, all in conformity with GAAP
consistently applied, except as may be noted therein. Unless the Closing occurs
on or before June 30, 1997, Buyer shall deliver to Seller promptly when
available correct and complete copies of Buyer's unaudited financial statements
for the three-months ended March 30, 1997 and each fiscal quarter thereafter
which are available prior to Closing, which statements and the notes thereto
shall fairly present the assets, liabilities and financial condition of Buyer as
of the date thereof and the results of operations and cash flows or changes in
financial position, as applicable, of Buyer for the period ended on such date,
all in conformity with GAAP consistently applied, except as may be noted
therein.
7.3 Employee Matters. (a) Buyer may offer employment upon
such terms and conditions of employment as Buyer may establish, to certain of
the employees of Employer who primarily perform services with respect to the
operation of the Business as of the Closing Date; provided, that if, prior to
the date which is 180 days after the Closing Date, Buyer terminates the
employment of any employee listed on Schedule 5.13(d) employed by Buyer as of
the Closing Date other than "for cause" as described in the Summary Plan
Description of Telecommunications Inc. Severance Pay Plan effective July 1, 1996
(the "Severance Plan"), Buyer shall pay to such terminated employee the
severance benefit payments which such employee would have been entitled to
receive had it been terminated by Employer as of the Closing Date in an amount
and upon such terms as set forth in the Severance Plan (but in no event more
than six months' severance benefits for any employee); provided, further, Buyer
shall
33
not be required to make any such severance payments with respect to any employee
who is hired by TCI or any of its direct or indirect wholly-owned subsidiaries
(including Employer) within 45 Business Days of his termination of employment by
Buyer. Not later than March 24, 1997, Buyer shall deliver to Seller a notice
containing the names of employees of the Business to whom Buyer intends to offer
employment on the Closing Date (the "Employee List"); provided, that (i) if the
Closing has not occurred, Buyer may deliver to Seller a notice updating the
Employee List on the date which is 150 days after the date of this Agreement and
(ii) if the Termination Date is extended by Seller, Buyer may deliver to Seller
a notice no later than 60 Business Days prior to the extended Termination Date
updating the Employee List; provided, however, that any notice delivered by
Buyer updating the Employee List shall not be deemed effective if the Closing
occurs fewer than 60 Business Days after delivery to Seller of such updated
Employee List. TCI shall cause Employer to terminate the employment of all such
employees hired by Buyer as of the Adjustment Time. Seller shall undertake to
provide to all affected employees and any other necessary persons any notice
that may be required under the WARN Act. Except as provided herein, Employer
shall retain all liabilities arising prior to the Adjustment Time relating to
employees, including severance obligations.
(b) For the period commencing on the date of this
Agreement and expiring on the date which is 180 days after the Closing Date, TCI
shall not, and shall cause its direct and indirect wholly-owned subsidiaries
including Employer not to, solicit, or offer employment to, any employee of
Employer set forth on Schedule 5.13(d) who primarily performs services with
respect to the operation of the Business as of the date of this Agreement;
provided, however, that after the Closing Date, each of TCI and its direct and
indirect wholly-owned subsidiaries including Employer may hire any such employee
that Buyer does not employ as of the Closing Date or whose employment Buyer
terminates after the Closing Date.
(c) Nothing in this Section 7.3 or elsewhere in this
Agreement is intended to confer upon any employee of Employer or his or her
legal representative or heirs any rights as a third party beneficiary or
otherwise or any remedies of any nature or kind whatsoever under or by reason of
this Agreement, or the transactions contemplated hereby, including, but not
limited to, any rights of employment or continued employment. All rights and
obligations created by this Agreement are solely between the parties hereto.
7.4 Franchise Extensions. Seller covenants and agrees
that, as soon as practicable following the execution of this Agreement, it will
apply to the applicable Governmental Authority for an extension (the
"Extensions") of each franchise described on Schedule 1.5 with an expiration
date prior to June 30, 2000. Each such Extension shall have an expiration date
no earlier than June 30, 2000 and shall otherwise be on substantially the terms
and conditions of the current franchises, subject to modifications customarily
imposed by Governmental Authorities, but which shall not impose any conditions
or obligations which are materially more burdensome than contained in the
current franchise.
7.5 Environmental Report. (a) Buyer may cause to be
prepared and delivered at its expense within 60 days after the date of this
Agreement, a Phase I environmental
34
report for the Real Property. Seller shall cooperate with Buyer and permit
access to such Real Property during normal business hours in order for Buyer or
its representatives to inspect such property and the related environmental
records in the possession of Seller, as necessary for the preparation of the
Phase I environmental report. Buyer shall deliver to Seller a copy of any such
environmental report within five Business Days of receipt of such report by
Buyer. If such environmental report discloses one or more adverse environmental
conditions which require remediation under applicable Environmental Law, Seller
shall assume full responsibility for remediation of each such environmental
condition(s) to the extent required by applicable Environmental Law (the
"Remediation") and shall bear all expenses incurred in connection therewith;
provided, that Seller shall not be obligated to spend more than $200,000 in
connection with the Remediation. Buyer shall give Seller notice confirming that
Buyer has delivered to Seller all environmental reports to be prepared pursuant
to this Section 7.5, and Seller shall notify Buyer within twenty Business Days
after its receipt of such notice if Seller concludes, in its reasonable
judgment, that it is or will be unable to complete the Remediation for $200,000
or less (the "Remediation Notice"). If Seller gives a Remediation Notice, then
Buyer may terminate this Agreement pursuant to Section 10.1 (c)(vii) by notice
to Seller given within five Business Days of the Remediation Notice; provided,
that if within five Business Days after receipt by Seller of Buyer's notice of
termination pursuant to Section 10. l(c)(vii), Seller gives notice to Buyer that
Seller agrees to bear all costs of Remediation in excess of $200,000, such
termination shall be void ab initio and this Agreement shall be deemed not to
have been terminated. If Buyer does not terminate this Agreement pursuant to
Section 10.1 (c)(vii) within such five Business Day period, (i) Buyer shall be
deemed to have assumed all liabilities and obligations in connection with the
Remediation as of the Closing Date, (ii) Buyer shall receive a credit at the
Closing in the amount of $200,000 less the aggregate of all amounts paid by
Seller to third parties in connection with the Remediation and (iii) after the
Closing Date Seller shall have no obligation or liability with respect to the
Remediation or otherwise in connection with any condition referred to in any
report prepared and/or delivered pursuant to this Section 7.5.
(b) If Seller concludes, in its reasonable judgment, that
the cost of the Remediation will not exceed $200,000 or Seller agrees to bear
any costs of Remediation in excess of $200,000, then Seller shall have the sole
right to direct the Remediation; provided, that if Buyer agrees to bear any
costs of Remediation in excess of $200,000, then from and after the Closing
Buyer may assume responsibility for overseeing the Remediation.
(c) In the event that Seller assumes full responsibility
for the Remediation and such Remediation has not been completed prior to the
Closing, then from and after the Closing and until Seller and Buyer shall have
agreed that Remediation has been completed, Buyer shall cooperate with Seller
and permit access to the Real Property to Seller and its representatives during
normal business hours in order for the Remediation to be completed.
7.6 Consents. Seller will use commercially reasonable
efforts to obtain, as soon as practicable and at its expense, all the Consents
and the Extensions, in form and substance reasonably satisfactory to Buyer;
provided, that "commercially reasonable efforts" for purposes of this Section
7.6 shall not require Seller or Buyer to undertake extraordinary or unreasonable
35
measures to obtain such approvals and consents, including, but not limited to,
the initiation or prosecution of legal proceedings or the payment of fees in
excess of normal and usual filing and processing fees. Concurrently with the
execution and delivery of this Agreement, Buyer is delivering to Seller "highly
confident" letters of Chase Manhattan Bank, N.A. with respect to Buyer's equity
and its debt financing and after the date hereof shall deliver to Seller such
other materials requested by Seller appropriate for Seller to use in connection
with seeking the Consents and the Extensions. Buyer will use commercially
reasonable efforts to assist Seller in its efforts to obtain all the Consents
and the Extensions, and in connection therewith will consent to such
modifications to any agreement that is the subject of the Ocean Pines Consent,
Tunnell Properties Consent, Sea Colony Consent or Angola Consent or any
Governmental Permit that Ocean Pines Association, Inc. (or its successor), Pot
Nets, Inc. (or its successor), Carl M. Freeman Associates Inc., as successor to
Sea Colony, Inc. (or its successor), Angola-by-the-Bay Property Owners
Association Inc. (or its successor) or a Governmental Authority, as the case may
be, may request as a condition to (i) the transfer of such agreement or
Governmental Permit to Buyer and/or (ii) obtaining extension of the term of such
Governmental Permit, provided, however, that Buyer will not be required to agree
to any modifications to a Governmental Permit unless they are customarily
imposed by Governmental Authorities issuing cable television franchises as a
condition to obtaining the consent to the transfer of such franchises and do not
impose upon Buyer any conditions or obligations which are materially more
burdensome than are presently contained in any such Governmental Permit; and
provided, further, that Buyer will not be required to agree to any modifications
to any agreement that is the subject of the Ocean Pines Consent, Tunnell
Properties Consent, Sea Colony Consent or Angola Consent that will impose upon
Buyer any conditions or obligations which are materially more burdensome than
presently contained in any such agreement, provided, that any change in rates
charged for Basic Services contained in the Sea Colony Consent which is
reflected in a purchase price adjustment pursuant to Section 3.3 shall not be
deemed to be a condition or obligation which is materially more burdensome.
7.7 HSR Notification. As soon as practicable after the execution of
this Agreement and if required by applicable Legal Requirements, Seller and
Buyer will each complete and file, or cause to be completed and filed, any
notification and report required to be filed under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Each of the
parties will take any additional action that may be necessary, proper or
advisable, will cooperate to prevent inconsistencies between their respective
filings and will furnish to each other such necessary information and reasonable
assistance as the other may reasonably request in connection with its
preparation of necessary filings or submissions under the HSR Act. Buyer and
Seller shall use commercially reasonable efforts (including the filing of a
request for early termination) to obtain the early termination of the waiting
period under the HSR Act.
7.8 Notification of Certain Matters. Each party will promptly notify
the other of any fact, event, circumstance or action the existence or occurrence
of which would cause any of such party's representations or warranties under
this Agreement not to be true in any material respect.
36
7.9 Risk of Loss; Condemnation. (a) Seller will bear the risk of any
loss or damage to the Assets resulting from fire, theft or other casualty
(except reasonable wear and tear) at all times prior to the Closing. If any such
loss or damage is so substantial as to prevent normal operation of any material
portion of the System, Seller shall promptly notify Buyer of that fact and
Buyer, at any time within 10 days after receipt of such notice, may elect by
written notice to Seller either (i) to waive such defect and proceed toward
consummation of the acquisition of the Assets in accordance with this Agreement
or (ii) to terminate this Agreement pursuant to Section 10.1(c)(v). If Buyer
elects to consummate the acquisition of the Assets notwithstanding such loss or
damage and does so, there will be no adjustment in the Purchase Price on account
of such loss or damage but all insurance proceeds payable as a result of the
occurrence of the event resulting in such loss or damage (to the extent not
previously applied by Seller with respect to such loss or damage) will be
delivered by Seller to Buyer or the rights to such proceeds will be assigned by
Seller to Buyer if not yet paid over to Seller.
(b) If, prior to the Closing, any part of a material Asset or an
interest in a material Asset is taken or condemned as a result of the exercise
of the power of eminent domain, or if a Governmental Authority having such power
informs Seller or Buyer that it intends to condemn all or any part of a material
Asset (such event being referred to, in either case, as a "Taking"), then Buyer
may terminate this Agreement pursuant to Section l0.1(c)(vi). If Buyer does not
elect to terminate this Agreement then (a) if the Closing occurs, Buyer shall
have the sole right, in the name of Seller, if Buyer so elects, to negotiate
for, claim, contest and receive all damages with respect to the Taking, (b)
Seller shall be relieved of its obligation to convey to Buyer the Asset or
interests that are the subject of the Taking and (c) at the Closing Seller shall
assign to Buyer all of Seller's rights (including the right to receive payment
of damage) with respect to such Taking and shall pay to Buyer all damages
previously paid to Seller with respect to the Taking.
7.10 Adverse Changes. Seller shall promptly notify Buyer in writing
of any materially adverse developments affecting the Assets, the System or the
Business which become known to Seller, including, but not limited to, (i) any
damage, destruction or loss (whether or not covered by insurance) materially and
adversely affecting any of the Assets, the System or the Business, (ii) any
notice of violation, forfeiture or complaint under any material Governmental
Permits or (iii) anything which, if not corrected prior to the Closing Date,
will prevent Seller from fulfilling any condition to Closing described in
Article VIII.
7.11 Action by Limited Partners. (a) If required by applicable Legal
Requirements and the Partnership Agreement to consummate the transactions
contemplated by this Agreement, or if the Seller otherwise elects to do so, the
Seller, acting through the General Partner, shall in accordance with the
applicable Legal Requirements and the Partnership Agreement: (i) within a
reasonable period of time (as determined by the General Partner) after the
execution and delivery of this Agreement, duly call, give notice of, convene and
hold a special meeting (the "Special Meeting") of the Limited Partners for the
purpose of approving the transactions contemplated by this Agreement; and (ii)
subject to its fiduciary duties (as determined by the General Partner after
consultation with independent counsel), include in any
37
proxy statement the determination and recommendation of the General Partner to
the effect that the General Partner, having determined that this Agreement and
the transactions contemplated hereby are in the best interests of Seller and the
Limited Partners, has approved this Agreement and such transactions and
recommends that the Limited Partners vote in favor of the sale of the Assets to
Buyer pursuant to this Agreement.
(b) As soon as practicable after the execution and delivery of
this Agreement, Seller shall file with the SEC under the Exchange Act, and shall
use commercially reasonable efforts to clear with the SEC and mail to the
Limited Partners no later than February 15, 1997, a proxy statement with respect
to the Special Meeting (the "Proxy Statement"). Buyer shall furnish to Seller
the information relating to Buyer as reasonably requested by Seller required by
the Exchange Act to be set forth in the Proxy Statement. Seller agrees that the
Proxy Statement shall comply in all material respects with the Exchange Act and
the rules and regulations thereunder; provided, however, that no agreement is
made by Seller with respect to information supplied by Buyer expressly for
inclusion in the Proxy Statement. Buyer and its counsel shall be given a
reasonable opportunity to review the Proxy Statement prior to the filing of the
definitive Proxy Statement with the SEC.
7.12 No Solicitation. (a) Each of Seller and the General Partner
shall not, and shall cause its respective employees, agents and representatives
(including, but not limited to, any investment banker, attorney or accountant
retained by Seller) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal with respect to any
Alternative Transaction, engage in any negotiations concerning, or provide to
any other Person any information or data relating to, the Business, the System,
the Assets or Seller for the purposes of, or have any discussions with any
Person relating to, or otherwise cooperate in any way with or assist or
participate in, facilitate or encourage, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any effort
or attempt by any other Person to seek or to effect an Alternative Transaction,
or agree to or endorse any Alternative Transaction; provided, however, that
nothing contained in this Section 7.12 shall prohibit Seller or the General
Partner from making any disclosure to the Limited Partners that, in the judgment
of the General Partner based upon the advice of independent counsel, is required
under applicable Legal Requirements; and provided, further, that (i) Seller or
the General Partner may, upon the unsolicited request of a third party, furnish
information or data (including, but not limited to, confidential information or
data) relating to the Business, the System, the Assets or Seller for the
purposes of facilitating an Alternative Transaction and participate in
negotiations with a Person making (or who may reasonably be expected to make) an
unsolicited proposal regarding an Alternative Transaction and (ii) following
receipt of a proposal for an Alternative Transaction, Seller or the General
Partner may terminate this Agreement pursuant to Section 10.1(b)(ii).
(b) TCI shall not, and shall cause its Affiliates which it
controls not to, make a proposal to Seller regarding an Alternative Transaction.
The restriction set forth in this Section 7.12(b) shall terminate on the earlier
of (i) the Closing or (ii) termination of this Agreement.
38
7.13 Sales and Transfer Taxes and Fees. Buyer and Seller shall each
pay 50 percent of any state or local sales, use, transfer, excise, documentary
or license taxes or fees or any other charge (including filing fees) imposed by
any Governmental Authority as a consequence of the transfer of any Assets
pursuant to this Agreement. Seller shall timely file any sales tax returns
required to be filed with any Governmental Authority as a consequence of the
transfer of any Assets pursuant to this Agreement. Buyer shall cooperate as
reasonably requested in the preparation and filing of any submission or
application necessary to obtain any clearance relating to, or, if available,
exemption from, any Taxes or fees described in this Section 7.13.
7.14 Commercially Reasonable Efforts. (a) Seller shall use
commercially reasonable efforts to take all steps within its power, and will
cooperate with Buyer, to cause to be fulfilled those of the conditions to
Buyer's obligations to consummate the transactions contemplated by this
Agreement that are dependent upon its actions, and to execute and deliver such
instruments and take such other reasonable actions as may be necessary or
appropriate in order to carry out the intent of this Agreement and consummate
the transactions contemplated hereby.
(b) Buyer shall use commercially reasonable efforts to take all
steps within its power, and will cooperate with Seller, to cause to be fulfilled
those of the conditions to Seller's obligations to consummate the transactions
contemplated by this Agreement that are dependent upon its actions and to
execute and deliver such instruments and take such other reasonable actions as
may be necessary or appropriate in order to carry out the intent of this
Agreement and consummate the transactions contemplated hereby.
7.15 Title Insurance. Seller shall cooperate with Buyer if Buyer
elects to obtain title insurance policies on any Real Property owned in fee or
leased. Buyer shall have the sole responsibility for obtaining and paying for
such policies. The parties agree that the obtaining of title insurance on any
Real Property shall not be a condition to the obligation of Buyer to consummate
the transactions contemplated hereby.
7.16 Non-Competition. For the period commencing on the Closing Date
and expiring on the fifth anniversary thereof, each of Seller, the General
Partner and TCI hereby covenants and agrees that it shall not, and TCI hereby
covenants and agrees that it shall cause its direct and indirect wholly-owned
subsidiaries not to, directly or indirectly, compete with Buyer in the provision
of terrestrial cable television video services by means of cable, microwave,
fiber optics, satellite receivers or broadcasts all of which being directed to
the delivery of terrestrial cable television video services to businesses,
residences, multi-family dwellings, hotels, motels, trailers and other users, in
any Service Area in which the Business operates on the Closing Date. For the
period commencing on the Closing Date and expiring on the fifth anniversary
thereof, each of Seller, the General Partner and TCI further covenants that it
shall not, and TCI further covenants that it shall cause its direct and indirect
wholly-owned subsidiaries not to, directly or indirectly, manage, operate, join,
control, participate, or become interested in, or be connected with (as a
consultant, partner, stockholder or investor) any such terrestrial cable
television video service that would compete with Buyer in the provision of cable
television service within any
39
portion of the geographical area described above, except as a passive investor
or stockholder holding less than five percent of the outstanding voting stock or
equity interest in any corporation or other entity.
7.17 Financing Commitment. No later than June 23, 1997, Buyer shall
have obtained, and delivered to Seller a true and correct copy of, a commitment
(in form and substance satisfactory to Seller in its reasonable judgment) of a
reputable financial institution to provide to Buyer the funds necessary (at any
time to and including December 19, 1997) which together with Buyer's then
existing resources enable it to satisfy all of Buyer's obligations under this
Agreement and with respect to the transactions contemplated by this Agreement,
including its obligation to purchase the Assets and to pay the Purchase Price,
with funding subject only to (a) the satisfaction of the conditions to Closing
set forth in Article VIII, (b) there having occurred no Material Adverse Change
in the Financial Markets after the date of such commitment and (c) there having
occurred no material adverse change in the financial condition of Buyer after
the date of such commitment (the "Commitment"). Without limiting the foregoing,
the Commitment shall not be subject to any condition with respect to equity
funding (except a condition, if any, which such financial institution has
confirmed, in writing to Seller, has been satisfied prior to the Initial
Termination Date).
7.18 Forms 394. Unless Seller and Buyer agree to waive filing of
Forms 394 with respect to a Governmental Authority, (i) within 15 Business Days
after the date of this Agreement, Seller shall deliver to Buyer all information
available to Seller necessary for Buyer to prepare Forms 394 and (ii) within 15
Business Days after the necessary information has been supplied by Seller, Buyer
shall prepare, in form and substance reasonably satisfactory to Seller, and
Seller shall file, Forms 394 with the applicable Governmental Authorities.
7.19 UCC Lien and Judgment Searches. Seller shall deliver to Buyer a
copy of all UCC lien and judgment searches which Seller has obtained and any
bringdowns thereto which Seller may obtain prior to Closing in connection with
the transactions contemplated by this Agreement.
7.20 Seller Financial Statements. Seller agrees that from and after
the date of this Agreement it shall, at Buyer's cost and expense (i) use its
commercially reasonable efforts to make promptly available to Buyer, upon
Buyer's request, such financial statements, financial statement schedules and
other financial information relating to the System and the Business, in form and
substance reasonably satisfactory to Seller and Buyer, which Buyer may be
required to include in any registration statement, report or other document
which Buyer may file with the SEC or any applicable state securities commission,
and shall direct KPMG Peat Marwick to cooperate in connection therewith and (ii)
use its commercially reasonable efforts to obtain promptly for Buyer, upon
Buyer's request, any consent, report, opinion or letter of KPMG Peat Marwick, in
form and substance reasonably satisfactory to Seller and Buyer, required to be
filed by Buyer under applicable regulations of the SEC or any applicable state
securities commission in connection therewith.
40
7.21 Ad Insertion Agreement. No later than 90 days after the date of
this Agreement, Buyer shall give Seller written notice of whether it intends to
assume the Letter Agreement, dated February 1, 1994, between TCI Cablevision of
Eastern Shore and American Cable Television of Lower Delaware (the "Ad Insertion
Agreement").
ARTICLE VIII
8. Conditions Precedent to Obligations of Buyer.
The obligations of Buyer under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
one or more of which may be waived by Buyer, in its sole discretion.
8.1 HSR Act. If required under applicable Legal Requirements, all
filings required under the HSR Act shall have been made and the applicable
waiting period shall have expired or been earlier terminated without the receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
8.2 Governmental or Legal Action. No action, suit or proceeding shall
be pending or threatened by any Governmental Authority and no Legal Requirement
shall have been enacted, promulgated or issued or deemed applicable to any of
the transactions contemplated by this Agreement by any Governmental Authority
that would (a) prohibit Buyer's ownership or operation of all or a material
portion of the System, the Business or the Assets or (b) prevent or make illegal
the consummation of the transactions contemplated by this Agreement.
8.3 Accuracy of Representations and Warranties. The representations
and warranties of Seller contained in this Agreement shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date, with the same effect as though made on and as of the Closing Date, except
for such changes permitted or contemplated by the terms of this Agreement and
except insofar as any of such representations and warranties relate solely to a
particular date or period, in which case they shall be true and correct in all
material respects on such Closing Date with respect to such date and period.
8.4 Performance of Agreements. Seller shall have performed in all
material respects all obligations and agreements and complied, or caused to be
complied with, all covenants and conditions required by this Agreement to be
performed or complied with by Seller at or prior to the Closing Date.
8.5 No Material Adverse Change. During the period from the date of
this Agreement through and including the Closing Date, there shall not have
occurred any material adverse change in the business, financial condition or
operations of the Assets, taken as a whole,
41
the System or the Business, other than any change arising out of matters of a
general economic nature or matters (including, but not limited to, competition
caused by or arising from the Multichannel Multipoint Distribution Service,
direct broadcast satellite, legislation, rule making and regulation) affecting
the cable television industry (national or regional) generally, and Seller shall
not have sustained any material loss or damage to the Assets or the System,
whether or not insured, that materially affects the ability of Seller to conduct
the Business in a manner consistent with past practice.
8.6 Consents and Extensions. Seller shall have delivered to Buyer
evidence, in form and substance reasonably satisfactory to Buyer, that all the
Required Consents and Extensions have been obtained or given.
8.7 Transfer Documents. Seller shall have delivered to Buyer
customary bills of sale, deeds, assignments and other instruments of transfer
sufficient to convey good and marketable title to the Assets in accordance with
the terms of this Agreement, in form and substance reasonably satisfactory to
Buyer.
8.8 Opinions of Seller's Counsel. Buyer shall have received the
opinion or opinions of Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel for
Seller, dated the Closing Date, substantially in the form of Exhibit D.
8.9 Discharge of Liens. Seller shall have secured the termination or
removal of all Encumbrances of any nature on the Assets, other than Permitted
Encumbrances.
8.10 Extension of Ad Insertion Agreement. In the event that Buyer
gives notice to Seller in accordance with Section 7.21 of its intention to
assume the Ad Insertion Agreement, such agreement shall have been extended on
terms similar to those contained in the existing agreement for a period of one
year from the Closing Date.
8.11 Opinion of Seller's FCC Counsel. Buyer shall have received the
opinion of Cole, Raywid & Braverman, FCC counsel for Seller, dated the Closing
Date, substantially in the form of Exhibit F.
8.12 Additional Documents and Acts. Seller shall have delivered or
caused to be delivered to Buyer all other documents required to be delivered
pursuant to this Agreement and done or caused to be done all other acts or
things reasonably requested by Buyer to evidence compliance with the conditions
set forth in this Article VIII.
8.13 Certificates. Seller shall have furnished Buyer with such other
certificates of Seller and others, dated as of the Closing Date, to evidence
compliance with the conditions set forth in this Article VIII, as may be
reasonably requested by Buyer.
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ARTICLE IX
9. Conditions Precedent to Obligations of Seller.
The obligations of Seller under the Agreement are subject to the
satisfaction, at or prior to the Closing Date, of each of the following
conditions, any one or more of which may be waived by Seller in its sole
discretion.
9.1 HSR Act. If required under applicable Legal Requirements, all
filings required under the HSR Act shall have been made and the applicable
waiting period shall have expired or been earlier terminated without the receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
9.2 Governmental or Legal Actions. No action, suit or proceeding
shall be pending or threatened by any Governmental Authority and no Legal
Requirement shall have been enacted, promulgated or issued or deemed applicable
to any of the transactions contemplated by this Agreement by any Governmental
Authority that would (a) prohibit Buyer's ownership or operation of all or any
material portion of the System, the Business or the Assets or (b) prevent or
make illegal the consummation of the transactions contemplated by this
Agreement.
9.3 Accuracy of Representations and Warranties. The representations
and warranties of Buyer contained in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and as of the Closing
Date, with the same effect as though made on and as of the Closing Date, except
for such changes permitted or contemplated by the terms of this Agreement and
except insofar as any of such representations and warranties relate solely to a
particular date or period, in which case they shall be true and correct in all
material respects on such Closing Date with respect to such date and period.
9.4 Performance of Agreements. Buyer shall have performed in all
material respects all obligations and agreements and complied, or caused to be
complied with, all covenants and conditions required by this Agreement to be
performed or complied with by Buyer at or prior to the Closing Date.
9.5 Consents. All Required Consents shall have been obtained or
given.
9.6 Opinions of Buyer's Counsel. Seller shall have received the
opinion or opinions of Cooperman Levitt Winikoff Lester & Newman, P.C., outside
counsel for Buyer, dated the Closing Date, substantially in the form of Exhibit
E.
9.7 Limited Partner Approval. The transactions contemplated by this
Agreement shall have been approved by the affirmative vote of or consent by the
Limited
43
Partners to the extent required by the Partnership Agreement or if Seller
otherwise elects as permitted by Section 7.11.
9.8 Payment of Purchase Price. Buyer shall have paid to Seller the
Purchase Price as set forth in Section 3.1.
9.9 Assumption of Liabilities. Buyer shall have delivered to Seller
a customary assumption of liabilities agreement in form and substance reasonably
acceptable to Buyer and Seller which is sufficient to cover Buyer's obligations
as set forth in Section 4.1.
9.10 Closing of Another System. In the event that, subsequent to the
date of this Agreement but prior to the Closing Date, Seller and Buyer enter
into an agreement for the sale by Seller of any cable television system to Buyer
other than the System, the closing of the sale of such other system shall have
occurred or shall occur contemporaneously with the Closing hereunder.
9.11 Additional Documents and Acts. Buyer shall have delivered or
caused to be delivered to Seller all other documents required to be delivered
pursuant to this Agreement and done all other acts or things reasonably
requested by Seller to evidence compliance with the conditions set forth in this
Article IX.
9.12 Certificates. Buyer shall have furnished Seller with such other
certificates of Buyer and others, dated as of the Closing Date, to evidence
compliance with the conditions set forth in this Article IX, as may be
reasonably requested by Seller.
9.13 Fairness Opinion. Seller shall have received an opinion, in form
and substance reasonably satisfactory to Seller, from its financial advisors as
to the fairness, from a financial point of view, of the transactions
contemplated by this Agreement.
ARTICLE X
10. Termination.
10.1 Events of Termination. This Agreement and the transactions
contemplated by this Agreement may be terminated at any time prior to the
Closing:
(a) by the mutual written consent of Buyer and Seller;
(b) by Seller:
(i) if the consummation of the transactions contemplated by
this Agreement by Seller would violate any nonappealable final order, decree or
judgment of any Governmental Authority having competent jurisdiction;
44
(ii) following receipt by Seller or the General Partner of an
unsolicited proposal for an Alternative Transaction to the extent that the
General Partner determines in good faith on the basis of advice of independent
counsel that such action is necessary or appropriate in order for the General
Partner to act in a manner that is consistent with its fiduciary obligations
under applicable law;
(iii) if any representation or warranty of Buyer made herein is
untrue in any material respect (other than a change permitted or contemplated by
this Agreement) and such breach is not cured within 10 days of Buyer's receipt
of a notice from Seller that such breach exists or has occurred;
(iv) if Buyer shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and such breach
is not cured within 30 days of Buyer's receipt of a notice from Seller that such
default exists or has occurred;
(v) if the conditions to Seller's obligations to consummate
the Closing as set forth in Article IX cannot reasonably be satisfied on or
before the Termination Date;
(vi) on any date from June 23, 1997 to and including the
Initial Termination Date, if Buyer has not obtained the Commitment required by
Section 7.17, and at any time thereafter if the Commitment is terminated; or
(vii) within five Business Days of the date which is 60 days
from the date of this Agreement, if Seller has not obtained the Ocean Pines
Consent, or within five Business Days the date which is 90 days from the date of
this Agreement, if Seller has not obtained the Ocean Pines Consent.
(c) by Buyer:
(i) if the consummation of the transactions contemplated by
this Agreement by Buyer would violate any nonappealable final order, decree or
judgment of any Governmental Authority having competent jurisdiction;
(ii) if any representation or warranty of Seller made herein is
untrue in any material respect (other than due to a change permitted or
contemplated by this Agreement) and such breach is not cured within 10 days of
Seller's receipt of a notice from Buyer that such breach exists or has occurred;
(iii) if Seller shall have defaulted in any material respect in
the performance of any material obligation under this Agreement and such breach
is not cured within 30 days of Seller's receipt of a notice from Buyer that such
default exists or has occurred;
(iv) if the conditions to Buyer's obligations to consummate the
Closing as set forth in Article VIII cannot reasonably be satisfied on or before
the Termination Date;
45
(v) within 10 days after receipt by Buyer of a notice from Seller
that the loss or damage to the Assets resulting from fire, theft or other
casualty is so substantial as to prevent normal operation of any material
portion of the System, as contemplated by Section 7.9(a);
(vi) following a Taking, as contemplated by the first sentence of
Section 7.9(b);
(vii) if Seller notifies Buyer that, in its reasonable judgment, the
cost of the Remediation will exceed $200,000, as contemplated by Section 7.5(a);
provided, that Seller has not agreed to bear all costs of the Remediation in
excess of $200,000; or
(viii) within five Business Days of the date which is 90 days from the
date of this Agreement, if Seller has not obtained the Ocean Pines Consent.
(d) Unless the Closing shall have theretofore taken place, by
either party after the Termination Date, provided that the terminating party is
not otherwise materially in default or breach of this Agreement.
10.2 Manner of Exercise. In the event of the termination of this
Agreement by either Buyer or Seller, pursuant to Section 10.1, notice thereof
shall forthwith be given to the other party and this Agreement shall terminate
and the transactions contemplated hereunder shall be abandoned without further
action by Buyer or Seller.
10.3 Effect of Termination. (a) Subject to paragraphs (b), (c), (d) and
(e) of this Section 10.3, in the event of the termination of this Agreement
pursuant to Section 10.1 and prior to the Closing, all obligations of the
parties hereunder shall terminate, except for the respective obligations of the
parties under Section 13.12; provided, however, that no termination of this
Agreement shall (i) except as set forth in paragraphs (b), (c), (d) and (e) of
this Section 10.3 and Section 10.4, relieve a defaulting or breaching party from
any liability to the other party or parties hereto for or in respect of such
default or (ii) result in the rescission of any transaction theretofore
consummated hereunder. For purposes of this Section 10.3 and Section 10.4, the
failure to obtain the Commitment on or prior to June 23, 1997 or the termination
of the Commitment at any time thereafter shall be deemed to be a breach or
default by Buyer of its obligations under this Agreement.
(b) If this Agreement is terminated by Seller pursuant to Section
10. 1(b)(ii), (i) Buyer shall be entitled to an immediate return of the Deposit
and (ii) Seller shall simultaneously with such notice of termination (which
notice of termination shall not be effective unless and until such payment is
made and action is taken) take all action required under the Escrow Agreement to
cause the Deposit (together with all interest earned thereon) to be released to
Buyer and pay to Buyer a termination fee of $1,077,500; provided, that if Seller
terminates this Agreement pursuant to 10.1(b)(ii) with respect to an unsolicited
proposal for an Alternative Transaction proposed by a person who submitted a
written proposal prior to the date
46
of this Agreement to purchase the System pursuant to the competitive auction
conducted by Daniels & Associates, L.P., then the amount of such termination fee
shall be $2,155,000. Any such termination fee shall be liquidated damages and
not a penalty, and upon receipt thereof and the Deposit Buyer shall be precluded
from exercising any other right or remedy available under this Agreement or
applicable law.
(c) If this Agreement is terminated for any reason other than
pursuant to Section 10.l(b)(ii), Section l0.l(b)(iii), Section l0.l(b)(iv) or
Section l0.1(b)(vi) and Buyer is not otherwise in default or breach of this
Agreement, Buyer shall be entitled to the immediate return of the Deposit
(together with all interest earned thereon), and Seller shall promptly (but in
no event more than two Business Days after the date of termination of this
Agreement) take all action required under the Escrow Agreement to cause the
Deposit (together with all interest earned thereon) to be released to Buyer.
(d) If this Agreement is terminated by Seller pursuant to Section
10.1 (b)(vi) on or prior to the Initial Termination Date, and if prior to such
termination, (i) there has occurred a Material Adverse Change in the Financial
Markets since the date of this Agreement and (ii) Seller has received written
notice from Buyer that its failure to have the Commitment was due solely to such
Material Adverse Change in the Financial Markets (which notice shall state with
particularity the events which constitute such change), then Seller's damages
for the termination of this Agreement shall be limited to $3,026,700. In any
action or proceeding to determine damages for termination of this Agreement,
Buyer shall have the burden to prove that the provisions of this paragraph (d)
are applicable to such termination.
(e) If (i) this Agreement is extended by Seller beyond the Initial
Termination Date and is subsequently terminated by Seller pursuant to Section
l0.1(b)(vi) and (ii) at any time after the Initial Termination Date but prior to
the Closing the Commitment is terminated solely because there has been a
Material Adverse Change in the Financial Markets following the Initial
Termination Date, Seller's damages shall be limited to $3,026,700; provided,
that if prior to such termination (x) all conditions to Closing set forth in
Articles VIII and IX, other than Section 9.10, have been satisfied and (y) Buyer
has given written notice to Seller stating that Buyer is prepared to consummate
the transactions contemplated by this Agreement and requesting that Seller waive
the condition to Closing set forth in Section 9.10 (the "Waiver Notice"), then
Seller shall be deemed to have waived all damages hereunder for termination of
this Agreement if thereafter the conditions to Closing set forth in Article VIII
have been satisfied and Buyer is unable to consummate the transactions
contemplated by this Agreement solely because the Commitment was terminated by
the issuing financial institution after the date of the Waiver Notice and the
Commitment was so terminated solely because a "material adverse change," as
defined (on commercially reasonable terms, but specifically excluding any
material adverse change of or relating to the Buyer or its business or financial
condition) in the Commitment, occurred after the date of the Waiver Notice. In
any action or proceeding to determine damages for termination of this Agreement,
Buyer shall have the burden to prove that the provisions of this paragraph (e)
are applicable to such termination.
47
(f) Subject to Section 10.4, if this Agreement is terminated
(i) pursuant to Section 10.1 (b)(vi) or (ii) for any reason other than pursuant
to Section 10.1 (b)(vi) or pursuant to Section 10. 1(b)(ii), and Buyer is in
default or breach of this Agreement, then in either such case the Deposit shall
continue to be held by Escrow Agent in accordance with the terms of the Escrow
Agreement pending final resolution of any claims for damages arising from
Buyer's default or breach of this Agreement or as otherwise directed by Seller
and Buyer.
10.4 Liquidated Damages. Provided that Seller is not in material
default of this Agreement, in the event of (i) the breach or default by Buyer of
its obligations under this Agreement and (ii) the termination of this Agreement
prior to the Closing pursuant to Section l0.l(b)(iii), (iv) or (vi) (but subject
to Section 10.3(e)), Seller shall have the option, upon notice from Seller to
Buyer given as provided in the Escrow Agreement, to receive as liquidated
damages, and not as a penalty, the Deposit. In the event Seller elects to
receive the Deposit (together with all interest earned thereon) as liquidated
damages as set forth in this Section 10.4, Buyer shall promptly (but in no event
more than five Business Days after receipt of such notice of termination) take
all action required under the Escrow Agreement to cause the Deposit (together
with all interest earned thereon) to be released to Seller. If Seller elects to
receive the Deposit as liquidated damages as set forth in this Section 10.4,
Seller shall, upon receipt of the Deposit (together with all interest earned
thereon), be precluded from exercising any other right or remedy available under
this Agreement or applicable law.
ARTICLE XI
11. Nature and Survival of Representations,
Warranties and Agreements.
11.1 Nature of Representations, Warranties and Agreements. Neither
party will be deemed to have made any representation, warranty, covenant or
agreement except as set forth in this Agreement. Without limiting the generality
of the foregoing, neither party will be liable or bound in any manner by any
express or implied representation, warranty, covenant or agreement that is made
by any employee, agent or other Person representing or purporting to represent
such party.
11.2 Survival of Representations and Warranties. The representations
and warranties of Seller and Buyer in this Agreement and in the documents and
instruments to be delivered by Seller and Buyer pursuant to this Agreement shall
survive the Closing only as and to the extent set forth in this Article XI.
11.3 Time Limitations. If the Closing occurs, except as set forth
below, Seller shall have no liability to Buyer with respect to any
representation or warranty or any covenant, agreement or obligation to the
extent required to be performed or complied with prior to the Closing Date,
unless on or before the first anniversary of the Closing Date Seller is given
written notice by Buyer asserting a claim with respect thereto and specifying
the factual basis of that
48
claim in reasonable detail to the extent then known by Buyer. If the Closing
occurs, Buyer shall have no liability to Seller with respect to any
representation or warranty or any covenant, agreement or obligation to the
extent required to be performed or complied with prior to the Closing Date,
unless on or before the first anniversary of the Closing Date Buyer is given
written notice by Seller of a claim with respect thereto and specifying the
factual basis of that claim in reasonable detail to the extent then known by
Seller. A claim with respect to any covenants to be performed or complied with
by Buyer or Seller after the Closing Date may be asserted at any time.
Notwithstanding the foregoing, indemnification claims for the breach of the
representations in Sections 5.5 and 5.16 and indemnification claims arising from
any third party claim asserted against Buyer arising from the Excluded
Liabilities may be made by Buyer at any time.
11.4 Limitations as to Amount. (a) If the Closing occurs, Seller
shall have no liability (for indemnification or otherwise) with respect to any
failure or breach of any representation or warranty or any covenant, agreement
or obligation to the extent required to be performed on or prior to the Closing
Date until the total of all damages with respect to all such failures or
breaches exceeds in the aggregate $50,000, and then only for damages in excess
of $50,000.
(b) If the Closing occurs, Buyer shall have no liability (for
indemnification or otherwise) with respect to any failure or breach of any
representation or warranty or any covenant, agreement, or obligation to the
extent required to be performed on or before the Closing Date until the total of
all damages with respect to all such failures or breaches exceeds in the
aggregate $50,000, and then only for damages in excess of $50,000.
(c) If the Closing occurs, Seller's aggregate liability (for
indemnification or otherwise) with respect to any failure or breach of any
representation or warranty or any covenant, agreement or obligation to the
extent required to be performed on or prior to the Closing Date shall be limited
to Buyer's right to make an indemnification claim against Seller under Article
XII and shall be further limited as set forth in Section 12.3.
ARTICLE XII
12. Indemnification.
12.1 Rights to Indemnification. Subject to the limitations set forth
in Sections 11.3 and 11.4, Seller agrees to indemnify and hold harmless Buyer
against any loss, liability, claim, damage or expense (including, but not
limited to, reasonable attorneys' fees, accountants' fees and disbursements)
arising from (a) any claim for brokerage or agent's or finder's commissions or
compensation in respect of the transactions contemplated by this Agreement by
any Person purporting to act on behalf of Seller, (b) any claim that Buyer is
liable for the Excluded Liabilities and (c) Seller's failure or breach of any
representation, warranty, covenant, agreement or obligation made or required to
be performed by Seller under this
49
Agreement (and specifically excluding any representation, warranty, covenant,
agreement or obligation of TCI or the General Partner, as to which Seller shall
have no obligations to Buyer). Subject to the limitations set forth in Sections
11.3 and 11.4, Buyer agrees to indemnify and hold harmless Seller against any
loss, liability, claim, damage or expense (including, but not limited to,
reasonable attorneys' fees, accountants' fees and disbursements) arising from
(a) any claim for brokerage or agent's or finder's commissions or compensation
in respect of the transactions contemplated by this Agreement by any Person
purporting to act on behalf of Buyer, (b) the failure to perform the obligations
of the Assumed Liabilities, (c) Buyer's failure or breach of any representation,
warranty, covenant, agreement or obligation made or required to be performed by
Buyer under this Agreement and (d) if Buyer has the right to terminate this
Agreement pursuant to Section 7.5(a) and does not give notice to terminate this
Agreement pursuant to Section 10.1 (c)(vii), then after the Closing any claim
with respect to any environmental condition disclosed or any report prepared and
delivered pursuant to Section 7.5.
12.2 Procedure for Indemnification. Promptly after receipt by an
indemnified party under Section 12.1 of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such section, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is prejudiced thereby. In case any such action shall
be brought against an indemnified party and it shall promptly give notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, within
ten Business Days of receipt of such notice, to assume the defense thereof with
counsel of its choice and reasonably satisfactory to such indemnified party and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such section for any fees of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation. If an indemnifying party assumes the defense of such
action, (a) no compromise or settlement thereof may be effected by the
indemnifying party without the indemnified party's consent unless (i) there is
no finding or admission of any violation of law or any violation of the rights
of the indemnified party and no effect on any other claims that may be made
against the indemnified party and (ii) the sole relief provided is monetary
damages that are paid in full by the indemnifying party and (b) the indemnifying
party shall have no liability with respect to any compromise or settlement
thereof effected without its consent (which shall not be unreasonably withheld).
If notice is given to an indemnifying party of the commencement of any action
and it does not, within ten Business Days after the indemnified party's notice
is given, give notice to the indemnified party of its election to assume the
defense thereof, the indemnifying party shall be bound by any determination made
in such action or any compromise or settlement thereof effected by the
indemnified party. Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that an action
may adversely affect it or its Affiliates other than as a result of monetary
damages, such indemnified party may, by notice to the indemnifying party, assume
the exclusive right to
50
defend, compromise or settle such action, but the indemnifying party shall not
be bound by any determination of an action so defended or any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld).
12.3 Deposit. Buyer acknowledges and agrees that recourse against the
Deposit up to an aggregate amount of $1,077,500 is its sole and exclusive remedy
in the event of a claim against Seller with respect to any representation or
warranty or any covenant, agreement or obligation, whether for indemnification
pursuant to Article XI or this Article XII or otherwise; provided, however, that
this limitation shall not apply to claims by Buyer for (i) breaches of
covenants, agreements or obligations to be performed or complied with by Seller
after the Closing Date, (ii) breaches of representations or warranties set forth
in Sections 5.5 and 5.16 and (iii) third party claims asserted against Buyer
arising from the Excluded Liabilities for which Buyer acknowledges and agrees
that its first recourse shall be against the Deposit, to the extent there are
funds available.
ARTICLE XIII
13. Miscellaneous.
13.1 Parties Obligated and Benefitted. (a) Subject to the limitations
set forth in clauses (b) and (c) below, this Agreement will be binding upon the
parties and their respective assigns and successors in interest and will inure
solely to the benefit of the parties and their respective assigns and successors
in interest, and no other Person will be entitled to any of the benefits
conferred by this Agreement.
(b) Without the prior written consent of the other parties, no
party will assign any of its rights under this Agreement or delegate any of its
duties under this Agreement; provided, that Buyer may assign this Agreement to
any Affiliate or subsidiary of Buyer without Seller's consent; provided,
however, that notwithstanding such assignment Buyer shall remain obligated to
Seller pursuant to the terms and conditions of this Agreement.
13.2 Press Releases and Confidentiality. Except as required by
applicable law based on the advice of counsel, neither party shall make any
public announcement, press release or Form 8-K filing under the Exchange Act
with the SEC or any other filing with any other regulatory agency with respect
to the transactions contemplated by this Agreement, without the prior written
approval of the other party. Prior to the Closing Date (or at any time if the
Closing does not occur), Buyer shall, and shall cause its members, officers,
directors, employees, lenders, potential investors, auditors, accountants and
representatives to, keep confidential and not disclose to any Person (other than
its members, officers, directors, employees, lenders, potential investors,
auditors, accountants and representatives) or use any information relating to
Seller, the General Partner, Tele-Communications, Inc., TCI or any of TCI's
direct or indirect wholly-owned subsidiaries and (except in connection with the
transactions contemplated hereby, including, but not limited to, efforts to
obtain from Governmental Authorities and third parties
51
Extensions and Required Consents to the transactions contemplated hereby and the
operation of the Business) all non-public information obtained by Buyer pursuant
to this Agreement. Prior to and following the Closing, Seller shall, and shall
cause its officers, employees and representatives to, keep confidential and not
disclose to any Person or use any information relating to Buyer and (except in
connection with preparing Tax returns, conducting proceedings relating to Taxes
or the Excluded Liabilities and, prior to the Closing Date, as required in the
conduct of the Business or as permitted by Section 7.12) any non-public
information relating to the Business. Buyer agrees to the inclusion of a
description of the transactions contemplated by this Agreement in a letter to
the Limited Partners. This Section 13.2 shall not be violated by disclosure
pursuant to court order or as otherwise required by law, on condition that
notice of the requirement for such disclosure is given to the other party hereto
prior to making any disclosure and the party subject to such requirement
cooperates as the other may reasonably request in resisting it.
13.3 Notices. All notices, consents, approvals, demands, requests and
other communications required or desired to be given hereunder must be given in
writing, shall refer to this Agreement, and shall be sent by registered or
certified mail, return receipt requested, by hand delivery, by facsimile or by
overnight courier service, addressed to the parties hereto at their addresses
set forth below, or such other addresses as they may designate by like notice:
To Seller:
American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Marvin Jones
Facsimile No.: (303) 488-3219
With copies to:
Kaye, Scholer, Fierman,
Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Lynn Toby Fisher, Esq.
Facsimile No.: (212) 836-7152
To Buyer at:
Mediacom LLC
90 Crystal Run Road, Suite 406-A
Middletown, NY 10940
Attention: Rocco Commisso
Facsimile No.: (914) 692-9099
52
With a copy to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attention: Robert Winikoff
Facsimile No.: (212) 755-2839
Any notice from a party hereto may be given by such party's respective
attorneys. Any notice or other communications made hereunder shall be deemed to
have been given (i) if delivered personally, by overnight courier service or by
facsimile, on the date received, or (ii) if by registered or certified mail,
return receipt requested, five business days after mailing.
13.4 Waiver. This Agreement or any of its provisions may not be
waived except in writing. The failure of any party to enforce any right arising
under this Agreement on one or more occasions will not operate as a waiver of
that or any other right on that or any other occasion.
13.5 Captions. The article and section captions of this Agreement are
for convenience only and do not constitute a part of this Agreement.
13.6 CHOICE OF LAW. THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN
THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
IN THAT STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
13.7 Nonrecourse. Notwithstanding anything in this Agreement to the
contrary, in any action brought by reason of this Agreement or the transactions
contemplated hereby, no judgment shall be sought or obtained against any of the
general or limited partners of Seller or enforced against any of such partners
or any of their assets.
13.8 Terms. Terms used with initial capital letters will have the
meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than a limiting sense.
13.9 Rights Cumulative. Except as set forth in Section 10.4, all
rights and remedies of each of the parties under this Agreement will be
cumulative, and the exercise of one or more rights or remedies will not preclude
the exercise of any other right or remedy available under this Agreement or
applicable law.
13.10 Further Actions. Seller and Buyer will execute and deliver to
the other, from time to time at or after the Closing, for no additional
consideration and at no additional cost
53
to the requesting party, such further assignments, certificates, instruments,
records, or other documents, assurances or things as may be reasonably necessary
to give full effect to this Agreement and to allow each party fully to enjoy and
exercise the rights accorded and acquired by it under this Agreement.
13.11 Time. If the last day permitted for the giving of any notice or
the performance of any act required or permitted under this Agreement falls on a
day which is not a Business Day, the time for the giving of such notice or the
performance of such act will be extended to the next succeeding Business Day.
13.12 Expenses. Except as otherwise expressly provided in this
Agreement, each party will pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations and the consummation of the transactions
contemplated by this Agreement.
13.13 Specific Performance. Seller and Buyer agree that irreparable
damages would occur if any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that Seller and Buyer shall be entitled to an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, in addition to any other remedy to which they are entitled
at law or in equity; provided, however, that Seller shall not be entitled to
enforce specifically the terms and provisions hereof if Buyer would be required,
as a result of such enforcement, to accept financing on terms which are not
commercially reasonable in order to fund the Purchase Price. Buyer acknowledges
and agrees that financing terms similar to those existing under its senior debt
facility agented by The Chase Manhattan Bank are deemed to be commercially
reasonable.
13.14 Additional Remedies. Buyer, TCI and the General Partner agree
that irreparable harm would occur if any of the obligations of TCI or the
General Partner set forth in Sections 7.3 and 7.16 were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Buyer shall be entitled to an injunction or injunctions
to prevent breaches of Sections 7.3 and 7.16 and to enforce specifically the
terms and provisions of Sections 7.3 and 7.16 in any court of the United States
or any state having jurisdiction, in addition to any other remedy to which they
are entitled at law or in equity. Buyer shall be entitled to any remedy
available at law or in equity with respect to a breach by TCI or the General
Partner of its respective representations, warranties or covenants in this
Agreement.
13.15 Waiver of Remedies. Each of Seller and Buyer hereby waives any
claim for damages and any right to bring any action, cause of action, suit,
demand or damage in law or equity which it may have against the other arising
from termination of this Agreement pursuant to Section 10.(b)(vii) or 10.1
(c)(viii); provided, however, that neither Seller nor Buyer shall be precluded
from bringing any action or suit arising from any default or breach of this
Agreement.
54
13.16 Schedules. Any disclosure made on a Schedule to this Agreement
will be deemed included on any other Schedule to which such disclosure may be
pertinent.
13.17 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original.
13.18 Entire Agreement. This Agreement (including the Schedules and
Exhibits referred to in this Agreement, which are incorporated in and constitute
a part of this Agreement) contains the entire agreement of the parties and
supersedes all prior oral or written agreements and understandings with respect
to the subject matter. This Agreement may not be amended or modified except by a
writing signed by the parties.
13.19 Severability. Any term or provision of this Agreement which is
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefitted by such provision or any other
provisions of this Agreement.
55
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the day and year first above written.
SELLER: AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P.,
its general partner
By: TCI Ventures Five, Inc.,
its general partner
By: /s/ Marvin L. Jones
----------------------------
Name: Marvin L. Jones
Title: President
BUYER: MEDIACOM LLC
By: /s/ Rocco B. Commisso
----------------------------
Name: Rocco B. Commisso
Title: its Manager
With respect to Sections 5.1(b), 5.2(b), 5.3(c),
7.3, 7.12(b), 7.16 and 13.14 only:
TCI COMMUNICATIONS, INC.
By: /s/ Steve Brett
--------------------------------------------
Name: Steve Brett
Title: Exec. Vice President
With respect to Sections 5.1(b), 5.2(b), 5.3(c),
7.12(a), 7.16 and 13.14 only:
IR-TCI PARTNERS V, L.P.
By: TCI Ventures Five, Inc., its general partner
By: /s/ Marvin L. Jones
--------------------------
Name: Marvin L. Jones
Title: President
List of Schedules and Exhibits
Pursuant to
Asset Purchase Agreement
of American Cable TV Investors 5, Ltd.
for AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
EXHIBITS
Exhibit A Geographic Areas of Seller's Business
Exhibit B Escrow Agreement
Exhibit C Form of Engagement Letter
Exhibit D Form of Opinion of Seller's Counsel
Exhibit E Form of Opinion of Buyer's Counsel
Exhibit F Form of Opinion of Seller's FCC Counsel
SCHEDULES
Schedule 1.1 Subscriber Rates
Schedule 1.2 Consents
Schedule 1.3 Equipment
Schedule 1.4 Franchise Areas
Schedule 1.5 Governmental Permits
Schedule 1.6 Permitted Encumbrances
Schedule 1.7 Real Property
Schedule 1.8 Seller Contracts
Schedule 1.9 System
Schedule 4.2 Excluded Assets
Schedule 5.3(b) Violations of Partnership Agreement and Legal Requirements
Schedule 5.4 Complete Systems
Schedule 5.5 Encumbrances on Seller's Title
Schedule 5.7 Environmental
Schedule 5.8 Compliance with Law
Schedule 5.9 Seller Contracts
Schedule 5.12 Legal Proceedings
Schedule 5.13(c) Employment Matters
Schedule 5.13(d) Employees
Schedule 5.13(e) Employer Plans
Schedule 5.14 System Information
Schedule 5.16 Taxes
Schedule 6.3(a) Consents to be Obtained or Waived by Closing Date
EXHIBIT 2.5
================================================================================
ASSET PURCHASE AGREEMENT
BETWEEN
COXCOM, INC.
AND
MEDIACOM CALIFORNIA LLC
DATED
MAY 22, 1997
================================================================================
TABLE OF CONTENTS
1. DEFINED TERMS .........................................................1
1.1. "Accounts Receivable" ..........................................1
1.2. "Agreement" ....................................................1
1.3. "Assets" .......................................................1
1.4. "Business Day" .................................................2
1.5. "Closing" ......................................................2
1.6. "Closing Date" .................................................2
1.7. "Code" .........................................................2
1.8. "Communications Act" ...........................................2
1.9. "Compensation Arrangement" .....................................2
1.10. "Consents" .....................................................2
1.11. "Contracts" ....................................................2
1.12. "Employee Plan" ................................................2
1.13. "Environmental Laws" ...........................................3
1.14. "Equivalent Subscriber" ........................................3
1.15. "ERISA" ........................................................4
1.16. "FAA" ..........................................................4
1.17. "FCC" ..........................................................4
1.18. "Franchises" ...................................................4
1.19. "Franchising Authorities" ......................................4
1.20. "Governmental Authority" .......................................4
1.21. "Governmental Permits" .........................................4
1.22. "Material Adverse Effect" ......................................4
1.23. "Multiemployer Plan" ...........................................4
1.24. "Permitted Encumbrances" .......................................5
1.25. "Personal Property" ............................................5
1.26. "Qualified Intermediary" .......................................5
1.27. "Real Property" ................................................5
1.28. List of Additional Definitions .................................5
2. SALE AND PURCHASE OF ASSETS ...........................................6
2.1. Agreement to Sell and Purchase .................................6
2.2. Excluded Assets ................................................7
2.3. Deposit ........................................................8
2.4. Purchase Price .................................................8
2.5. Adjustments and Prorations .....................................8
2.6. Assumption of Liabilities and Obligations .....................11
2.7. Financial and Tax Reporting ...................................11
3. REPRESENTATIONS AND WARRANTIES OF SELLER .............................12
3.1. Organization, Standing and Authority ..........................12
Page
----
3.2. Authorization and Binding Obligation ..........................12
3.3. Absence of Conflicting Agreements .............................12
3.4. Governmental Permits ..........................................12
3.5. Real Property .................................................13
3.6. Personal Property .............................................13
3.7. Contracts .....................................................13
3.8. Consents ......................................................14
3.9. Information on System .........................................14
3.10. Financial Statements ..........................................15
3.11. Employee Benefit Plans ........................................15
3.12. Labor Relations ...............................................15
3.13. Taxes, Returns and Reports ....................................16
3.14. Claims and Legal Actions ......................................16
3.15. Environmental Matters .........................................16
3.16. Compliance with Laws ..........................................16
3.17. Conduct of Business in Ordinary Course ........................17
3.18. FCC and Copyright Compliance ..................................17
3.19. Assets ........................................................19
3.20. Bonds .........................................................19
3.21. Accounts Receivable ...........................................19
3.22. Intangibles ...................................................19
3.23. No Other Authorizations .......................................19
3.24. No Undisclosed Liabilities ....................................19
3.25. Liabilities to Customers ......................................19
3.26. Restoration ...................................................20
3.27. Overbuilds ....................................................20
4. REPRESENTATIONS AND WARRANTIES OF BUYER ..............................20
4.1. Organization, Standing and Authority ..........................20
4.2. Authorization and Binding Obligation ..........................20
4.3. Absence of Conflicting Agreements .............................20
4.4. Buyer Qualification ...........................................21
5. COVENANTS OF THE PARTIES .............................................21
5.1. Conduct of the Business of the System .........................21
5.2. Access to Information .........................................22
5.3. Confidentiality ...............................................23
5.4. Publicity .....................................................23
5.5. Consents ......................................................23
5.6. Cooperation ...................................................24
5.7. Taxes, Fees and Expenses ......................................25
ii
Page
----
5.8. Brokers .......................................................25
5.9. Risk of Loss ..................................................25
5.10. Employee Benefit Matters ......................................26
5.11. Bonds, Letters of Credit, Etc. ................................27
5.12. Noncompetition ................................................28
5.13. Transitional Services .........................................28
5.14. Title Insurance ...............................................28
5.15. Use of Seller's Name ..........................................28
5.16. Adverse Changes ...............................................29
5.17. Forms 394 .....................................................29
5.18. Monthly Financial Statements ..................................29
5.19. Reporting Requirements ........................................29
5.20. Certain Retransmission Contracts ..............................30
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
AND SELLER TO CLOSE ..................................................30
6.1. Conditions Precedent to Obligations of Buyer to Close .........30
6.2. Conditions Precedent to Obligations of Seller to Close ........31
7. CLOSING AND CLOSING DELIVERIES .......................................32
7.1. Closing .......................................................32
7.2. Like-Kind Exchange ............................................32
7.3. Deliveries by Seller ..........................................32
7.4. Deliveries by Buyer ...........................................33
8. TERMINATION ..........................................................34
8.1. Method of Termination .........................................34
8.2. Rights Upon Termination .......................................34
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND INDEMNIFICATION ..................................................35
9.1. Representations and Warranties ................................35
9.2. Indemnification by Seller .....................................35
9.3. Indemnification by Buyer ......................................35
9.4. Procedure for Indemnification .................................36
9.5. Limitation on Indemnification; Exclusive Remedy ...............37
10. MISCELLANEOUS ........................................................38
10.1. Notices .......................................................38
10.2. Benefit and Binding Effect ....................................38
10.3. Bulk Transfer .................................................39
iii
10.4. Governing Law .................................................39
10.5. Headings ......................................................39
10.6 Gender and Number .............................................39
10.7. Entire Agreement ..............................................39
10.8. Cooperation and Further Assurances ............................39
10.9. Waiver of Compliance; Consents ................................40
10.10. Severability ..................................................40
10.11. Counterparts ..................................................40
10.12. No Third Party Beneficiaries ..................................40
10.13. Construction ..................................................40
10.14. Time of the Essence ...........................................40
10.15. Definition of Knowledge .......................................40
10.16. Cure ..........................................................40
iv
LIST OF OMITTED EXHIBITS AND SCHEDULES
--------------------------------------
Exhibit A List of Franchises
Exhibit B Form of Deposit Escrow Agreement
Exhibit C Form of Franchise Transfer Consent
Exhibit D-1 Form of Opinion of Seller's Counsel
Exhibit D-2 Form of Opinion of Seller's FCC Counsel
Exhibit E Form of Opinion of Buyer's Counsel
Schedule 2.2 Excluded Assets
Schedule 2.6 Assumed Liabilities
Schedule 3.4 Governmental Permits
Schedule 3.5 Real Property
Schedule 3.6 Personal Property
Schedule 3.7 Contracts
Schedule 3.8 Consents
Schedule 3.9.3 System Rate Information
Schedule 3.9.4 System Channel Lineup Information
Schedule 3.9.5 Additional System Information
Schedule 3.10 Financial Statements
Schedule 3.11 Employee Benefit Plans
Schedule 3.12 Labor Relations
Schedule 3.13 Taxes, Returns and Reports
Schedule 3.14 Claims and Legal Actions
Schedule 3.15 Environmental Matters
Schedule 3.17 Exceptions to Conduct of Business in Ordinary Course
Schedule 3.18 FCC and Copyright Compliance
Schedule 3.20 Bonds
Schedule 3.22 Intangibles
Schedule 3.24 Undisclosed Liabilities
Schedule 3.27 Overbuilds
Schedule 5.1 Conduct of the System
Schedule 6.1.7 Bank MAC
Registrants agree to furnish supplementally a copy of such Exhibits and
Schedules to the Commission upon request.
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is dated May 22, 1997, by and between
Mediacom California LLC ("Buyer"), a Delaware limited liability company, and
CoxCom, Inc. ("Seller"), a Delaware corporation.
RECITALS:
--------
A. Seller owns and operates the cable television system serving the areas
in and around Sun City in Riverside County, California and providing cable
television services to customers pursuant to the Franchises (as defined below)
listed on Exhibit A (the "System").
---------
B. Seller desires to sell, and Buyer wishes to buy, all of Seller's
assets used in the operation of the System and the cable television business
related thereto for the price and on the terms and conditions hereinafter set
forth.
C. Seller intends to transfer such assets in a transaction to which
Section 1031 of the Code (as defined below) applies, and Buyer is willing to
take such steps as are appropriate on its part to enable Seller's transfer to so
qualify, including, without limitation, the transfer of the assets and the
consideration through the use of a Qualified Intermediary (as defined below).
AGREEMENTS:
----------
In consideration of the above recitals and the covenants and agreements
contained herein, Buyer and Seller agree as follows:
1. DEFINED TERMS
-------------
The following terms shall have the following meanings in this Agreement:
1.1. "Accounts Receivable" means, as of the Closing Date, the rights of
Seller to payment for services billed by Seller in connection with its operation
of the System in the ordinary course of business (including, without limitation,
those billed to subscribers of the System, but excluding any rights to payment
for advertising time provided by Seller) and unpaid prior to the Closing Date as
reflected on the billing records of Seller relating to the System.
1.2. "Agreement" means this Asset Purchase Agreement.
1.3. "Assets" means all the tangible and intangible assets presently or
hereafter owned, leased or used by Seller in connection with the conduct of the
business or operations of the System, including, without limitation, those
specified in detail in Section 2.1 but excluding those specified in Section 2.2.
1.4. "Business Day" means any day other than Saturday, Sunday or a day on
which banking institutions in New York City, New York or Atlanta, Georgia are
required or authorized to be closed.
1.5. "Closing" means the consummation of the transaction contemplated by
this Agreement in accordance with the provisions of Section 7.
1.6. "Closing Date" means the date of the Closing specified in Section 7.
1.7. "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations thereunder, or any subsequent legislative enactment thereof, as
in effect from time to time.
1.8. "Communications Act" means the Communications Act of 1934, as
amended, and the rules and regulations thereunder, as in effect from time to
time.
1.9. "Compensation Arrangement" shall mean any written plan or
compensation arrangement other than an Employee Plan or a Multiemployer Plan
that provides to employees of Seller employed at the System any compensation or
other benefits, whether deferred or not, in excess of base salary or wages and
excluding overtime pay, including, but not limited to, any bonus or incentive
plan, stock rights plan, deferred compensation arrangement, stock purchase plan,
severance pay plan and any other perquisites and employee fringe benefit plan.
1.10. "Consents" means all of the consents, permits, approvals or other
action of Governmental Authorities and other third parties necessary to permit
the transfer of the Assets to Buyer or otherwise to consummate lawfully the
transaction contemplated hereby.
1.11. "Contracts" means all pole attachment and conduit agreements,
personal property leases, real property leases, subscription agreements with
customers for cable services provided by the System, maintenance agreements,
retransmission consent agreements and other agreements, written or oral
(including any amendments and other modifications thereto) to which Seller is a
party and that relate to the Assets or the business or operations of the System
(other than the Franchises, and other than programming agreements and any other
contracts that are Excluded Assets) that are either (i) in effect on the date
hereof (other than those that expire by their terms and are not renewed prior to
Closing); or (ii) entered into by Seller in the ordinary course of business of
the System as permitted by this Agreement between the date hereof and the
Closing Date.
1.12. "Employee Plan" shall mean any written pension, retirement, profit-
sharing, deferred compensation, vacation, severance, bonus, incentive, medical,
vision, dental, disability, life insurance or any other employee benefit plan as
defined in Section 3(3) of ERISA (other than a Multiemployer Plan) to which
Seller contributes or which Seller sponsors or maintains or by which Seller
otherwise is bound, that provides benefits to employees of Seller employed at
the System.
2
1.13. "Environmental Laws" shall mean the following: (i) Clean Air Act (42
U.S.C. (S) 7401, et seq.); (ii) Clean Water Act (33 U.S.C. (S) 1251 et seq.);
-- --- -- ---
(iii) Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.); (iv)
-- ---
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. (S) 9601, et seq.; (v) Safe Drinking Water Act (42 U.S.C. (S) 300f et
-- --- --
seq.); (vi) Toxic Substances Control Act (15 U.S.C. (S) 2601, et seq.); (vii)
- --- -- ---
Rivers and Harbors Act of 1899 (33 U.S.C. (S) 401, et seq.); (viii) Endangered
-- ---
Species Act of 1973 (16 U.S.C. (S) 1531, et seq.); and (ix) Occupational Safety
-- ---
and Health Act of 1970 (29 U.S.C. (S) 651 et seq.); all as amended.
-- ---
1.14. "Equivalent Subscriber" shall mean an active customer for basic
cable service either in a single household, a commercial establishment or in a
multi-unit dwelling (including a hotel unit); provided, however, that the number
of customers in a multi-unit dwelling or commercial establishment that obtain
service on a "bulk-rate" basis shall be determined by dividing the gross bulk-
rate billings for both basic cable service and CPST (but not billings from a la
carte tiers or premium services, installation or other non-recurring charges,
converter rental, new product tier or from any outlet or connection other than
such customer's first (except in the case of a hotel unit), or from any pass-
through charge for sales taxes, line-itemized franchise fees, fees charged by
the FCC and the like) attributable to such multi-unit dwelling or commercial
establishment during the most recent billing period ended prior to the date of
calculation (but excluding billings in excess of a single month's charge) by the
retail rate charged during that billing period to individual households for
combined basic cable service and CPST offered by the System, such rate as of the
date of this Agreement being $23.04 (excluding a la carte tiers or premium
services, installation or other nonrecurring charges, converter rental, new
product tier or from any outlet or connection other than the first or from any
pass-through charges for sales taxes, line-itemized franchise fees, fees charged
by the FCC and the like). For purposes of this definition (i) "basic cable
service" shall mean the tier of cable television service that includes the
retransmission of local broadcast signals as defined by the Communications Act;
(ii) "CPST" shall mean the tier of cable television service immediately above
basic cable service offered by the System providing for a package of programming
that includes satellite-delivered services; (iii) an "active customer" shall
mean any person, commercial establishment or multi-unit dwelling at any given
time that is paying for and receiving basic cable service from the System who
has an account that is not more than 60 days past due (except for past due
amounts of $10 or less, provided such account is otherwise current), provided
that for purposes of this definition, an "active customer" does not include (a)
any person, commercial establishment or multi-unit dwelling that as of the date
of calculation has not paid in full, without discount (unless discounted
pursuant to Marketing Programs (as defined in Section 3.9.5 below) conducted in
the ordinary course of business), the charges for at least one month of the
services ordered, including deposit and installation charges, if any, due in
connection with such customer's initially obtaining cable television service
from the System, (b) any courtesy account, (c) any customer that comes within
the definition of "active customer" because such customer's account (or any part
thereof) has been compromised or written off, other than in the ordinary course
of business consistent with past practices for reasons such as service
interruptions, but not for the purpose of making such customer qualify as an
Equivalent Subscriber or (d) any account that has a disconnect request pending
or that is scheduled to be disconnected for any reason, except for any customer
who has a disconnect request pending in connection with a transfer of service
within the System's service area; and (iv)
3
the number of days past due of a customer account shall be determined from the
first day of the period for which the applicable billing relates.
1.15. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the regulations thereunder, as in effect from time to
time.
1.16. "FAA" means the Federal Aviation Administration.
1.17. "FCC" means the Federal Communications Commission.
1.18. "Franchises" means all franchise agreements, franchise
applications, operating permits and similar governing agreements, instruments,
statutes, ordinances, approvals, authorizations, and similar rights obtained
from any Franchising Authority which are necessary or required in order to
operate the System and provide cable television services thereto, including all
amendments thereto and renewals or modifications thereof.
1.19. "Franchising Authorities" means all Governmental Authorities
which have issued municipal or county cable franchises relating to the operation
of the System or before which are pending any franchise applications filed by
Seller relating to the operation of the System.
1.20. "Governmental Authority" means (i) the United States of
America, (ii) any state, commonwealth, territory or possession of the United
States of America and any political subdivision thereof (including counties,
municipalities and the like) or (iii) any agency, authority or instrumentality
of any of the foregoing, including any court, tribunal, department, bureau,
commission or board.
1.21. "Governmental Permits" means all Franchises, domestic
satellite, business radio and other licenses, earth station registrations, and
all authorizations and permits relating to the System granted to Seller by any
Governmental Authority, including all amendments thereto and modifications
thereof.
1.22. "Material Adverse Effect" means any of (a) a material adverse
effect on the operations of the System, taken as a whole, or (b) a material
adverse effect on the assets of the System, taken as a whole, or (c) a material
adverse effect on the financial condition of the System, taken as a whole, in
each case other than matters affecting the cable television industry generally
(including, without limitation, legislative, regulatory or litigation matters)
and matters relating to or arising from national economic conditions (including,
without limitation, financial and capital markets).
1.23. "Multiemployer Plan" means a plan, as defined in ERISA Section
3(37) or 4001 (a)(3), to which Seller or any trade or business which would be
considered a single employer with Seller under Section 400 l(b)(l) of ERISA
contributed, contributes or is required to contribute that provides benefits to
employees of Seller employed at the System.
4
1.24. "Permitted Encumbrances" shall mean any of the following liens
or encumbrances: (i) landlord's liens and liens for current taxes, assessments
and governmental charges not yet due or being contested in good faith by
appropriate proceedings; (ii) statutory liens or other encumbrances that are
minor or technical defects in title that do not, individually or in the
aggregate, materially affect the value, marketability or utility of the Assets
as presently utilized or that do not, individually or in the aggregate, exceed
$25,000; (iii) such liens, liabilities or encumbrances as are Assumed
Liabilities; (iv) leased interests in property leased to others; (v)
restrictions set forth in, or rights granted to Franchising Authorities as set
forth in, the Franchises or applicable laws relating thereto; and (vi) zoning,
building or similar restrictions, easements, rights-of-way, reservations of
rights, conditions or other restrictions or encumbrances relating to or
affecting the Real Property, that do not materially interfere with the use of
such Real Property in the operation of the System as presently conducted.
1.25. "Personal Property" means all of the machinery, equipment,
tools, vehicles, furniture, leasehold improvements, office equipment, plant,
inventory, spare parts, supplies and other tangible and intangible personal
property, including, without limitation, the Governmental Permits, the Contracts
and the Accounts Receivable, that are owned, leased or held by Seller and used,
useful or held for use as of the date hereof in the conduct of the business or
operations of the System, plus such additions thereto and deletions therefrom
arising in the ordinary course of business and as permitted by this Agreement
between the date hereof and the Closing Date.
1.26. "Qualified Intermediary" means an entity constituting a
"qualified intermediary" within the definition set forth in Treas. Reg. (S)
1.1031(k)-1(g)(4).
1.27. "Real Property" means all of the real property interests of
Seller, including without limitation fee interests in real estate (together with
the buildings and other improvements located thereon), leasehold interests in
real estate, easements, licenses, rights to access, rights-of-way and other real
property interests that are (i) leased by Seller and used as of the date hereof
in the business or operations of the System; or (ii) owned by Seller and used as
of the date hereof in the business or operations of the System, plus such
additions thereto and deletions therefrom arising in the ordinary course of
business and permitted by this Agreement between the date hereof and the Closing
Date.
1.28. List of Additional Definitions. The following is a list of some
------------------------------
additional terms used in this Agreement and a reference to the Section hereof in
which such term is defined:
Term Section
---- -------
Ad Sales Certificate 2.5.9
Advertising Agreement 2.5.3
Assumed Liabilities 2.6
Authorizations 3.23
Bank MAC 6.1.7
Billing Services 5.13
Buyer Preamble
5
Buyer's 401(k) Plan 5.10.5
Confidential Information 5.3
Claimant 9.4.1
Copyright Act 3.18.2
Deposit 2.3
Escrow Agent 2.3
Escrow Agreement 2.3
Excluded Assets 2.2
Final Report 2.5.7
Financial Statements 3.10
Indemnifying Party 9.4.1
Marketing Programs 3.9.5
Preliminary Report 2.5.6
Purchase Price 2.4
Seller Preamble
Seller's 401(k) Plan 5.10.5
Subscriber Count 2.5.5(i)
Subscriber Estimate 2.5.5(i)
System Recitals
Taxes 3.13
Threshold Amount 9.5.1
Transferred Employees 5.10.1
2. SALE AND PURCHASE OF ASSETS
---------------------------
2.1. Agreement to Sell and Purchase. Subject to the terms and
------------------------------
conditions set forth in this Agreement, Seller hereby agrees to sell, transfer
and deliver to Buyer on the Closing Date, and Buyer agrees to purchase from
Seller on the Closing Date, all of the Assets, free and clear of any claims,
liabilities, mortgages, liens, pledges, conditions, charges or encumbrances of
any nature whatsoever except for Permitted Encumbrances, more specifically
described as follows:
2.1.1. The Personal Property;
2.1.2. The Real Property;
2.1.3. The Governmental Permits;
2.1.4. The Contracts;
2.1.5. The Accounts Receivable and all advertising commissions
receivable under the Advertising Agreement (as defined in Section 2.5.3 below);
2.1.6. All of Seller's proprietary information, technical
information and data, machinery and equipment warranties, maps, computer discs
and tapes, plans, diagrams, blueprints
6
and schematics, including filings with the Franchising Authorities and the FCC
relating to the System (other than the materials described in Section 2.2.2
hereof);
2.1.7. All choses in action of Seller relating to the System;
2.1.8. Subject to Section 2.2.2, all books and records
relating to the business or operations of the System, including executed copies
of the Contracts and all correspondence and memoranda relating thereto, customer
records and all records required by the Franchising Authorities and the FCC to
be kept, subject to the right of Seller to have such books and records made
available to Seller for a reasonable period, not to exceed three years from the
Closing Date; and
2.1.9. The goodwill and going concern value generated by
Seller with respect to the System, if any.
2.2. Excluded Assets. The Assets shall exclude the following
---------------
assets (the "Excluded Assets"):
2.2.1. Seller's cash on hand as of the Closing Date and all
other cash in any of Seller's bank or savings accounts, including, without
limitation, customer advance payments and deposits; any and all bonds, surety
instruments, insurance policies and all rights and claims thereunder, letters of
credit or other similar items and any cash surrender value in regard thereto,
and any stocks, bonds, certificates of deposit and similar investments;
2.2.2. Any books and records that Seller is required by law
to retain and any correspondence, memoranda, books of account, tax reports and
returns and the like related to the System other than those described in Section
2.1.8, subject to the right of Buyer to have access to and to copy for a
reasonable period, not to exceed three years from the Closing Date, and Seller's
corporate minute books and other books and records related to internal corporate
matters and financial relationships with Seller's lenders and affiliates;
2.2.3. Any claims, rights and interest in and to any refunds
of federal, state or local franchise, income or other taxes or fees of any
nature whatsoever for periods prior to the Closing Date including, without
limitation, fees paid to the U.S. Copyright Office or any choses in action owned
by Seller relating to such refunds;
2.2.4. All programming agreements and retransmission consent
agreements of Seller, including those relating to or benefitting the System
(other than the local programming agreements, retransmission consents and
must-carry notices listed on Schedule 3.7);
2.2.5. Except as provided in Section 5.15, all trademarks,
trade names, service marks, service names, logos and similar proprietary rights
of Seller whether or not used in the business of the System;
7
2.2.6. Any Employee Plan, Compensation Arrangement or
Multiemployer Plan;
2.2.7. Any and all assets and rights of Seller unrelated to the
System;
2.2.8. Except as provided in Section 5.13, all equipment,
software and agreements related to Seller's accounting and customer billing
systems, the material items of which are listed on Schedule 2.2;
2.2.9. Any contracts, agreements or other arrangements between
Seller and its affiliates relating to corporate overhead, MIS, accounting
services, payroll system services, programming costs, employee benefits,
insurance coverage, marketing, advertising and converter repair services; and
2.2.10. The assets listed on Schedule 2.2.
2.3. Deposit. Upon execution and delivery of this Agreement by Seller
-------
and Buyer, Buyer shall deliver to Wachovia Bank of Georgia, N.A., Atlanta,
Georgia ("Escrow Agent") the sum of Three Hundred Thousand Dollars ($300,000)
(the "Deposit"), to secure the obligations of Buyer to close under this
Agreement. The Deposit shall be held in an escrow account and applied pursuant
to the terms of that certain Deposit Escrow Agreement, in the form attached
hereto as Exhibit B executed concurrently herewith by Buyer, Seller and Escrow
---------
Agent (the "Escrow Agreement"). Upon the Closing, the amount of the Deposit,
together with interest thereon, shall be delivered to Seller or, at Seller's
direction, to a Qualified Intermediary for purposes of effecting a like-kind
exchange of property under Section 1031 of the Code, and credited against the
Purchase Price. In the event of a termination of this Agreement, the Deposit
shall be paid in accordance with Section 8.2 hereof.
2.4. Purchase Price. The purchase price for the Assets shall be Eleven
--------------
Million Five Hundred Thousand Dollars ($11,500,000) (the "Purchase Price"),
which amount shall be adjusted as provided in Section 2.5 below and be paid by
Buyer to Seller at Closing by wire transfer of immediately available funds to
Seller or, at Seller's direction, to a Qualified Intermediary for purposes of
effecting a like-kind exchange of property under Section 1031 of the Code.
2.5. Adjustments and Prorations.
--------------------------
2.5.1. All expenses and other liabilities arising from the System
up until midnight on the day prior to the Closing Date, including franchise
fees, pole and other rental charges payable with respect to cable television
service, utility charges, real and personal property taxes and assessments
levied against the Assets, salesperson advances, property and equipment rentals,
applicable copyright or other fees, sales and service charges, taxes (except for
taxes arising from the transfer of the Assets hereunder), accrued vacation (only
to the extent Buyer honors such accrual as set forth in Section 5.10.4) and
similar prepaid and deferred items, shall be prorated between Buyer and Seller
in accordance with the principle that Seller shall be responsible for all
expenses, costs and liabilities allocable to the conduct of the business or
operations of the System for the
8
period prior to the Closing Date, and Buyer shall be responsible for all
expenses, costs and liabilities allocable to the conduct of the business or
operations of the System on the Closing Date and for the period thereafter.
2.5.2. The Purchase Price shall be increased by an amount
equal to (i) 100% of the face amount of all cable service customer Accounts
Receivable that are outstanding 30 days or less from the first day of the period
to which any outstanding bill relates, (ii) 90% of the face amount of all cable
service customer Accounts Receivable that are outstanding more than 30 but fewer
than 61 days from the first day of the period to which any outstanding bill
relates and (iii) 0% of the face amount of all cable service customer Accounts
Receivable that are outstanding more than 60 days from the first day of the
period to which any outstanding bill relates.
2.5.3. The Purchase Price shall be increased by an amount
equal to any advertising commissions payable to Seller under that certain
Agreement, dated July 22, 1992, between King VideoCable Company and Dimension
Media Services, Inc. (the "Advertising Agreement") for advertising services
provided prior to the Closing Date.
2.5.4. The Purchase Price shall be reduced by an amount equal
to (i) any customer advance payments (i.e., customer payments received by Seller
prior to Closing but relating to service to be provided by Buyer after Closing)
and deposits (including any interest owing thereon), (ii) any other advance
payments (i.e., advertising payments received by Seller prior to Closing but
relating to service to be provided by Buyer after Closing) and (iii) Accounts
Receivable relating to services to be performed after the Closing and the
responsibility for which is assumed by Buyer under this Agreement.
2.5.5. The Purchase Price shall be reduced as follows:
(i) In the event the Closing occurs on or before
August 15, 1997, the Purchase Price shall be reduced by $1,200 for each
Equivalent Subscriber less than 9,500 as of the Closing Date, but, except as
provided below, the Purchase Price shall not be reduced pursuant to this Section
2.5.5(i) by an amount greater than $600,000. The number of such Equivalent
Subscribers shall be estimated as of Closing in Seller's Preliminary Report (as
defined in Section 2.5.6 below) delivered to Buyer in accordance with Section
2.5.6, and thereafter being subject to post-Closing verification and adjustment
under Section 2.5.7. In the event the number of Equivalent Subscribers estimated
as of Closing (the "Subscriber Estimate") is at least 9,000 but is determined
upon post-Closing verification and adjustment under Section 2.5.7 (the
"Subscriber Count") to be fewer than 9,000, the Purchase Price reduction
pursuant to this Section 2.5.5(i) shall not be subject to the $600,000
limitation set forth herein. In addition, in the event the Subscriber Estimate
is less than 9,000, Buyer elects to proceed with the Closing, and the Subscriber
Count is less than such Subscriber Estimate, Buyer shall be entitled to a
further Purchase Price reduction equal to $1,200 multiplied by the difference
between such Subscriber Estimate and the Subscriber Count, which shall not be
subject to the $600,000 limitation set forth herein.
9
(ii) In the event the Closing occurs after August 15,
1997, the Purchase Price shall be reduced by $1,200 for each Equivalent
Subscriber less than 9,600 as of the Closing Date, but, except as provided
below, the Purchase Price shall not be reduced pursuant to this Section
2.5.5(ii) by an amount greater than $600,000. The number of such Equivalent
Subscribers shall be estimated as of Closing in Seller's Preliminary Report (as
defined in Section 2.5.6 below) delivered to Buyer in accordance with Section
2.5.6, and thereafter being subject to post-closing verification and adjustment
under Section 2.5.7. In the event the Subscriber Estimate (as defined in Section
2.5.5(i) above) is at least 9,100 but the Subscriber Count (as defined in
Section 2.5.5(i) above) is less than 9,100, the Purchase Price reduction
pursuant to this Section 2.5.5(ii) shall not be subject to the $600,000
limitation set forth herein. In addition, in the event the Subscriber Estimate
is less than 9,100, Buyer elects to proceed with the Closing, and the Subscriber
Count is less than such Subscriber Estimate, Buyer shall be entitled to a
further Purchase Price reduction equal to $1,200 multiplied by the difference
between such Subscriber Estimate and the Subscriber Count, which shall not be
subject to the $600,000 limitation set forth herein.
2.5.6. At least ten Business Days prior to the Closing,
Seller will deliver to Buyer a report with respect to the System (the
"Preliminary Report"), showing in detail the preliminary determination of the
adjustments referred to in this Section 2.5, calculated in accordance with such
Section as of the Closing Date (or as of any other date(s) agreed to by the
parties) together with any documents substantiating the determination of the
adjustments to the Purchase Price proposed in the Preliminary Report. The
Preliminary Report will include a schedule setting forth advance payments and
deposits made to or by Seller, as well as Accounts Receivable information
relating to the System (showing sums due and their respective aging as of the
Closing Date) and the Subscriber Estimate. The parties shall negotiate in good
faith to resolve any dispute and to reach an agreement prior to the Closing Date
on such estimated adjustments as of the Closing Date or thereafter in accordance
with Section 2.5.7 below. The adjustment shown in the Preliminary Report, as
adjusted by agreement of the parties, will be reflected as an adjustment to the
Purchase Price payable at the Closing, provided Buyer has not given notice to
Seller that, in Buyer's reasonable opinion, the proposed adjustments are
materially incorrect. If Buyer gives Seller notice that in its reasonable
opinion, the proposed adjustments are materially incorrect, and if the parties
have not been able to resolve the matter prior to the Closing Date, any disputed
amounts shall be paid by the party to be charged with a disputed adjustment into
escrow, and shall be held by the Escrow Agent in accordance with the Escrow
Agreement until the adjustments are finally determined pursuant to Section
2.5.7, at which time Seller and Buyer shall deliver a joint written notice to
the Escrow Agent setting forth appropriate instructions as to the disposition
from escrow of such disputed amounts deposited thereunder, in accordance with
the Escrow Agreement.
2.5.7. Within 120 days after the Closing Date, Buyer shall
deliver to Seller a report with respect to the System (the "Final Report"),
showing in detail the final determination of any adjustments which were not
calculated as of the Closing Date and containing any corrections to the
Preliminary Report, together with any documents substantiating the final
calculation of the adjustments proposed in the Final Report. If Seller shall
conclude that the Final Report does not accurately reflect the adjustments and
prorations to be made to the Purchase Price in accordance with this Section 2.5,
Seller shall, within 30 days after its receipt of the Final Report, provide to
10
Buyer its written statement of any discrepancies believed to exist. Buyer and
Seller shall use good faith efforts to jointly resolve the discrepancies within
30 days of Buyer's receipt of Seller's written statement of discrepancies, which
resolution, if achieved, shall be binding upon all parties to this Agreement and
not subject to dispute or judicial review. If Buyer and Seller cannot resolve
the discrepancies to their mutual satisfaction within such 30-day period, Buyer
and Seller shall, within the following 10 days, jointly designate a national
independent public accounting firm to be retained to review the Final Report
together with Seller's discrepancy statement and any other relevant documents.
The parties agree that the foregoing independent public accounting firm shall
not be one that is, or within two years prior to the Closing Date has been,
regularly engaged by Buyer or Seller. Such firm shall report its conclusions as
to adjustments pursuant to this Section 2.5 which shall be conclusive on all
parties to this Agreement and not subject to dispute or judicial review. If,
after adjustment as appropriate with respect to the amount of the aforesaid
adjustments paid or credited at the Closing, Buyer or Seller is determined to
owe an amount to the other, the appropriate party shall pay such amount thereof
to the other, within three Business Days after receipt of such determination.
The cost of retaining such independent public accounting firm shall be borne
one-half by Seller and one-half by Buyer.
2.5.8. Within 30 days after the first anniversary of the Closing
Date, Buyer shall deliver to Seller a certificate (the "Ad Sales Certificate"),
signed by an officer of Buyer, certifying to his or her knowledge, without
personal liability, to the amount of advertising commissions earned and received
by Buyer pursuant to the Advertising Agreement in the 12-month period
immediately following Closing; provided that the Ad Sales Certificate shall be
accompanied by financial and other records sufficient to support the
certification set forth therein. If the amount of advertising commissions
calculated pursuant to this Section 2.5.8 is less than $75,000, Seller will pay
to Buyer the difference between $75,000 and the advertising commissions so
calculated within five Business Days after receipt of the Ad Sales Certificate.
2.6. Assumption of Liabilities and Obligations. As of the Closing
-----------------------------------------
Date, Buyer shall assume and pay, discharge and perform the following:
(collectively, the "Assumed Liabilities"): (i) all the obligations and
liabilities of Seller arising on or after the Closing Date under the
Governmental Permits and the Contracts; (ii) all obligations and liabilities of
Seller arising on or after the Closing Date to all customers and advertisers of
the System for any advance payments or deposits to the extent Buyer received a
credit therefor pursuant to Section 2.5.4; (iii) all obligations and liabilities
arising out of events occurring on or after the Closing Date related to Buyer's
ownership of the Assets or its conduct of the business or operations of the
System; and (iv) the obligations and liabilities listed on Schedule 2.6. All
other obligations and liabilities of Seller shall remain and be the obligations
and liabilities solely of Seller.
2.7. Financial and Tax Reporting. Buyer and Seller agree to use
---------------------------
reasonable business efforts to engage in the mutually agreeable sharing of
financial and valuation information in order to obtain mutually consistent
financial and tax reporting, to the greatest extent practicable.
11
3. REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Seller represents and warrants to Buyer as of the date of this
Agreement and as of the Closing Date, as follows:
3.1. Organization, Standing and Authority. Seller is a corporation
------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and is qualified to conduct business as a foreign corporation
in each jurisdiction in which the property owned, leased or operated by it
requires it to be so qualified, except where the failure to so qualify would not
have a Material Adverse Effect, or a material adverse effect on the validity,
binding effect or enforceability of this Agreement or the ability of Seller to
perform its obligations hereunder. Seller has the requisite corporate power and
authority (i) to own, lease and use the Assets as presently owned, leased and
used by it; and (ii) to conduct the business and operations of the System as
presently conducted by it. Seller is not a participant in any joint venture or
partnership with any other person or entity with respect to any part of the
System's operations or the Assets.
3.2. Authorization and Binding Obligation. Seller has the corporate
------------------------------------
power and authority to execute and deliver this Agreement and to carry out and
perform all of its other obligations under the terms of this Agreement. All
corporate action by Seller necessary for the authorization, execution, delivery
and performance by it of this Agreement has been taken. This Agreement has been
duly executed and delivered by Seller and this Agreement constitutes the valid
and legally binding obligation of Seller, enforceable against it in accordance
with its terms, except (i) as rights to indemnity, if any, thereunder may be
limited by federal or state securities laws or the public policies embodied
therein; (ii) as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect affecting
the enforcement of creditors' rights generally; and (iii) as the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
3.3. Absence of Conflicting Agreements. Subject to obtaining the
---------------------------------
Consents listed on Schedule 3.8, the execution, delivery and performance of this
Agreement by Seller will not (i) violate the articles of incorporation or bylaws
of Seller; (ii) violate any law, judgment, order, ordinance, injunction, decree,
rule or regulation of any Governmental Authority applicable to Seller with
respect to the Assets; or (iii) conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, accelerate or
permit the acceleration of any performance required by the terms of, any
agreement, instrument, license or permit to which Seller is a party or may be
bound and by which the Assets or the System are affected, excluding from the
foregoing clauses (ii) and (iii) such violations, conflicts, terminations,
breaches and defaults, which in the aggregate would not have a Material Adverse
Effect.
3.4. Governmental Permits. Schedule 3.4 includes a true and complete
--------------------
list of all Governmental Permits that are held for use in connection with the
operations of the System. True and complete copies of such Governmental Permits
(together with any and all amendments thereto) have been made available to
Buyer. Each of the Governmental Permits listed on Schedule 3.4 is
12
valid and binding on Seller and, to the knowledge of Seller, in full force and
effect in accordance with its terms. No proceedings are pending or, to Seller's
knowledge, threatened, to revoke, terminate, cancel or modify any of the
Governmental Permits. Except as listed on Schedule 3.4 and except for any
noncompliance or default that would not have a Material Adverse Effect, the
Seller and the operations of the System by Seller are in compliance with the
terms and conditions of the Governmental Permits and are not in default
thereunder.
3.5. Real Property. Schedule 3.5 contains a list of all leases of Real
-------------
Property to which Seller is a party as of the date hereof, and all
rights-of-way, easements, or other interests in Real Property to which Seller is
a party as of the date hereof, except for those rights-of-way, easements and
other interests which if not held by Seller would not have a Material Adverse
Effect. Seller does not own fee title to any real property used in the operation
of the System. To Seller's knowledge, there are not pending or threatened any
condemnation actions or special assessments or any pending proceedings for
changes in the zoning with respect to such Real Property or any part thereof and
Seller has not received any notice of the desire of any Governmental Authority
or other entity to take or use any Real Property or any part thereof. All
structures owned by Seller on the Real Property are structurally sound and in
good operating condition and repair (reasonable wear and tear excepted). Each
parcel of Real Property has access to all public roads and utilities necessary
for operation of the System with respect to such parcel.
3.6. Personal Property. Schedule 3.6 contains a list of all material
-----------------
items of machinery, equipment, vehicles, plant and other tangible Personal
Property used or held for use by Seller in the operation of the System. Seller
has, or will have on the Closing Date, good title to all Personal Property owned
by Seller, and as of the Closing Date none of the Personal Property will be
subject to any claims, liabilities, mortgages, liens, pledges, conditions,
charges or encumbrances of any nature whatsoever, except for Permitted
Encumbrances. Except as set forth in Schedule 3.6. the Personal Property is in
reasonable operating condition and repair (subject to normal wear and tear).
3.7. Contracts. Schedule 3.7 lists all Contracts in existence as of
---------
the date hereof except for: (i) subscription agreements with customers for the
cable services provided by the System; (ii) oral employment contracts and
miscellaneous service contracts terminable at will without penalty; and (iii)
other contracts not involving either liabilities under such contract exceeding
$5,000 per year or any material nonmonetary obligation. Notwithstanding the
foregoing, Schedule 3.7 contains a description of all oral employment contracts.
Seller has made available to Buyer true and complete copies of all written
Contracts disclosed in Schedule 3.7. Except as set forth thereon, all of the
Contracts listed on Schedule 3.7 are valid and binding and in full force and
effect and, to the knowledge of Seller, legally enforceable in accordance with
their terms upon the other parties thereto. There is not under any Contract any
breach or default by Seller or, to the knowledge of Seller, any other party
thereto, except for such breaches and defaults which, individually or in the
aggregate, would not have a Material Adverse Effect. Seller has not nor, to
Seller's knowledge, has any other party to any Contract given or received notice
of termination and, to Seller's knowledge, subject to the receipt of the
Consents set forth on Schedule 3.8, the consummation of the transactions
contemplated by this Agreement will not result in any such termination.
13
3.8. Consents. Except for the Consents described in Schedule 3.8 and
--------
Consents which if not obtained would not have a Material Adverse Effect or a
material adverse effect on Seller's ability to perform its obligations under
this Agreement, no consent, approval, permit or authorization of, or declaration
to or filing with any Governmental Authority or any other third party is
required to consummate this Agreement and the transaction contemplated hereby.
3.9. Information on System.
---------------------
3.9.1. As of the date of this Agreement (i) there are
approximately 145 miles of energized cable plant in the System of which
approximately 70% is underground and approximately 30% is aerial and (ii) not
less than 75% of the energized cable plant has a bandwidth capacity of at least
550 MHz.
3.9.2. As of the date of this Agreement, the energized cable
plant passes 13,100 "dwellings" (where "dwellings" means a home or other
residential unit that can legally be serviced by the System by using no more
than 300 feet of drop cable). Of these 13,100 "dwellings," 12,700 can legally be
serviced by the System by using no more than 150 feet of drop cable, with the
remaining 400 "dwellings" requiring more than 150 feet (but no more than 300
feet) of drop cable.
3.9.3. As of the date of this Agreement, the rates (including
installation charges) charged to customers for each class of service and
categories of customers for the System are set forth in Schedule 3.9.3.
3.9.4. The System duly and properly carries and delivers the
channels indicated in Schedule 3.9.4. Seller has obtained all required FCC
clearances for the operation of the System in all necessary aeronautical
frequency bands.
3.9.5. Schedule 3.9.5 sets forth the following System
information, true and correct in all material respects as of March 31, 1997
(unless otherwise noted):
(i) an inventory of converters;
(ii) the approximate number of Equivalent Subscribers;
(iii) a listing of all communities registered with the
FCC included within the Franchise areas;
(iv) the channel capacity of the System, all
broadcast and nonbroadcast stations or signals carried by the System, with a
breakdown as to each signal as between satellite and off-air reception, current
channel and frequencies utilized (including system radius and designated
coordinates reported to the FCC);
(v) all marketing programs pursuant to which any
customers of the System currently are receiving discounts, whether or not such
programs currently are being offered to
14
customers or potential customers of the System, and all marketing programs
active as of the date of this Agreement as described in written materials
distributed to customers or potential customers of the System (collectively,
"Marketing Programs");
(vi) all FCC call signals and licenses, including,
but not limited to, business radios, earth stations and microwave; and
(vii) all retransmission agreements and must carry
requests utilized by Seller in the operation of the System.
3.10. Financial Statements. Schedule 3.10 contains true and complete
--------------------
copies of unaudited financial statements of the System containing (i) balance
sheets and statements of income as of December 31, 1995 and 1996 and for each of
the years then ended and (ii) balance sheets and statements of income as of
March 31, 1997 and for the three-month period then ended (collectively, the
"Financial Statements"). The Financial Statements are prepared in accordance
with generally accepted accounting principles consistently applied, except for
the absence of footnotes and statements of cash flows and, with respect to the
interim Financial Statements, subject to normal recurring year-end adjustments.
The Financial Statements are in accordance with the books and records of Seller
and present fairly in all material respects the financial condition of the
System as of their respective dates and the results of operations for the
periods then ended.
3.11. Employee Benefit Plans.
----------------------
3.11.1. All of Seller's Employee Plans and Compensation
Arrangements providing benefits to employees of the System as of the date of
this Agreement are listed in Schedule 3.11, and copies of any such Employee
Plans and Compensation Arrangements (or related insurance policies) and any
amendments thereto have been made available to Buyer, along with copies of any
currently available employee handbooks or similar documents describing such
Employee Plans and Compensation Arrangements. Except as disclosed in Schedule
3.11, there is not now in effect or to become effective after the date of this
Agreement and until the Closing Date, any new Employee Plan or Compensation
Arrangement or any amendment to an existing Employee Plan or Compensation
Arrangement which will affect the benefits of employees or former employees of
the System.
3.11.2. Each of Seller's Employee Plans and Compensation
Arrangements has been administered without material exception in compliance with
its own terms and, where applicable, with ERISA, the Code, the Age
Discrimination in Employment Act and any other applicable federal or state laws.
3.11.3. Except as disclosed in Schedule 3.11, Seller does not
contribute to and is not required to contribute to any Multiemployer Plan with
respect to its employees at the System.
3.12. Labor Relations. Schedule 3.12 lists the names, dates of hire
---------------
and job titles (indicating whether such employee is full-time or part-time) of
all personnel whose work is
15
performed wholly or substantially for the System, and Seller has previously
delivered to Buyer the current rates of compensation and bonus arrangements for
all such employees. To the knowledge of Seller, Seller is not liable for any
arrearages of wages or any taxes or penalties relating thereto. Except as
disclosed in Schedule 3.12, Seller is not a party to or subject to any
collective bargaining agreements with respect to the System and the employees of
the System are not represented by a union. Seller has no written or oral
contracts of employment with any employee of the System, other than (i) oral
employment agreements terminable at will without penalty; or (ii) those listed
in Schedule 3.7.
3.13. Taxes, Returns and Reports. All federal, state and local tax
--------------------------
returns required to be filed by Seller through the date hereof in connection
with the operation of the System with respect to any federal, state or local
taxes (the "Taxes") have been filed. Except as set forth in Schedule 3.13, all
Taxes which are due and payable or disputed in good faith have been properly
accrued or paid or are being contested in good faith by appropriate proceedings.
3.14. Claims and Legal Actions. Except as set forth in Schedule 3.14,
------------------------
and except for any investigations and rule-making proceedings affecting the
cable industry generally, there is no (i) judgment or order outstanding, (ii)
legal action, counterclaim, suit, arbitration, proceeding or claim in progress
or, to the knowledge of Seller, pending, threatened against or relating to
Seller, the Assets or the business or operations of the System, or (iii) to the
knowledge of Seller, governmental investigation in progress, pending, threatened
against or relating to Seller, the Assets or the business or operations of the
System; other than those which would not have a Material Adverse Effect or would
not impair the ability of Seller to perform its obligations under this
Agreement.
3.15. Environmental Matters.
---------------------
3.15.1. Except as disclosed in Schedule 3.15 hereto, Seller's
operations with respect to the System, including with respect to the Real
Property, comply with all applicable Environmental Laws except for any
noncompliance that would not have a Material Adverse Effect. Except as described
in Schedule 3.15 hereto, to the knowledge of Seller no underground storage tanks
are located on the Real Property.
3.15.2. No hazardous substances, pollutants, contaminants or
petroleum products, as such terms are defined in Environmental Laws, are present
on the Real Property, whether inside or outside of any building, in such a
manner as may require remediation by Seller under any Contract or applicable
Environmental Laws.
3.15.3. Seller has not received written notice from any
Governmental Authority of any violation by Seller with respect to the System of
any Environmental Laws which violation has not been remedied or cured on or
prior to the date hereof.
3.16. Compliance with Laws. Seller has complied and is in compliance
--------------------
with all federal, state and local laws, rules, regulations and ordinances
applicable to the System, except for such noncompliance which would not have a
Material Adverse Effect.
16
3.17. Conduct of Business in Ordinary Course. Except as set forth on
--------------------------------------
Schedule 3.17, since December 31, 1996, (i) Seller has conducted the business
and operations of the System only in the ordinary course; (ii) Seller has not
suffered any changes, events or conditions that, individually or in the
aggregate, have had a Material Adverse Effect; (iii) except for assets or
properties retired due to obsolescence, there has been no sale, assignment or
transfer of any material assets or properties related to the System, or any
theft, damage, removal of property, destruction or casualty loss that has not
been repaired, replaced or restored by Seller and that, individually or in the
aggregate, has had a Material Adverse Effect; and (iv) there has been no waiver
or release of any material right or claim of Seller against any third party.
3.18. FCC and Copyright Compliance.
----------------------------
3.18.1. Seller is permitted under all applicable FCC rules,
regulations and orders to distribute the transmissions (whether television,
satellite, radio or otherwise) of video programming or other information that
the Seller makes available to customers of the System presently being carried to
the customers of and by the System and to utilize all carrier frequencies
generated by the operations of the System, and is licensed to operate all the
facilities required by law to be licensed, including, without limitation, any
business radio and any cable television relay service system, being operated as
part of the System. Except as provided in Schedule 3.18, Seller's operation of
the System and of any FCC-licensed or registered facility used in conjunction
with Seller's operation of the System, is in compliance with the FCC's rules and
regulations and the provisions of the Communications Act, except for such
noncompliance that would not have a Material Adverse Effect, and all required
reports of Seller to the FCC are materially true and correct and have been
timely filed. Seller makes no representation or warranty with respect to the
effect of the cable television industry-wide dispute concerning music licensing
fees.
3.18.2. Seller has deposited with the U.S. Copyright Office all
statements of account and other documents and instruments, and paid all
royalties, supplemental royalties, fees and other sums to the U.S. Copyright
Office under the Copyright Act of 1976, as amended (the "Copyright Act"), with
respect to the business and operations of the System as are required to obtain,
hold and maintain the compulsory license for cable television systems prescribed
in Section 111 of the Copyright Act. The System is in compliance with the
Copyright Act and the rules and regulations of the U.S. Copyright Office, except
for such noncompliance that would not have a Material Adverse Effect and except
as to potential copyright liability arising from the performance, exhibition or
carriage of any music on the System. To the knowledge of Seller, there is no
inquiry, claim, action or demand pending before the U.S. Copyright Office or
from any other party which questions the copyright filings or payments made by
Seller with respect to the System.
3.18.3. All necessary FAA approvals have been obtained with
respect to the height and location of towers used in connection with the
operation of the System and are listed in Schedule 3.4. The towers are being
operated in compliance with applicable FCC and FAA rules, except for such
noncompliance that would not have a Material Adverse Effect.
17
3.18.4. Without limiting the generality of the foregoing,
except to the extent that the failure to comply with any of the following could
not (either individually or in the aggregate) have a Material Adverse Effect and
except as set forth in Schedule 3.18 hereto:
(i) the Franchise areas have been registered with
the FCC;
(ii) all of the annual performance tests on the
System required under the rules and regulations of the FCC have been performed
and the results of such tests demonstrate satisfactory compliance in all
material respects;
(iii) the System currently meets or exceeds the
technical standards set forth in the rules and regulations of the FCC,
including, without limitation, the leakage limits contained in 47 C.F.R. Section
76.605(a)(11);
(iv) the System is being operated in compliance
with the provisions of 47 C.F.R. Sections 76.6 10 through 76.619 (mid-band and
super-band signal carriage), including 47 C.F.R. Section 76.611 (compliance with
the cumulative signal leakage index); and
(v) all notices to subscribers of the System
required by the rules and regulations of the FCC have been provided.
3.18.5. Except as set forth on Schedule 3.18, the carriage
of all television and radio station signals (other than satellite super
stations) by the System are permitted by valid transmission consent agreements
or by must-carry elections by broadcasters.
3.18.6. Seller is in compliance with its obligations with
regard to the protection of subscriber privacy pursuant to Section 631 of the
Communications Act except to the extent that failure to so comply could not
(either individually or in the aggregate) reasonably be expected to have a
Material Adverse Effect.
3.18.7. No Governmental Authority has notified Seller of its
application to be certified to regulate rates with respect to the System as
provided in 47 C.F.R. Section 76.910.
3.18.8. No Governmental Authority has notified Seller that it
has been certified and has adopted regulations required to commence regulation
with respect to the System as provided in 47 C.F.R. Section 76.910(c)(2).
3.18.9. Seller has established rates charged to customers
that are permitted rates under rules and regulations promulgated by the FCC
under the Communications Act, and any authoritative interpretation thereof,
except as set forth in Schedule 3.18.
3.18.10. No Governmental Authority has an order outstanding
requiring the Seller to reduce rates or issue refunds to subscribers.
18
3.19. Assets. Seller has no properties or assets used or held for use
------
in the System that are not included in the Assets, other than the Excluded
Assets, and except for the Excluded Assets, the Assets to be transferred to
Buyer at Closing include all material properties and assets necessary for the
conduct of the business of the System in the ordinary course of business in
substantially the same manner as conducted prior to the Closing Date.
3.20. Bonds. Seller has in force all bonds required to be obtained by
-----
Seller with respect to the System, including without limitation all bonds
required by Governmental Permits and Contracts, as set forth on Schedule 3.20.
Schedule 3.20 is true, complete and accurate in all material respects and the
bonds referred to therein are in full force and effect, and Seller has received
no notice of non-renewal or cancellation of such bonds.
3.21. Accounts Receivable. The Accounts Receivable have not been
-------------------
assigned to or for the benefit of any other person. The Accounts Receivable
reflected in the Financial Statements and all Accounts Receivable arising after
the dates thereof up to and including the Closing Date (to the extent not
heretofore or theretofore collected) arose and will arise from bona fide
transactions in the ordinary course of business.
3.22. Intangibles. Except as set forth on Schedule 3.22, Seller owns
-----------
or possesses royalty free licenses or other rights to use all trademarks,
service marks and trade names necessary to the operation of the System as
presently conducted without any conflict with, or infringement of, the rights of
others. Schedule 3.22 contains a true, correct and complete list of all
trademarks, service marks and trade names which are material to the operation of
the System. There is no claim pending, or, to Seller's knowledge, threatened
with respect to any such trademarks, service marks and trade names.
3.23. No Other Authorizations. Seller has obtained and is in
-----------------------
compliance with all consents, approvals, authorizations, waivers, orders,
licenses, certificates, permits and franchises (collectively, "Authorizations")
from all Governmental Authorities and other persons required for the operation
of the System as presently operated, all of which are in full force and effect
and enforceable in accordance with their respective terms and comply with all
applicable legal requirements, except for such Authorizations that if not
obtained would not have a Material Adverse Effect, and except for such
noncompliance that would not have a Material Adverse Effect.
3.24. No Undisclosed Liabilities. Except as and to the extent set
--------------------------
forth on Schedule 3.24, Seller does not have any liability or obligation (direct
or indirect, absolute, fixed, contingent or otherwise) arising out of the Assets
or operation of the System which would be required by generally accepted
accounting principles to be reflected or reserved on the Financial Statements
but which are not so reflected or reserved, and Seller has not incurred any such
liability or obligation since December 31, 1996 other than in the ordinary
course of business.
3.25. Liabilities to Customers. There are no obligations or
------------------------
liabilities to customers of the System except with respect to (i) prepayments or
deposits made by such customers as set forth in the Financial Statements or,
since December 31, 1996, incurred in the ordinary course of business
19
consistent with past practices, and (ii) the obligation to supply services to
customers in the ordinary course of business in accordance with and pursuant to
the terms of the Governmental Permits and Contracts.
3.26. Restoration. No property of any third party has been damaged,
-----------
destroyed, disturbed or removed in the process of construction or maintenance of
the System that has not been, or will not be, prior to the Closing, repaired,
restored or replaced, other than in connection with installation and work
projects undertaken in the ordinary course of business and on-going as of
Closing.
3.27. Overbuilds. To the knowledge of Seller and except as set forth
----------
in Schedule 3.27, (i) no construction programs have been undertaken or are
proposed or threatened to be undertaken by any municipality or other cable
television, multichannel multipoint distribution system or multipoint
distribution system provider or operator in any Franchise area served by the
System; and (ii) no franchise or other application or request of any person is
pending, threatened or proposed. Except as set forth on Schedule 3.27, Seller is
not, nor is an affiliate of Seller, a party to any agreement restricting the
ability of a third party to operate cable television systems in the Franchise
areas.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as of the date of this
Agreement and as of the Closing Date, as follows:
4.1. Organization, Standing and Authority. Buyer is a limited
------------------------------------
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware. Buyer has the requisite company power and
authority to execute and deliver this Agreement and to perform and comply with
all of the terms, covenants and conditions to be performed and complied with by
Buyer hereunder and thereunder.
4.2. Authorization and Binding Obligation. Buyer has the company power
------------------------------------
and authority to execute and deliver this Agreement and to carry out and perform
all of its other obligations under the terms of this Agreement. All company
action by Buyer necessary for the authorization, execution, delivery and
performance by Buyer of this Agreement has been taken. This Agreement has been
duly executed and delivered by Buyer and this Agreement constitutes the valid
and legally binding obligation of Buyer, enforceable against it in accordance
with its terms, except (i) as rights to indemnity, if any, thereunder may be
limited by federal or state securities laws or the public policies embodied
therein; (ii) as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect affecting
the enforcement of creditors' rights generally; and (iii) as the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
4.3. Absence of Conflicting Agreements. Subject to obtaining the
---------------------------------
Consents listed on Schedule 3.8, the execution, delivery and performance of this
Agreement by Buyer will not: (i) require the consent, approval, permit or
authorization of, or declaration to or filing with any
20
Governmental Authority or any other third party; (ii) violate the articles of
organization or operating agreement of Buyer; (iii) violate any material law,
judgment, order, ordinance, injunction, decree, rule or regulation of any
Governmental Authority; or (iv) conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
material agreement, instrument, license or permit to which Buyer is a party or
by which Buyer may be bound, such that Buyer could not perform hereunder and
acquire or operate the Assets.
4.4. Buyer Qualification. Buyer knows of no reason why it cannot
-------------------
become the franchisee pursuant to the Franchises, and to its knowledge has the
requisite qualifications to own and operate the System.
5. COVENANTS OF THE PARTIES
------------------------
5.1. Conduct of the Business of the System. Except as contemplated by
-------------------------------------
this Agreement, disclosed on Schedule 5.1 or with the prior written consent of
Buyer (which consent shall not be unreasonably withheld or delayed), between the
date hereof and the Closing Date, Seller shall operate the System in the
ordinary course of business in accordance with past practices and shall:
5.1.1. Not enter into any contract or commitment, except for any
contract or commitment entered into in the ordinary course of business and that
involves liabilities under such contract or commitment not exceeding $5,000 per
year;
5.1.2. Not sell, assign, lease or otherwise dispose of any of the
Assets, except for assets consumed or disposed of in the ordinary course of
business, where no longer used or useful in the business or operations of the
System or in conjunction with the acquisition of replacement property of
equivalent kind and value;
5.1.3. Not create, assume or permit to exist any claim,
liability, mortgage, lien, pledge, condition, charge or encumbrance upon the
Assets, except for Permitted Encumbrances;
5.1.4. Not implement any retiering or repackaging of channels,
change customer rates, or change billing, disconnect or marketing practices
(other than customary marketing practices conducted in the ordinary course of
business);
5.1.5. Maintain the Assets, including the plant and equipment
related thereto, in good operating condition consistent with past practices
(normal wear and tear excepted), and implement any capital expenditures required
in connection with such maintenance consistent with past practices;
5.1.6. Maintain all bonds and casualty and liability insurance
relating to the System as in effect on the date of this Agreement;
21
5.1.7. Keep all of its business books, records and files
relating to the System in the ordinary course of business in accordance with
past practices, and pay, consistent with past practices, all accounts payable
and other debts, liabilities and obligations relating to the System;
5.1.8. Continue to implement its customary procedures for
disconnection and discontinuance of service to System customers whose accounts
are delinquent in accordance with those procedures in effect on the date of this
Agreement;
5.1.9. Not permit the amendment or cancellation of any of
the Governmental Permits or Contracts (other than those constituting Excluded
Assets) which would have a Material Adverse Effect;
5.1.10. Maintain inventories of equipment, cable and supplies
at normal levels consistent with past practices, as described on Schedule 3.6;
5.1.11. Not increase the compensation or change any benefits
available to employees of Seller who work in the System except as required
pursuant to existing written agreements or except in the ordinary course of
business consistent with past practice;
5.1.12. Report and write off Accounts Receivable in
accordance with past practices;
5.1.13. Withhold and pay when due all Taxes relating to
employees of the System, the Assets, and/or the System;
5.1.14. Maintain service quality of the System consistent
with past practices; and
5.1.15. File with the FCC all material reports required to be
filed under applicable FCC rules and regulations, and otherwise comply with all
material legal requirements with respect to the System.
5.2. Access to Information. Seller shall allow Buyer and its
---------------------
authorized representatives reasonable access upon reasonable advance notice at
Buyer's expense during normal business hours to the Assets and to all other
properties, equipment, books, records, Contracts and documents relating to the
System for the purpose of inspection, and furnish or cause to be furnished to
Buyer or its authorized representatives all information with respect to the
affairs and business of the System as Buyer may reasonably request, it being
understood that the rights of Buyer hereunder shall not be exercised in such a
manner as to interfere with the operations of Seller's business. Without
limiting the generality of the foregoing, Buyer shall have access to all
documents and information and reasonable access to books, records and employees
necessary to permit Buyer to verify, to its reasonable satisfaction, the
representations and warranties of the Seller contained herein, including without
limitation that (i) all offset frequencies relating to the System are in place
and (ii) the System is otherwise in compliance with all applicable legal
requirements, and Buyer shall be permitted to conduct (if it so desires) a
signal leakage rideout and follow up and such other tests as Buyer shall deem
necessary to verify the foregoing.
22
5.3. Confidentiality. Each party shall keep secret and hold in
---------------
confidence for a period of one and one-half years following the date hereof, any
and all information relating to the other party that is proprietary to such
other party, including without limitation proprietary information, contacts,
marketing information, technical information, product or service concepts,
subscriber information, rates, financial information, ideas, concepts and
research and development (collectively, "Confidential Information").
Confidential Information does not include any item of information that (i) is
publicly known at the time of its disclosure, (ii) is lawfully received from a
third party not known by a party hereto to be bound in a confidential
relationship with the other party hereto, (iii) is published or otherwise made
known to the public by any source other than a party bound by the provisions
hereof, or (iv) was generated independently. Buyer and Seller agree that
Confidential Information received from the other shall be used solely in
connection with the transactions contemplated by this Agreement. Buyer and
Seller each agrees that it shall treat confidentially and not directly or
indirectly divulge, reveal, report, publish, transfer or disclose, for any
purposes whatsoever, all or any portion of the Confidential Information
disclosed to it by the other, other than (x) information that is required to be
disclosed by applicable law or judicial order, (y) disclosures made by any party
to its directors, officers, employees, attorneys, accountants, members, lenders
and accredited potential investors (excluding any potential investors that are
competitors of the System) and other agents that need the information in
connection with the evaluation and consummation of the transactions contemplated
herein, or (z) disclosures made by any party as shall be reasonably necessary in
connection with obtaining the Consents; provided, however, in connection with
disclosure of Confidential Information under (x) and (z) hereof, the disclosing
party shall give the other party hereto timely prior notice of the anticipated
disclosure and the parties shall cooperate in designing reasonable procedural
and other safeguards to preserve, to the maximum extent possible, the
confidentiality of such material; and provided, further, in connection with
disclosure of Confidential Information under (y) hereof, that Seller and Buyer,
as the case may be, shall be fully liable for any breach of this provision by
any such persons.
5.4. Publicity. Neither party hereto will issue any press release or
---------
otherwise make any public statement with respect to this Agreement and the
transactions contemplated hereby without the prior consent of the other, except
as may be required by applicable laws, in which event the party required to make
the release or announcement shall, if possible, allow the other party reasonable
time to comment on such release or announcement in advance of such issuance.
5.5. Consents. Following the execution hereof, Seller shall make such
--------
applications to the Franchising Authorities and other third parties whose
Consents are listed on Schedule 3.8 required for the consummation hereof, and
shall otherwise use its commercially reasonable efforts to obtain the Consents
as expeditiously as possible, but in no event shall Seller be required, as a
condition of obtaining such Consents, to expend any monies on, before or after
the Closing Date (other than customary application and filing fees, professional
fees and expenses incurred in connection with the efforts to obtain such
Consents), or to offer or grant any accommodations or concessions adverse to
Seller. Buyer shall use its commercially reasonable efforts to promptly assist
Seller and shall take such prompt and affirmative actions as may reasonably be
necessary in obtaining such Consents and shall cooperate with Seller in the
preparation, filing and prosecution of such applications as may reasonably be
necessary, including, without limitation, making management and other personnel
of
23
Buyer available to assist in obtaining such Consents. The parties agree to use
commercially reasonable efforts to obtain consents to the transfer of the cable
television Franchises in substantially the form attached hereto as Exhibit C.
---------
Seller shall not agree to any change in any Franchise more burdensome than
currently exists as a condition to obtaining any authorization, consent, order
or approval necessary for the transfer of such Franchise unless Buyer shall
otherwise consent; provided, however, that Buyer, and not Seller shall bear the
cost and expense of any conditions imposed by Franchising Authorities on
Franchise transfers to which Buyer has consented. Buyer acknowledges that
Franchising Authorities and third parties to Contracts may impose bond, letter
of credit, indemnity and insurance requirements pursuant to the current terms of
the Franchises and Contracts as a condition to giving their consent to
assignment or transfer thereof. Notwithstanding anything to the contrary
contained in this Section 5.5, and regardless of whether any of such bond,
letter of credit, indemnity or insurance requirements have been waived with
respect to Seller, Buyer shall be obligated to accept any such conditions. In
addition, Buyer acknowledges that Franchising Authorities may also modify the
bond, indemnity and insurance provisions of the Franchises or may impose penalty
provisions and other similar provisions to the appropriate Franchise as a
condition to giving their consent to assignment or transfer thereof.
Notwithstanding anything to the contrary contained in this Section 5.5, Buyer
shall be obligated to accept any such conditions as long as the requirements are
reasonable and customary in the industry for similarly situated cable system
operators in terms of size and financial and operating qualifications.
Notwithstanding anything to the contrary contained in this Section 5.5, Buyer
acknowledges that it shall be obligated to deliver to Franchising Authorities
and third parties to Contracts bonds and letters of credit in amounts no less
than the amounts of such bonds and letters of credit delivered by Seller and set
forth on Schedule 3.20, even if such amounts are not specified in the Franchises
or Contracts or are in amounts in excess of those required by the terms of the
Franchises and Contracts. Buyer agrees that it shall not, without the prior
written consent of Seller (which may be withheld at Seller's sole discretion),
seek amendments or modifications to Franchises or Contracts. Buyer shall, at
Seller's request, promptly furnish Seller with copies of such documents and
information with respect to Buyer, including financial information and
information relating to the cable and other operations of Buyer and any of its
affiliated or related companies, as Seller may reasonably request in connection
with the obtaining of any of the Consents or as may be reasonably requested by
any person in connection with any Consent. Notwithstanding anything to the
contrary contained in this Section 5.5, Seller's obligations hereunder with
respect to pursuing any Consent to the transfer of pole attachment or conduit
contracts shall be fully satisfied if Buyer has executed a new contract with the
respective pole company or if such pole company has indicated in writing that it
is willing to execute a new contract with Buyer.
5.6. Cooperation. Buyer agrees that Seller's transfer of the Assets to
-----------
Buyer shall be accomplished in a manner that will enable Seller to qualify the
transfer as part of a like-kind exchange of property within the meaning of
Section 1031 of the Code. Buyer shall, at no expense to Buyer, cooperate with
Seller on and prior to the Closing Date, which cooperation shall include,
without limitation, the manner in which the Purchase Price and Deposit is paid
and the Assets are transferred through the qualified Escrow Agent and a
Qualified Intermediary, to enable Seller to qualify the transfer of Assets as
part of a like-kind exchange of property within the meaning of Section 1031 of
the Code.
24
5.7. Taxes, Fees and Expenses. Buyer and Seller shall each pay
------------------------
one-half of all sales, use, transfer, purchase taxes and fees, filing fees,
recordation fees and application fees, if any, arising out of the transactions
contemplated herein. Each party shall pay its own expenses incurred in
connection with the authorization, preparation, execution and performance of
this Agreement, including all fees and expenses of counsel, accountants, agents
and other representatives.
5.8. Brokers. Each of Buyer and Seller represents and warrants that
-------
neither it nor any person or entity acting on its behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transaction contemplated by this Agreement, except that Seller has retained
Daniels & Associates whose fees shall be paid by Seller. Buyer agrees to
indemnify and hold harmless Seller against any fee, commission, loss or expense
arising out of any claim by any broker or finder employed or alleged to have
been employed by it, and Seller agrees to indemnify and hold harmless Buyer
against any fee, commission, loss or expense arising out of any claim by Daniels
& Associates and any other broker or finder employed or alleged to have been
employed by it.
5.9. Risk of Loss.
------------
5.9.1. The risk of loss, damage or destruction to the System from
fire, theft or other casualty or cause shall be borne by Seller at all times up
to completion of the Closing. It is expressly understood and agreed that in the
event of any material loss or damage to any material portion of the Assets from
fire, casualty or other cause prior to the Closing, Seller shall promptly notify
Buyer of same in writing. Such notice shall report the loss or damage incurred,
the cause thereof, if known, and the insurance coverage related thereto.
5.9.2. Notwithstanding anything to the contrary contained in this
Agreement, including without limitation the provisions of Sections 8.1.2 and
8.1.3, in the event of any loss or damage to the System prior to the Closing,
Seller shall promptly restore, replace or repair the damaged Assets to their
previous condition at Seller's sole cost and expense. In the event such loss or
damage shall not be restored, replaced or repaired by the Closing Date, the
Closing Date shall be postponed (but not to a date later than February 28,
1998), to permit the restoration, repair or replacement of the damaged or lost
Assets.
5.9.3. In the event such loss or damage to the System shall not
have been restored, replaced or repaired by February 28, 1998, Buyer shall, at
its option:
(i) Proceed with the Closing and accept the Assets in
their then condition, in which event Seller shall pay or assign to Buyer all
proceeds of insurance theretofore received or to be received as a result of such
loss or damage, and the Purchase Price shall be reduced by an amount equal to
the difference between the amount of such insurance proceeds and the fair market
value of such loss or damage as reasonably agreed by the parties; or
(ii) Terminate this Agreement by notice to Seller, in
which event there shall be no Closing and this Agreement and all the terms and
provisions hereof shall thereupon be
25
deemed null and void and Buyer shall be entitled to a return of the Deposit plus
accrued interest, whereupon the parties shall have no further liability to each
other.
5.10. Employee Benefit Matters.
------------------------
5.10.1. It is clearly understood that Buyer has no obligation
to employ any of Seller's employees employed at the System and that Seller shall
be responsible for and shall cause to be discharged and satisfied in full all
amounts owed to any employee, including without limitation, wages, salaries, any
employment, incentive, compensation or bonus agreements or other benefits or
payments on account of termination. Buyer, which as noted above has no
obligations to hire any of Seller's employees at the System, agrees that it will
provide Seller with notice of which employees of the System Buyer intends to
hire (the "Transferred Employees") at least 45 days before the Closing Date.
From the date of this Agreement until 180 days after Closing, Seller agrees that
it shall not, and that it shall use its best efforts to cause Cox
Communications, Inc. and its affiliates to not, solicit any employees of the
System for the purpose of retaining and reassigning such employees.
5.10.2. As of the Closing Date, Seller shall terminate
employment of all Transferred Employees.
5.10.3. Buyer shall offer health plan coverage to all of the
full-time Transferred Employees, on terms and conditions generally applicable to
all of Buyer's employees. For purposes of providing such coverage, Buyer shall
waive all preexisting condition limitations for all such employees of the System
covered by the Seller's health care plan as of the Closing Date who have been
employed by Seller for at least six months as of the Closing Date (other than
preexisting conditions which were excluded by Seller's health care plan) and
shall provide such health care coverage effective as of the Closing Date without
the application of any eligibility period for coverage. In addition, Buyer shall
credit all employee payments toward deductible and co-payment obligation limits
under Seller's health care plans for the plan year which includes the Closing
Date as if such payments had been made for similar purposes under Buyer's health
care plans during the plan year which includes the Closing Date, with respect to
Transferred Employees, provided Buyer receives proof of such payments if
required by Buyer's health care plans.
5.10.4. For each Transferred Employee, Buyer shall give past
service credit for all crediting purposes under such of its employee benefit
plans that, on or after the Closing Date, provides coverage to Transferred
Employees, in accordance with Buyer's benefit plans. For each Transferred
Employee, to the extent Buyer shall have received an adjustment pursuant to
Section 2.5.1, Buyer shall honor all accrued vacation not taken by such employee
for the calendar year in which the Closing occurs.
5.10.5. Within a reasonable period of time after the Closing,
Seller shall transfer from the Cox Communications, Inc. Savings and Investment
Plan ("Seller's 401(k) Plan") to the Mediacom California LLC 401(k) Plan
("Buyer's 401(k) Plan") an amount equal to the aggregate account balances held
in the Seller's 401(k) Plan as of the date of transfer with respect to all
26
Transferred Employees. The transfer of assets contemplated by this Section
5.10.5 shall be in cash or a combination of cash and in kind, as may be mutually
agreeable to Seller and Buyer; provided, that Buyer shall be obligated to accept
as a part of such transfer any promissory notes with respect to Transferred
Employees that have taken participant loans from the Seller's 401(k) Plan that
are outstanding as of the Closing Date. Prior to the date of such transfer, and
as preconditions thereto: (i) Seller shall deliver to Buyer a copy of the most
recently issued IRS determination letter (or other proof reasonably satisfactory
to counsel for Buyer) that the Seller's 401(k) Plan is qualified under the Code,
and (ii) Buyer shall deliver to Seller a copy of the most recently issued IRS
determination letter (or other proof reasonably satisfactory to counsel for the
Seller) that the Buyer's 401(k) Plan is qualified under the Code. Seller shall
not take any action with respect to the Seller's 401(k) Plan to create a right
on behalf of the Transferred Employees to distribution of plan assets from the
Seller's 401(k) Plan prior to such transfer. Subsequent to the transfer of
assets to the Buyer's 401(k) Plan, neither Seller nor the Seller's 401(k) Plan
shall retain any liability with respect to such Transferred Employees to provide
them with benefits in accordance with the terms of the Seller's 401(k) Plan.
Notwithstanding the foregoing, in the event Buyer determines that a transfer of
assets would require one or more amendments to the Buyer's 401(k) Plan to comply
with the requirements of Section 411(d)(6) of the Code, no transfer of assets
to the Buyer's 401(k) Plan will be required unless Buyer, in its sole
discretion, consents to making such amendment(s). On or prior to the Closing
Date, Seller shall deliver to Buyer a list of all Transferred Employees,
indicating thereon the total amount deferred in pre-tax dollars to the Seller's
401(k) Plan by each Transferred Employee under the terms of Section 402(g) of
the Code with respect to the plan year of the Seller's 401(k) Plan in which the
Closing occurs. Seller and Buyer agree to cooperate with respect to any
government filing, including, but not limited to, the filing of IRS Forms
5310-A, if necessary, to effect the transfer of assets contemplated by this
Section 5.10.5.
5.10.6. Promptly upon Seller's written request, Buyer shall
reimburse Seller for one-half of the total amount of severance payments that
Seller is obligated to pay, pursuant to the severance benefits plan disclosed as
Item 5 on Schedule 3.11, to any of the Seller's employees as to which Buyer
notifies Seller, pursuant to Section 5.10.1 above, that it intends to hire at
Closing, if Buyer fails to hire any such employees on the Closing Date. In
addition, if Buyer discharges without cause any Transferred Employees within 90
days of Closing, if Seller or an affiliate of Seller does not hire such
employees within 60 days of discharge by Buyer, and if such employees would have
been entitled to severance payments pursuant to Seller's severance benefits plan
if such employees had been discharged without cause by Seller in accordance with
Section 5.10.2 and not been hired by Buyer as of Closing, then Buyer and Seller
shall pay severance payments to such employees in accordance with Seller's
severance benefits plan listed as Item 5 on Schedule 3.11 to the extent such
plan would have paid severance to any such employees if they had not been hired
by Buyer at Closing, with Buyer and Seller each paying one-half of the amount of
such severance payments. Except for severance payments, Buyer shall not be
responsible for any other severance benefits pursuant to Seller's severance
benefits plan.
5.11. Bonds, Letters of Credit. Etc. Buyer shall take all reasonably
------------------------------
necessary steps, and execute and deliver all reasonably necessary documents, to
insure that on the Closing Date Buyer has delivered such bonds, letters of
credit, indemnity agreements and similar instruments in such
27
amounts and in favor of such Franchising Authorities and other persons requiring
the same in connection with the Governmental Permits and the Contracts.
5.12. Noncompetition. Seller covenants and agrees that, unless Buyer
--------------
shall otherwise give its prior written consent, for a period of three years from
the Closing Date neither it nor any of its affiliates will own, manage, operate,
control or engage, directly or indirectly, in the business of operating a
wireline video cable television system within the area currently serviced by the
System. Notwithstanding the foregoing, nothing herein shall be construed to
prohibit or restrict (i) Seller or its affiliates from directly or indirectly
holding an ownership interest in or participating in the management or
operations of, or acting as distributor for, PrimeStar Partners, L.P., its
successors and assigns, presently offering direct broadcast satellite service
nationwide, including within the area currently served by the System, or (ii)
the ownership of a company's securities listed on a national securities exchange
or the National Association of Securities Dealers Automated Quotations System,
which (A) constitutes less than 10% of the outstanding voting stock of such
company, (B) does not constitute control over such company and (C) is held
solely for investment purposes.
5.13. Transitional Services.
---------------------
5.13.1. Seller shall provide to Buyer subscriber billing
services, excluding lockbox services ("Billing Services") in connection with the
System for a period of up to 12 months after the Closing Date, free of charge,
to allow for conversion of existing billing arrangements. Seller shall provide
reasonable cooperation and support to Buyer in connection with such conversion,
including, without limitation, reasonable access to all data and information
necessary for conversion planning purposes.
5.13.2. To facilitate Buyer's access to Seller's customer
billing system, for a period of up to 12 months after the Closing Date, Seller
shall permit Buyer to use certain computer and communications equipment located
at the System and used to access Seller's customer billing system, including the
material items listed on Schedule 2.2. At the end of such 12 month period or
such earlier time as Buyer has completed the transition to Buyer's customer
billing system, Buyer shall return to Seller such equipment.
5.14. Title Insurance. Seller shall cooperate with Buyer if Buyer
---------------
elects to obtain title insurance policies or surveys on any Real Property owned
in fee or leased. Buyer shall have the sole responsibility for obtaining and
paying for such policies and surveys. The parties agree that the obtaining of
title insurance and surveys on any Real Property shall not be a condition to the
obligation of Buyer to consummate the transactions contemplated hereby.
5.15. Use of Seller's Name. For a period of up to 120 days after the
--------------------
Closing Date, Buyer may continue (but only to the extent reasonably necessary)
to operate the System using Seller's name and all derivations and abbreviations
of such name and related trade names and marks in use in the System on the
Closing Date, such use to be in a manner consistent with the way in which Seller
has used the names and marks. Within 120 days after the Closing Date, Buyer will
discontinue using and will dispose of all items of stationery, business cards
and literature bearing such names or
28
marks. Seller will be entitled to indemnification (as provided in Section 9.3)
with respect to Buyer's misuse of such names and marks.
5.16. Adverse Changes. Between the date of execution and delivery of
---------------
this Agreement and the Closing Date, Seller shall give Buyer prompt written
notice of any material adverse change in the condition of any of the Assets or
the condition, operations or financial condition of the System or any material
change in any of the information contained in the representations and warranties
of Seller or information otherwise furnished to Buyer which, to the best of
Seller's knowledge, occurs after the date hereof, including, without limitation,
(i) any damage, destruction or loss (whether or not covered by insurance); (ii)
any notice of violation, forfeiture or complaint under any Governmental Permit
or Contract; (iii) any claim, action, investigation or proceeding threatened in
writing or initiated relating to any rate then being charged by Seller for any
service provided by the System or the carriage of or failure to carry any
television broadcast signal; or (iv) anything which, if not corrected prior to
the Closing Date, will prevent Seller from fulfilling any condition to Closing
described herein. During such period, Seller shall consult with Buyer and keep
Buyer fully informed at all times regarding any hearings or developments
relating to any such claim, action, investigation or proceeding. No such
furnishings of information to Buyer and no investigation by Buyer shall affect
Buyer's right to rely on, or Seller's liability with respect to, any
representation or warranty made in this Agreement.
5.17. Forms 394. If required, within 20 Business Days after the date
---------
of this Agreement, Seller and Buyer shall, each at its own expense, prepare and
file properly prepared Applications for Franchise Authority Consent to
Assignment or Transfer of Control of Cable Television Franchise FCC 394 with the
Franchising Authorities and shall file all additional information required by
such Franchises or applicable local legal requirements or that the Franchising
Authorities deem necessary or appropriate in connection with their consideration
of the request of Seller or Buyer that such authority approve of the transfer of
the Franchises to Buyer.
5.18. Monthly Financial Statements. Between the date of execution and
----------------------------
delivery of this Agreement and the Closing Date, Seller shall deliver to Buyer
within 30 days after the end of each calendar month, unaudited financial reports
in the form customarily prepared by Seller with respect to the System, and other
reports with respect to the System, in the form customarily prepared by Seller
or as Buyer may reasonably request (including, without limitation, capital
expenditures to the System, reports setting forth the revenue and cash flow of
the System for each month and year-to-date, customer activity information,
including information on connect and disconnect requests, pay television units
and homes passed), beginning as soon as practicable after the date of this
Agreement. Such financial statements and other reports, if any, shall present
fairly and accurately the financial condition and results of operations of
Seller and the System for the period then ended and as of such dates and be
prepared in accordance with generally accepted accounting principles
consistently applied through the periods specified, subject to normal year end
adjustments.
5.19. Reporting Requirements. Seller covenants and agrees that from
----------------------
time to time, upon the request of Buyer, and at the expense of Buyer (which
expense shall include, without limitation, all fees of Seller's independent
auditors as well as the costs of Seller's accountants), Seller shall (i)
29
as soon as practicable make available to Buyer such financial information with
respect to the System relating to periods prior to the Closing Date as Buyer may
request in order to prepare any financial statements and financial statement
schedules relating to the System that Buyer is required to include in any
registration statement, report or other document that it files with the
Securities and Exchange Commission or any state securities commission, in
appropriate form as provided by applicable federal or state securities laws and
the rules and regulations promulgated thereunder, and Seller shall direct its
present certified public accountants, Deloitte & Touche, L.L.P., to cooperate
with Buyer in connection therewith, and (ii) use its commercially reasonable
efforts to obtain for Buyer as soon as practicable any consent, report, opinion
or letter of accountants required to be filed in connection therewith.
Notwithstanding anything to the contrary contained in this Section 5.19, Seller
shall have no obligation to comply with the terms of this Section 5.19 if Seller
is unable to locate or produce any such financial information after good faith
efforts to do so.
5.20. Certain Retransmission Contracts. Buyer agrees to use
--------------------------------
commercially reasonable efforts to obtain authorization to carry, from and after
Closing, the signals referenced in Section 6.1.9 below, and Seller shall, at no
expense to Seller, cooperate with and assist Buyer in obtaining such
authorization to the extent Seller reasonably deems appropriate.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SELLER TO CLOSE
----------------------------------------------------------------
6.1. Conditions Precedent to Obligations of Buyer to Close. The
-----------------------------------------------------
obligations of Buyer to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived, in whole or in part, by Buyer for purposes of
consummating such transactions:
6.1.1. Representations and Warranties. All representations and
------------------------------
warranties of Seller contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time except for
changes contemplated by this Agreement.
6.1.2. Covenants and Conditions. Seller shall have in all
------------------------
material respects performed and complied with all material covenants, agreements
and conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
6.1.3. No Injunction, Etc. No action, suit or other proceeding
------------------
shall have been instituted, threatened or proposed before any Governmental
Authority to enjoin, restrain, prohibit or obtain substantial damages in respect
of, or which is related to, or arising out of, this Agreement or the
consummation of the transaction contemplated hereby.
6.1.4. Consents. Each of the following Consents shall have been
--------
duly obtained and delivered to Buyer: (i) the Consents of the Franchising
Authorities listed on Schedule 3.8; (ii) the Consents of the FCC listed on
Schedule 3.8, except for any FCC consent to any business radio license that
Seller reasonably expects can be obtained within 120 days after the Closing and
so long
30
as a temporary authorization is available to Buyer under FCC rules with respect
thereto; and (iii) such other consents as designated by an asterisk on Schedule
3.8.
6.1.5. Deliveries. Seller shall have made or stand willing and able
----------
to make all the deliveries to Buyer set forth in Section 7.3.
6.1.6. Material Adverse Effect. Between the date of this Agreement
-----------------------
and the Closing Date, there shall have been no Material Adverse Effect.
6.1.7. Financing. The financial institutions that are providing
---------
financing to Buyer in connection with the Closing shall not have exercised the
"material adverse changes" provision in their commitment letter or credit
agreement (the "Bank MAC"), the exact language of such provision being set forth
on Schedule 6.1.7.
6.1.8. Subscribers. As of the Closing Date, there shall be no fewer
-----------
than (i) 9,000 Equivalent Subscribers, in the event the Closing is on or before
August 15, 1997, or (ii) 9,100 Equivalent Subscribers, in the event the Closing
is after August 15, 1997.
6.1.9. Retransmission Consents. Buyer shall have obtained
-----------------------
authorization, on terms reasonable and customary in the industry for cable
system operators and broadcast stations of similar size, to carry KCBS, KNBC,
KABC, KTTV, KTLA and KCOP on the System from and after Closing.
6.2. Conditions Precedent to Obligations of Seller to Close. The
------------------------------------------------------
obligations of Seller to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived, in whole or in part, by Seller for purposes of
consummating such transactions:
6.2.1. Representations and Warranties. All representations and
------------------------------
warranties of Buyer contained in this Agreement shall be true and complete in
all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time except to the
extent changes are permitted or contemplated pursuant to this Agreement.
6.2.2. Covenants and Conditions. Buyer shall have in all material
------------------------
respects performed and complied with all material covenants, agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date.
6.2.3. No Injunction, Etc. No action, suit or other proceeding shall
------------------
have been instituted, threatened or proposed before any Governmental Authority
to enjoin, restrain, prohibit or obtain substantial damages in respect of, or
which is related to, or arising out of, this Agreement or the consummation of
the transaction contemplated hereby.
31
6.2.4. Deliveries. Buyer shall have made or stand willing and able to
----------
make all the deliveries set forth in Section 7.4.
7. CLOSING AND CLOSING DELIVERIES
------------------------------
7.1. Closing. The Closing shall take place at 10:00 a.m. on a date to be
-------
mutually agreed upon, not fewer than five and not more than 15 Business Days
following the date upon which the conditions set forth in Section 6.1.4 hereof
shall have been satisfied, or on such other date as Buyer and Seller may
mutually agree (the "Closing Date"). Seller acknowledges that Buyer's health
care plan allows for the addition of new employees only on specified days of the
month, and Seller agrees to schedule the Closing Date at such time as to
accommodate Buyer's obligation to provide health care plan coverage to the
Transferred Employees effective as of the Closing Date. The Closing shall be
held at the offices of Cooperman Levitt Winikoff Lester & Newman, P.C., 800
Third Avenue, New York, New York 10022, or will be conducted by mail or at such
other place and time as the parties may agree.
7.2. Like-Kind Exchange. On the Closing Date, Buyer and Seller shall be
------------------
prepared to effectuate the transfer of the Purchase Price, Deposit and Assets in
a manner that enables Seller to qualify the transaction as part of a like-kind
exchange of property within the meaning of Section 1031 of the Code.
7.3. Deliveries by Seller. Prior to or on the Closing Date, Seller shall
--------------------
deliver to Buyer the following, in form and substance reasonably satisfactory to
Buyer and its counsel:
7.3.1. Transfer Documents. Duly executed warranty bills of sale,
------------------
assignments and other transfer documents which shall be sufficient to vest good
title to the Assets in the name of Buyer or its permitted assignees, free and
clear of any claims, liabilities, mortgages, liens, pledges, conditions, charges
or encumbrances of any nature whatsoever except for Permitted Encumbrances;
7.3.2. Consents. The original of each Consent listed on Schedule 3.8
--------
subject to Section 6.1.4;
7.3.3. Officer's Certificate. A certificate, dated as of the Closing
---------------------
Date, executed by the President or a Vice President of Seller, certifying to his
knowledge, without personal liability: (i) that the representations and
warranties of Seller contained in this Agreement are true and complete in all
material respects at and as of the Closing Date as though made on and as of such
time, except for changes contemplated by this Agreement; and (ii) that Seller
has, in all material respects, performed and complied with all material
covenants, agreements and conditions required by this Agreement to be performed
or complied with by Seller prior to or on the Closing Date;
7.3.4. Secretary's Certificate. A certificate, dated as of the
-----------------------
Closing Date, executed by the Secretary of Seller, without personal liability:
(i) certifying that the resolutions, as attached to such certificate, were duly
adopted by Seller's Board of Directors and stockholders (if required),
authorizing and approving the execution of this Agreement and the consummation
of the transaction
32
contemplated hereby and that such resolutions remain in full force and effect;
(ii) certifying as to the incumbency of each signatory to this Agreement
executed by Seller; and (iii) certifying that Seller is duly formed and validly
existing under the laws of the State of Delaware, together with a true and
complete copy of Seller's articles of incorporation, certified by the Secretary
of State of the State of Delaware, and good standing certificates of recent
dates from the Secretary of State of the States of California and Delaware; and
7.3.5. Opinions of Counsel. Opinions of Seller's counsel dated as of
-------------------
the Closing Date, substantially in the forms attached hereto as Exhibit D-1 and
-----------
Exhibit D-2.
- -----------
7.4. Deliveries by Buyer. Prior to or on the Closing Date, Buyer shall
-------------------
deliver to Seller or, at Seller's direction, to a Qualified Intermediary, the
following, in form and substance reasonably satisfactory to Seller and its
counsel:
7.4.1. Purchase Price. The Purchase Price, as adjusted as provided in
--------------
Section 2.4 (subject to credit for the Deposit, together with interest thereon);
7.4.2. Assumption Agreements. Appropriate assumption agreements
---------------------
pursuant to which Buyer shall assume and undertake to perform the Assumed
Liabilities;
7.4.3. Officer's Certificate. A certificate, dated as of the Closing
---------------------
Date, executed by a Member of Buyer, certifying to his knowledge, without
personal liability (i) that the representations and warranties of Buyer
contained in this Agreement are true and complete in all material respects as of
the Closing Date as though made on and as of that date; and (ii) that Buyer has,
in all material respects, performed all of its obligations and complied with all
of its material covenants set forth in this Agreement to be performed or
complied with by Buyer on or prior to the Closing Date;
7.4.4. Secretary's Certificate. A certificate, dated as of the
-----------------------
Closing Date, executed by a Member of Buyer, without personal liability: (i)
certifying that the resolutions, as attached to such certificate, were duly
adopted by Buyer's management committee and/or members as required by applicable
law and Buyer's articles of organization and operating agreement, authorizing
and approving the execution of this Agreement and the consummation of the
transaction contemplated hereby and that such resolutions remain in full force
and effect; (ii) certifying as to the incumbency of each signatory to this
Agreement executed by Buyer; and (iii) certifying that Buyer is duly formed and
validly existing under the laws of the State of Delaware, together with a true
and complete copy of Buyer's articles of organization, certified by the
Secretary of State of the State of Delaware, and good standing certificates of
recent dates from the Secretary of State of the States of California and
Delaware; and
7.4.5. Opinion of Counsel. An opinion of Buyer's counsel dated as of
------------------
the Closing Date, substantially in the form attached hereto as Exhibit E.
---------
33
8. TERMINATION
-----------
8.1. Method of Termination. This Agreement constitutes the binding and
---------------------
irrevocable agreement of the parties to consummate the transactions contemplated
hereby, subject to and in accordance with the terms hereof, the consideration
for which is (i) the covenants, representations, warranties and agreements set
forth in this Agreement; and (ii) the expenditures and obligations incurred and
to be incurred by Buyer on the one hand, and by Seller, on the other hand, in
respect of this Agreement, and this Agreement may be terminated or abandoned
only as follows:
8.1.1. By the mutual consent of Seller and Buyer; or by Seller or
Buyer if any condition to Closing set forth in Section 6.1.3 or 6.2.3 is not
fulfilled and the failure of such condition is not a result of a breach of
warranty or nonfulfillment of any covenant or agreement by Buyer or Seller
contained in this Agreement; or by Buyer if the condition to Closing set forth
in Section 6.1.7 is not fulfilled;
8.1.2. By Buyer after November 30, 1997, if any of the conditions set
forth in Section 6.1 hereof to which the obligations of Buyer are subject (other
than the conditions set forth in Sections 6.1.3 and 6.1.7) have not been
fulfilled or waived, and provided that the failure to fulfill such condition is
not a result of a breach of warranty or nonfulfillment of any covenant or
agreement by Buyer contained in this Agreement; or
8.1.3. By Seller after November 30, 1997, if any of the conditions
set forth in Section 6.2 hereof to which the obligations of Seller are subject
(other than the conditions set forth in Section 6.2.3) have not been fulfilled
or waived, and provided that the failure to fulfill such condition is not a
result of a breach of warranty or nonfulfillment of any covenant or agreement by
Seller contained in this Agreement.
8.2. Rights Upon Termination.
-----------------------
8.2.1. In the event of a termination of this Agreement pursuant to
Section 8.1.1 hereof, the Buyer shall be entitled to the return of the Deposit
and all interest accrued thereon, each party shall pay the costs and expenses
incurred by it in connection with this Agreement, and no party (or any of its
officers, directors, members, employees, agents, representatives or
stockholders) shall be liable to any other party for any cost, expense, damage
or loss of anticipated profits hereunder.
8.2.2. In the event of a termination of this Agreement pursuant to
Section 8.1.2 hereof, Buyer shall be entitled to the return of the Deposit and
all interest accrued thereon and, if Seller is in breach of this Agreement, also
shall have the right to seek all remedies available to it as provided hereunder
or at law or equity, including the remedy of specific performance; provided,
however, that Buyer shall not be entitled to recover monetary damages from
Seller in excess of $2,000,000 under any circumstances. In the event of any
action to enforce this Agreement, Seller hereby waives the defense that there is
an adequate remedy at law.
34
8.2.3. In the event of a termination of this Agreement pursuant to
Section 8.1.3 xxxreof as a result of a breach of this Agreement by Buyer, Seller
shall have the right to pursue all xxxgal or equitable remedies, other than
specific performance, for breach of contract or otherwise, in xxxhich case the
Deposit and all interest accrued thereon shall be applied toward any damage
award, xxxt in no event shall the Deposit and any interest accrued thereon be
deemed the sole source of funds xxx the recovery of any such damage award;
provided, however, that Seller shall not be entitled to cover monetary damages
from Buyer in excess of $2,000,000 under any circumstances. In the xxxent of any
action to enforce this Agreement, Buyer hereby waives the defense that there is
an equate remedy at law.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION
--------------------------------------------------------------
9.1. Representations and Warranties. All representations, warranties,
------------------------------
covenants and xxxreements contained in this Agreement or in documents or
instruments delivered pursuant hereto xxxll be deemed continuing
representations, warranties, covenants and agreements, and shall survive Closing
Date for a period ending on the first anniversary of the Closing Date; provided,
however, xxxt the representations and warranties regarding tax and environmental
matters contained in xxxtions 3.13 and 3.15 and the representations and
warranties regarding title to the Assets contained Sections 3.5 and 3.6 shall
survive for the period of the applicable statute of limitations.
9.2. Indemnification by Seller. Seller shall indemnify and hold Buyer
-------------------------
harmless against xxxi with respect to, and shall reimburse Buyer for:
9.2.1. Any and all losses, liabilities or damages resulting from any
untrue xxxresentation, breach of warranty or nonfulfillment of any covenant by
Seller contained herein;
9.2.2. Any and all obligations of Seller not assumed by Buyer
pursuant to the terms xxxeof;
9.2.3. Any and all losses, liabilities or damages resulting from or
relating to Seller's xxxration or ownership of the System or Assets prior to the
Closing Date; and
9.2.4. Any and all actions, suits, proceedings, claims, demands,
assessments, xxxgments, costs and expenses, including, without limitation,
reasonable legal fees and expenses, xxxdent to any of the foregoing or incurred
in investigating or attempting to avoid the same or to xxxose the imposition
thereof, or in enforcing this indemnity.
9.3. Indemnification by Buyer. Buyer shall indemnify and hold Seller
------------------------
harmless against with respect to, and shall reimburse Seller for:
9.3.1. Any and all losses, liabilities or damages resulting from any
untrue xxxesentation, breach of warranty or nonfulfillment of any covenant by
Buyer contained herein;
9.3.2. Any and all of the Assumed Liabilities;
35
9.3.3. Any and all losses, liabilities or damages resulting from or
relating to Buyer's operation or ownership of the System or Assets on and after
the Closing Date; and
9.3.4. Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including, without limitation,
reasonable legal fees and expenses, incident to any of the foregoing or incurred
in investigating or attempting to avoid the same or to oppose the imposition
thereof, or in enforcing this indemnity.
9.4. Procedure for Indemnification. The procedure for indemnification
-----------------------------
shall be as follows:
9.4.1. The party claiming indemnification (the "Claimant") shall
promptly give notice to the party from whom indemnification is claimed (the
"Indemnifying Party") of any claim, whether between the parties or brought by a
third party, specifying (i) the factual basis for such claim; and (ii) the
estimated amount of the claim. If the claim relates to an action, suit or
proceeding filed by a third party against Claimant, such notice shall be given
by Claimant within five days after written notice of such action, suit or
proceeding was given to Claimant; provided that failure to give such notice
within such five-day period shall not bar or otherwise prejudice Claimant's
rights to indemnification with respect to such third-party action, suit or
proceeding unless any defense, claim, counterclaim or crossclaim of the
Indemnifying Party is prejudiced thereby.
9.4.2. Following receipt of notice from the Claimant of a claim
(other than a claim brought by a third party), the Indemnifying Party shall have
30 days to make such investigation of the claim as the Indemnifying Party deems
necessary or desirable. For the purposes of such investigation, the Claimant
agrees to make available to the Indemnifying Party and/or its authorized
representative(s) the information relied upon by the Claimant to substantiate
the claim. If the Claimant and the Indemnifying Party agree at or prior to the
expiration of said 30-day period (or any mutually agreed upon extension thereof)
to the validity and amount of such claim, the Indemnifying Party shall
immediately pay to the Claimant the full amount of the claim subject to the
terms and in accordance with the procedures set forth herein. If the Claimant
and the Indemnifying Party do not agree within said period (or any mutually
agreed upon extension thereof), the Claimant may seek appropriate legal or
equitable remedy.
9.4.3. With respect to any claim by a third party as to which the
Claimant is entitled to indemnification hereunder, the Indemnifying Party shall
have the right at its own expense, to participate in or assume control of the
defense of such claim, with counsel of its choice, and the Claimant shall
cooperate fully with the Indemnifying Party. If the Indemnifying Party elects to
assume control of the defense of any third-party claim, the Claimant shall have
the right to participate in the defense of such claim at its own expense. In the
event that the Indemnifying Party desires to compromise or settle any such
claim, Claimant shall have the right to consent to such settlement or
compromise; provided, however, that if such settlement or compromise is for
money damages only to be paid by the Indemnifying Party, and will include a full
release and discharge of Claimant, and Claimant withholds its consent to such
compromise or settlement, Buyer and Seller agree that (i) the Indemnifying
Party's liability shall be limited to the amount of the proposed
36
settlement or compromise, and upon payment of such amount to Claimant, the
Indemnifying Party shall thereupon be relieved of any further liability with
respect to such claim, and (ii) from and after such date of payment, Claimant
will undertake all legal costs and expenses in connection with any such claims.
If the Indemnifying Party fails to defend any claim within a reasonable time,
Claimant shall be entitled to assume the defense thereof, and the Indemnifying
Party shall be liable to Claimant for its expenses reasonably incurred,
including attorneys' fees and payment of any settlement amount or judgment. If
the Indemnifying Party does not elect to assume control or otherwise participate
in the defense of any third party claim, it shall be bound by the results
obtained by the Claimant with respect to such claim.
9.4.4. If a claim, whether between the parties or by a third party,
requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
9.5. Limitation on Indemnification: Exclusive Remedy.
-----------------------------------------------
9.5.1. Seller shall not be required to indemnify Buyer under Section
9.2 until the aggregate amount of Buyer's claims exceeds $100,000 (the
"Threshold Amount"), and if such claims exceed the Threshold Amount, Buyer shall
be entitled to recover all of its losses, including, without limitation, the
amount of the Threshold Amount.
9.5.2. Seller's liability under Section 9.2 shall be limited to
losses or damages not exceeding in the aggregate $4,000,000.
9.5.3. The amount payable by Seller to Buyer with respect to Section
9.2 shall be reduced by the amount of any insurance proceeds received by Buyer
with respect to losses, liabilities or damages, and each of the parties hereby
agrees to use reasonable efforts to collect any and all insurance proceeds to
which it may be entitled in respect to any such losses, liabilities or damages.
Such amount payable shall be further reduced by the amount of any tax benefit
actually realized (including by refund or by reduction or offset against taxes
otherwise payable had the losses, liabilities or damages not been sustained) by
Buyer (or the affiliated or combined group of which it is a member) by reason of
the payment or incurrence by Buyer of the losses, liabilities or damages for
which indemnity is sought or the occurrence of the event giving rise to such
losses, liabilities or damages. To the extent that insurance proceeds are
received and/or a tax benefit is realized after payment has been made by Seller
to Buyer, Buyer shall promptly pay an amount equal to such proceeds or benefit
to Seller.
9.5.4. After the Closing Date, the sole and exclusive remedy of any
party for any misrepresentation or any breach of a warranty or covenant set
forth in or made pursuant to this Agreement shall be a claim for indemnification
under and pursuant to this Article 9.
9.5.5. Notwithstanding the foregoing, the Threshold Amount and other
limitations contained in this Section 9.5 shall not apply to indemnification
claims brought by Buyer relating to
37
the liabilities of Seller that are not Assumed Liabilities ad for which Buyer
did not receive a credit pursuant to Section 2.5.4.
10. MISCELLANEOUS
-------------
10.1. Notices. All notices, demands and requests required or permitted to
-------
be given under the provisions of this Agreement shall be (i) in writing; (ii)
delivered by personal delivery, facsimile transmission (to be followed promptly
by written confirmation mailed by certified mail as provided below) or sent by
commercial delivery service or certified mail, return receipt requested; (iii)
deemed to have been given on the date of personal delivery, the date of
transmission and receipt of facsimile transmissions, or the date set forth in
the records of the delivery service or on the return receipt; and (iv) addressed
as follows:
If to Seller: c/o Cox Communications, Inc.
1400 Lake Hearn Drive, N.E.
Atlanta, Georgia 30319
Attn: Mr. John M. Dyer
Facsimile No.: (404) 847-6336
With a copy to: Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, DC 20036-6802
Attn: Stuart A. Sheldon, Esq.
Facsimile No.: (202) 776-2222
If to Buyer: c/o Mediacom LLC
90 Crystal Run Road
Suite 406-A
Middletown, New York 10941
Attn: Mr. Rocco B. Commisso, Manager
Facsimile No.: (914) 695-2699
With a copy to: Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attn: H. Frances Kleiner, Esq.
Facsimile No.: (212) 755-2839
or to any such other persons or addresses as the parties may from time to time
designate in a writing delivered in accordance with this Section 10.1.
10.2. Benefit and Binding Effect. Neither party hereto may assign this
--------------------------
Agreement without the prior written consent of the other party; provided,
however, that Seller may assign some or all
38
of its rights but not its obligations under this Agreement to a Qualified
Intermediary for purposes of effecting a like-kind exchange of property under
Section 1031 of the Code without Buyer's consent. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
10.3. Bulk Transfer. Buyer acknowledges that Seller has not and will not
-------------
file any bulk transfer notice or otherwise complied with applicable bulk
transfer laws, and the parties agree to waive compliance with same. Seller shall
indemnify and hold harmless Buyer from and against any claims or liabilities
asserted against Buyer by any creditor of Seller or the System by reason of such
noncompliance.
10.4. Governing Law. This Agreement shall be governed, construed and
-------------
enforced in accordance with the laws of the State of Delaware, without regard to
the conflicts of law principles of such state.
10.5. Headings. The headings herein are included for ease of reference only
--------
and shall not control or affect the meaning or construction of the provisions of
this Agreement.
10.6. Gender and Number. Words used herein, regardless of the gender and
-----------------
number specifically used, shall be deemed and construed to include any other
gender, masculine, feminine or neuter, and any other number, singular or plural,
as the context requires.
10.7. Entire Agreement. This Agreement, all schedules ad exhibits hereto,
----------------
and all documents and certificates to be delivered by the parties pursuant
hereto collectively represent the entire understanding and agreement between
Buyer and Seller with respect to the subject matter hereof. All schedules and
exhibits attached to this Agreement shall be deemed part of this Agreement and
incorporated herein, where applicable, as if fully set forth herein. This
Agreement supersedes all prior negotiations between Buyer and Seller with
respect to the transaction contemplated hereby, and all letters of intent and
other writings relating to such negotiations, and cannot be amended,
supplemented or modified except by an agreement in writing which makes specific
reference to this Agreement or an agreement delivered pursuant hereto, as the
case may be, and which is signed by the party against which enforcement of any
such amendment, supplement or modification is sought.
10.8. Cooperation and Further Assurances. Buyer and Seller shall cooperate
----------------------------------
fully with each other and their respective counsel and accountants in connection
with any actions required to be taken as part of their respective obligations
under this Agreement, and Buyer and Seller shall execute such other documents as
may be necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use diligent efforts to consummate the transaction
contemplated hereby and to fulfill their obligations hereunder. Each party
covenants that at any time, and from time to time, after the Closing Date, it
will execute such additional instruments and take such actions as may be
reasonably requested by the other parties to confirm or perfect or otherwise to
carry out the intent and purposes of this Agreement.
39
10.9. Waiver of Compliance; Consents. Except as otherwise provided in this
------------------------------
Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement or condition herein may be waived
by the party entitled to the benefits thereof, but such waiver or failure to
insist upon strict compliance with such obligation, representation, warranty,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
10.10. Severability. If any provision of this Agreement or the application
------------
thereof to any person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provision to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law; provided however that the
economic and legal substance of the transactions contemplated by this Agreement
is not affected in any manner that is materially adverse to any party affected
by such invalidity or unenforceability.
10.11. Counterparts. This Agreement may be signed in any number of
------------
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument.
10.12. No Third Party Beneficiaries. This Agreement constitutes an
----------------------------
agreement solely among the parties hereto, and, except as otherwise provided
herein, is not intended to and will not confer any rights, remedies, obligations
or liabilities, legal or equitable on any person other than the parties hereto
and their respective successors or assigns, or otherwise constitute any person a
third party beneficiary under or by reason of this Agreement.
10.13. Construction. This Agreement has been negotiated by Buyer and Seller
------------
and their respective legal counsel, and legal or equitable principles that might
require the construction of this Agreement or any provision of this Agreement
against the party drafting this Agreement shall not apply in any construction or
interpretation of this Agreement.
10.14. Time of the Essence. Time is of the essence under this Agreement. If
-------------------
the last day permitted for the giving of any notice or the performance of any
act required or permitted under this Agreement falls on a day that is not a
Business Day, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding Business Day.
10.15. Definition of Knowledge. References in this Agreement to "to the
-----------------------
knowledge of Seller," "to Seller's knowledge," "of which Seller has knowledge"
and the like shall mean the actual knowledge of John M. Dyer, Vice
President--Financial Planning and Analysis of Cox Communications, Inc., David J.
Head, Director of Investment Planning of Cox Communications, Inc., and Mark
Stucky, Director of Public Affairs for Orange County of CoxCom, Inc.
10.16. Cure. Each party will promptly notify the other of any fact, event,
----
circumstance or action the existence or occurrence of which would cause any of
such party's representations or warranties under this Agreement not to be true
and correct in any material respect. Notwithstanding the foregoing, for all
purposes under this Agreement, the existence or occurrence of any event or
circumstance that constitutes a breach of a representation or warranty or the
nonfulfillment of any
40
pre-Closing covenant or agreement of Buyer or Seller contained in this Agreement
(including, without limitation, the schedules hereto) on the date such
representation or warranty is made or the fulfillment of such pre-Closing
covenant or agreement is due, shall not constitute a breach of such
representation or warranty or the nonfulfillment of such pre-Closing covenant or
agreement if such event or circumstance is cured on or prior to the Closing
Date.
41
IN WITNESS WHEREOF, this Agreement has been executed by Buyer and Seller as
of the date first above written.
BUYER:
-----
MEDIACOM CALIFORNIA LLC
By: Mediacom LLC, a member
By: /s/ Rocco B. Commisso
------------------------------
Name: Rocco B. Commisso
Title: Manager
SELLER:
------
COXCOM, INC.
By:
-----------------------------------
Name: John M. Dyer
Title: Vice President
GUARANTY
--------
MEDIACOM LLC hereby unconditionally guarantees the full and timely payment
and performance by Buyer of Buyer's obligations set forth in the foregoing Asset
Purchase Agreement and in all other agreements and instruments hereafter
executed in connection with the transactions contemplated therein. The guarantee
provided herein is an absolute and continuing guarantee and shall not be
affected by any amendment of the foregoing Asset Purchase Agreement, or any
renewal or extension of the time for performance by Buyer of any of its
obligations thereunder, or any indulgences or waivers with respect thereto.
Mediacom LLC hereby waives presentment for payment or performance, notice of
nonpayment or nonperformance, demand and protest.
MEDIACOM LLC
By: /s/ Rocco B. Commisso
-----------------------------------
Name: Rocco B. Commisso
Title: Manager
42
IN WITNESS WHEREOF, this Agreement has been executed by Buyer and Seller as
of the date first above written.
BUYER:
-----
MEDIACOM CALIFORNIA LLC
By: Mediacom LLC, a member
By:
------------------------------
Name: Rocco B. Commisso
Title: Manager
SELLER:
------
COXCOM, INC.
By: /s/ John M. Dyer
-----------------------------------
Name: John M. Dyer
Title: Vice President
GUARANTY
--------
MEDIACOM LLC hereby unconditionally guarantees the full and timely payment
and performance by Buyer of Buyer's obligations set forth in the foregoing Asset
Purchase Agreement and in all other agreements and instruments hereafter
executed in connection with the transactions contemplated therein. The guarantee
provided herein is an absolute and continuing guarantee and shall not be
affected by any amendment of the foregoing Asset Purchase Agreement, or any
renewal or extension of the time for performance by Buyer of any of its
obligations thereunder, or any indulgences or waivers with respect thereto.
Mediacom LLC hereby waives presentment for payment or performance, notice of
nonpayment or nonperformance, demand and protest.
MEDIACOM LLC
By:
-----------------------------------
Name: Rocco B. Commisso
Title: Manager
42
EXHIBIT 2.6
ASSET PURCHASE AGREEMENT
BETWEEN
JONES CABLE INCOME FUND 1-B/C VENTURE
AND
MEDIACOM CALIFORNIA LLC
DATED
SEPTEMBER 17, 1997
TABLE OF CONTENTS
1. CERTAIN DEFINITIONS...................................................... 1
2. PURCHASE AND SALE OF THE ASSETS.......................................... 7
2.1. Agreement to Purchase and Sell.................................. 7
2.2. Excluded Assets................................................. 7
2.3. Deposit......................................................... 8
2.4. Purchase Price.................................................. 8
2.5. EBS Adjustment.................................................. 9
2.6. Current Items Amount............................................ 9
2.7. Adjustments and Current Items Amount Calculated................. 10
2.8. Assumption of Liabilities....................................... 11
2.9. Allocation...................................................... 12
3. SELLER'S REPRESENTATIONS................................................. 12
3.1. Organization and Qualification.................................. 12
3.2. Authorization................................................... 12
3.3. System Information.............................................. 12
3.4. No Other Operators.............................................. 13
3.5. Title and Condition of Personal Property........................ 13
3.6. Franchises, Licenses and Contracts.............................. 14
3.7. No Conflicts; Consents.......................................... 14
3.8. Litigation...................................................... 15
3.9. Employment Matters.............................................. 15
3.10. Taxes........................................................... 16
3.11. Financial Statements............................................ 16
3.12. No Adverse Change............................................... 16
3.13. Compliance with Legal Requirements.............................. 17
3.14. Environmental Laws and Regulations.............................. 18
3.15. Real Property................................................... 19
3.16. Non-Infringement................................................ 19
3.17. Accounts Receivable............................................. 20
3.18. Books and Records............................................... 20
3.19. Bonds........................................................... 20
3.20. Insurance....................................................... 20
3.21. Sufficiency of Assets........................................... 20
3.22. Accuracy of Schedules........................................... 20
3.23. Disclosure...................................................... 20
4. BUYER'S REPRESENTATIONS.................................................. 21
4.1. Organization.................................................... 21
4.2. Authorization................................................... 21
4.3. Disclosure...................................................... 21
5. COVENANTS................................................................ 21
5.1. Seller's Pre-Closing Obligations................................ 21
5.2. Financial Information........................................... 24
5.3. Title Matters................................................... 24
5.4. Employees of the System......................................... 24
5.5. Cooperation in the Obtaining of Consents........................ 24
5.6. HSR Act Compliance.............................................. 25
5.7. Bulk Sales...................................................... 25
5.8. Leased Property................................................. 25
5.9. Use of Names and Logos.......................................... 25
5.10. Transitional Billing Services................................... 26
6. CONDITIONS PRECEDENT..................................................... 28
6.1. Conditions Precedent to Buyer's Obligations..................... 28
6.2. Conditions Precedent to Seller's Obligations.................... 29
7. CLOSING.................................................................. 30
7.1. Time and Place.................................................. 30
7.2. Seller's Deliveries............................................. 30
7.3. Buyer's Obligations............................................. 31
8. TERMINATION.............................................................. 32
8.1. Termination Events.............................................. 32
8.2. Effect of Termination........................................... 33
9. SURVIVAL OF REPRESENTATIONS AND INDEMNITY................................ 34
9.1. Survival of Representations, Warranties and Covenants........... 34
9.2. Seller's Indemnity.............................................. 34
9.3. Buyer's Indemnity............................................... 35
9.4. Procedure for Indemnified Third Party Claim..................... 35
9.5 Determination of Indemnification Amounts........................ 35
9.6. Indemnity Escrow................................................ 36
9.7. Determination of Indemnification Amounts and Related Matters.... 36
10. CONFIDENTIALITY AND PRESS RELEASES...................................... 36
10.1. Confidentiality................................................. 36
10.2. Press Releases.................................................. 37
11. BROKERAGE FEES.......................................................... 37
12. CASUALTY LOSSES......................................................... 37
13. MISCELLANEOUS........................................................... 38
13.1. Further Assurances.............................................. 38
13.2. Notices......................................................... 38
13.3. Assignment; Binding Effect...................................... 39
13.4. Expenses........................................................ 39
13.5. Taxes........................................................... 39
13.6. Collection of Accounts.......................................... 39
13.7. Entire Agreement; Amendments; Waivers........................... 40
13.8. Counterparts.................................................... 40
13.9. Severability.................................................... 40
13.10. Schedules and Exhibits; Headings............................... 40
13.11. Governing Law.................................................. 40
13.12. Third Parties; Joint Ventures.................................. 40
13.13. Construction................................................... 40
13.14. Attorney's Fees................................................ 41
13.15. Commercially Reasonable Efforts................................ 41
INDEX OF OMITTED SCHEDULES AND EXHIBITS
Schedules
2.2 Excluded Contracts
3.3 System Information
3.4 Other Operators
3.5 Personal Property
3.6 Franchises, Licenses and Contracts
3.7 Consents
3.8 Litigation
3.9 Employees of the System
3.10 Taxes
3.12 Material Adverse Changes
3.13 Legal Requirements
3.14 Environmental Matters
3.15 Real Property
3.19 Bonds
3.21 Sufficiency of Assets
5.1 Discount and Late Charge Policies
Exhibits
A Form of Indemnity Escrow Agreement
B Form of Bill of Sale, Assignment and Assumption
Agreement
C Form of Opinion of Seller's Counsel
D Form of Noncompetition Agreement
E Form of Opinion for Buyer's Counsel
F Form of Opinion of Seller's FCC Counsel
Registrants agree to furnish supplementally a copy of such Schedules and
Exhibits to the Commission upon request.
ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of the 17th
day of September 1997, by and between JONES CABLE INCOME FUND 1-B/C VENTURE,
a Colorado general partnership ("Seller") and MEDIACOM CALIFORNIA, LLC, a
Delaware limited liability company ("Buyer").
RECITALS
--------
A. Seller owns and operates a cable television system operating in and
around the communities of Clearlake and Lake Port, California (the "System").
B. Seller desires to sell, and Buyer desires to purchase, substantially
all of the assets comprising the System on the terms and conditions set forth in
this Agreement.
AGREEMENTS
----------
In consideration of the mutual promises and covenants hereinafter set
forth, Buyer and Seller hereby agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms, whether in singular or
plural form, shall have the following meanings:
1.1. "Accounts Receivable" means the rights of Seller to payment for any
-------------------
services rendered by Seller in connection with the operation of the System,
including, but not limited to, advertising sales, as reflected on the billing
records of Seller prior to the Selling Date.
1.2. "Assumed Contracts" means (i) all Contracts listed in Schedule 3.6
-----------------
hereto designated with an asterisk to indicate that such Contracts will be
assumed by Buyer; (ii) any Contracts entered into by Seller in the ordinary
course of business and as permitted by this Agreement between the date hereof
and the Closing Date that would have been listed on Schedule 3.6 had they been
in existence on the date hereof; and (iii) all Contracts (except employee-
related contracts, vehicle leases and the Contracts referred to or listed in
Section 2.2) which meet the criteria set forth in Section 3.6.1 (i), (ii), (iii)
- ----------- -------------
or (iv) for exclusion from Schedule 3.6.
1.3. "Basic Service" means the lowest tier of service offered to
-------------
subscribers of the System.
1.4. "Cable Act" means Title VI of the Communications Act of 1934, as
---------
amended. 47 U.S.C. (S)151 et seq., and all other provisions of the Cable
------
Communications Policy Act of 1984, Pub. L. No. 98-549, the Cable Television
Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385, and the
provisions of the Telecommunications Act of 1996 amending Title VI of the
Communications Act, as such statutes may be amended from time to time, and the
rules and regulations promulgated thereunder.
1.5. "Closing" means the consummation of the transaction contemplated by
-------
this Agreement in accordance with the provisions of Section 7.
---------
1.6. "Closing Date" means the date of the Closing as determined in
------------
accordance with the provisions of Section 7.
---------
1.7. "Code" means the Internal Revenue Code of 1986, as amended, and the
----
regulations thereunder, or any subsequent legislative enactment thereof, as in
effect from time to time.
1.8. "Consents" means all of the consents, permits or approvals of third
--------
parties required by law or contractual agreement to transfer the Assets to Buyer
or otherwise to consummate lawfully the transaction contemplated hereby.
1.9. "Contracts" means all contracts, leases, private easements, private
---------
rights-of-way, multiple dwelling unit agreements, retransmission consent
agreements relating to the System other than those described as Excluded
Contracts, must carry notifications, pole attachment and conduit agreements,
subscriber agreements and other agreements, written or oral (including any
amendments and other modifications thereto) to which Seller is a party and which
affect the Assets or the business or operations of the System other than those
described as Excluded Contracts, and (i) which are in effect on the date hereof
and which by their terms (including any renewal options exercised by Seller) are
to be in effect as of the Closing Date, or (ii) which are entered into by Seller
in the ordinary course of business as permitted by this Agreement between the
date of this Agreement and the Closing Date and which by their terms (including
any renewal options exercised by Seller) are to be in effect as of the Closing
Date.
1.10. "Equivalent Basic Subscribers (or "EBSs")" means (i) the number of
----------------------------------------
residential households that subscribe to Basic Service (exclusive of secondary
outlets and courtesy accounts) which pay the standard rate for Basic Service in
the System without discount, each of which has paid in full without discount at
least one monthly bill generated in the ordinary course of business, none of
which, as of the Closing Date, is pending disconnection for any reason, and none
of which is, as of the Date of Closing, delinquent in payment for services for
more than sixty days (provided that a customer's account shall not be considered
past due as a result of unpaid amounts not exceeding $5.00 in the more than 60
day aging category) plus (ii) the number of equivalent bulk subscribers
(determined by dividing the aggregate dollar amount
-2-
collected from bulk/commercial accounts for Basic Service and Expanded Basic
Service in the System by the combined monthly rate for residential Basic Service
and Expanded Basic Service then in effect in the System), each of which has paid
in full without discount at least one monthly bill generated in the ordinary
course of business, none of which, as of the Closing Date, is pending
disconnection for any reason, and none of which is, as of the Date of Closing,
delinquent in the payment for services for more than sixty days (provided that a
customer's account shall not be considered past due as a result of unpaid
amounts not exceeding $5.00 in the more than 60 day aging category). The
definition of Equivalent Basic Subscriber shall not include any subscriber which
has been obtained within the 12 month period prior to the Closing Date by offers
made, promotions conducted or discounts given outside the ordinary course of
business or any subscriber which otherwise falls within the definition of an EBS
because its account has been compromised or written off within the 12 month
period prior to the Closing Date, other than in the ordinary course of business
consistent with past practices for reasons including, but not limited, to
service interruptions, but not for the purpose of making it qualify as an EBS.
1.11. "ERISA" means the Employee Retirement Income Security Act of 1974,
-----
as amended, and rules and regulations promulgated thereunder and published
interpretations with respect thereto.
1.12. "Expanded Basic Service" means any package of basic video programming
----------------------
provided over the System, regardless of service tier, other than (a) Basic
Service, (b) premium channels or (c) pay-per-view channels.
1.13. "FCC" means the Federal Communications Commission.
---
1.14. "Franchises" means all municipal, county and state franchises,
----------
franchise applications (if any), authorizations, ordinances and permits relating
to the System, other than the Licenses.
1.15. "Governmental Authority" means (i) the United States of America, any
----------------------
state, commonwealth, territory, or possession thereof and any political
subdivision or quasi-governmental authority of any of the same, including but
not limited to courts, tribunals, departments, commissions, boards, bureaus,
agencies, counties, municipalities, provinces, parishes, and other
instrumentalities, and (ii) any foreign (as to the United States of America)
sovereign entity, including but not limited to nations, states, republics,
kingdoms and principalities, any state, province, commonwealth, territory or
possession thereof, and any political subdivision, quasi-governmental authority,
or instrumentality of any of the same.
1.16. "Hazardous Substances" means (i) any "hazardous waste" as defined by
--------------------
the Resources Conservation and Recovery Act of 1976 ("RCRA") (42 U.S.C. (S)6901
et seq.), as amended, and rules and regulations promulgated thereunder; (ii) any
- ------
"hazardous substance" as
-3-
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. (S) 9601 et seq.) ("CERCLA"), as amended, and rules and
-------
regulations promulgated thereunder; (iii) any substance regulated by the Toxic
Substances Act ("TSCA") (42 U.S.C. (S)2601 et seq.), as amended, and rules and
-------
regulations promulgated thereunder; (iv) asbestos; (v) polychlorinated
biphenyls; (vi) any substances regulated under the provisions of Subtitle I of
RCRA relating to underground storage tanks; (vii) any substance the presence,
use, treatment, storage or disposal of which on the Real Property is prohibited
by any Legal Requirements; and (viii) any other substance which by any Legal
Requirements require special handling, reporting or notification of any
Governmental Authority in its collection, storage, use, treatment, or disposal.
1.17. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
-------
1976, as amended.
1.18. "Judgment" means any judgment, writ, order, injunction, award or
--------
decree of any court, judge, justice or magistrate, including any bankruptcy
court or judge, arbitrator or panel of arbitrators, and any order of or by any
Governmental Authority.
1.19. "Knowledge" with respect to any matter means the actual awareness or
---------
knowledge of such Person (if a natural person) or any of the officers or System
general managers of such Person (if not a natural Person), as opposed to implied
or institutional knowledge, but without any duty of investigation or inquiry.
1.20. "Legal Requirements" means applicable common law and any statute,
------------------
ordinance, code or other law, rule, regulation, order, technical or other
standard, requirement or procedure enacted, adopted, promulgated, applied or
followed by any Governmental Authority, including Judgments.
1.21. "Licenses" means all domestic satellite, business radio, CARS,
--------
microwave and other licenses, and all authorizations and permits relating to the
System granted to Seller by any Governmental Authority, except the Franchises or
any public easements or rights-of-way related thereto.
1.22. "Lien" means any security agreement, financing statement filed with
----
any Governmental Authority, conditional sale or other title retention agreement,
any lease, consignment or bailment given for purposes of security, any lien,
mortgage, indenture, pledge, option, constructive trust or other trust, claim,
or attachment, easement, right-of-entry, restrictive covenant, restriction on
transfer, or any other exception or defect in title or interest, or other
ownership interest (including, but not limited to, possibilities of reverter) of
any kind, which otherwise constitutes an interest in or claim against property,
whether arising pursuant to any Legal Requirement, Contract or otherwise.
-4-
1.23. "Litigation" means any claim, action, suit, proceeding, arbitration,
----------
investigation, hearing or other activity or procedure that could result in a
Judgment, and any notice of any of the foregoing.
1.24. "Losses" means any claims, losses, liabilities, damages, Liens,
------
penalties, costs, and expenses, including, but not limited to, interest which
may be imposed in connection therewith, expenses of investigation, reasonable
fees and disbursements of counsel and other experts, and the cost to any Person
making a claim or seeking indemnification under this Agreement with respect to
funds expended by such Person by reason of the occurrence of any event with
respect to which indemnification is sought.
1.25. "Person" means any natural person, Governmental Authority,
------
corporation, limited liability company, general or limited partnership, limited
liability general or limited partnership, joint venture, trust, association or
unincorporated entity of any kind.
1.26. "Personal Property" means all of the equipment, plant, inventory,
-----------------
vehicles, spare parts, supplies and other tangible personal property which are
owned or leased by Seller and used or useful as of the date hereof in the
conduct of the business or operations of the System, other than the Excluded
Assets, plus such additions thereto and deletions therefrom arising in the
ordinary course of business and permitted by this Agreement between the date of
this Agreement and the Closing Date.
1.27. "Real Property" means all of the fee estates, and all buildings,
-------------
fixtures, and other improvements located thereon, leasehold interests in real
estate, private easements, private rights to access, private rights-of-way, and
other real property interests which are owned or leased by Seller and used or
useful, as of the date of this Agreement, in the conduct of the business or
operations of the System, plus such additions thereto and deletions therefrom
arising in the ordinary course of business and permitted by this Agreement
between the date of this Agreement and the Closing Date.
1.28. "Taxes" means all levies and assessments of any kind or nature
-----
imposed by any Governmental Authority, including but not limited to all income,
sales, use, ad valorem, value added, franchise, severance, net or gross
proceeds, withholding, payroll, employment, excise or property taxes, together
with any interest thereon and any penalties, additions to tax or additional
amounts applicable thereto.
1.29. "Tentative Subscriber" shall mean any subscribers for Basic Service
--------------------
who, within thirty days prior to the Closing Date, have paid one payment (which
can include a prorata payment in respect of a partial month's service or a
payment in respect of installation equal to at least 50% of the standard
installation fees at hook-up) but have not yet paid at least one full monthly
bill generated in the ordinary course of business.
-5-
1.30. "Transaction Documents" means all instruments and documents executed
---------------------
and delivered by Buyer or Seller or any officer, director or affiliate of either
of them in connection with this Agreement or the transaction contemplated
hereby.
1.31. List of Additional Definitions. The following is a list of additional
------------------------------
terms used in this Agreement and a reference to the Section hereof in which such
term is defined:
Term Section
---- -------
Adjustment Time 2.6
Assets 2.1
Assumed Liabilities 2.8
Buyer Preamble
Current Items Amount 2.6
Deposit 2.3
EBS Adjustment Amount 2.5
EBS Shortfall 2.5
Escrow Agent 2.3
Excluded Assets 2.2
Excluded Contracts 2.2.2
Final Subscriber Count 2.5
GAAP 2.6
Final Adjustment 2.7
Financial Statements 3.11
Indemnitee 9.4
Indemnitor 9.4
Independent Accountant 2.7
Initial Adjustment Certificate 2.7
Material Consent 6.1.2
Outside Closing Date 7.1
Owned Property 5.12
Permitted Liens 5.3
Purchase Price 2.4
Seller Preamble
Study 5.12
Subscriber Estimate 2.5
System Recitals
Threshold Amount 9.5
Title Commitments 5.3
Title Defect 5.3
Transitional Billing Services 5.7
-6-
2. PURCHASE AND SALE OF THE ASSETS.
-------------------------------
2.1. Agreement to Purchase and Sell. Subject to the terms and conditions
------------------------------
set forth in this Agreement, at Closing, Seller will sell to Buyer, and Buyer
will purchase from Seller, subject to Permitted Liens and Liens for ad valorem
Taxes not yet due and payable, the following described tangible and intangible
assets used or useful in connection with the conduct of the business or
operations of the System (collectively, the "Assets"):
2.1.1 the Personal Property;
2.1.2 the Real Property;
2.1.3 the Franchises;
2.1.4 the Assumed Contracts;
2.1.5 the Accounts Receivable;
2.1.6 the Licenses;
2.1.7 all of Seller's technical information and data, customer lists,
machinery and equipment warranties, maps, computer disks and tapes, plans,
diagrams, blueprints and schematics relating to the System, including filings
with the FCC, other than as any of the foregoing relate to the Excluded Assets;
2.1.8 all books and records relating to the business or operations of
the System, including executed copies of the Assumed Contracts, subject to the
right of Seller to have such books and records made available to Seller for a
reasonable period, not to exceed three years from the Closing Date;
2.1.9 the goodwill and going concern value generated by Seller with
respect to the System, if any; and
2.1.10 all intangible assets of Seller relating to the System not
specifically described above.
2.2. Excluded Assets. The following assets shall not be transferred by
---------------
Seller to Buyer and are specifically excluded from the definition of Assets
(collectively, the "Excluded Assets"):
2.2.1 Seller's cash on hand as of the Closing Date, and all other
cash in any of Seller's bank or savings accounts, any and all insurance
policies, construction and performance
-7-
bonds, intercompany receivables with respect to any affiliate of Seller, letters
of credit or other similar items and any cash surrender value in regard thereto,
and any stocks, bonds, certificates of deposit and similar investments;
2.2.2 Any programming Contracts, employment Contracts, consulting
Contracts, billing services and related leased equipment, employee benefit
plans, and the Contracts described on Schedule 2.2 (the "Excluded Contracts");
2.2.3 Any books and records that Seller is required by law to
retain, subject to the right of Buyer to have access to and to copy for a
reasonable period, not to exceed three years from the Closing Date, and Seller's
partnership books and records related to internal partnership matters and
financial relationships with Seller's lenders;
2.2.4 Any claims, rights and interests in and to any refunds of
federal, state or local franchise, income or other taxes or fees for periods
prior to the Closing Date;
2.2.5 The trademarks, trade names, service marks and all other
information and similar intangible assets relating to Seller or the System,
subject to the right of Buyer to use such assets as provided for in Section 5.9;
-----------
and
2.2.6 The rights, assets and properties described on Schedule 2.2.
2.3. Deposit. Upon execution and delivery of this Agreement by Seller and
-------
Buyer, Buyer shall deliver $300,000.00 (the "Deposit") to Colorado National Bank
("Escrow Agent"), to be held in an interest bearing account and applied pursuant
to the terms of that certain Escrow Agreement, dated the date hereof, by and
among Seller, Buyer and Escrow Agent.
2.4. Purchase Price. Subject to the terms and conditions of this
--------------
Agreement, at the Closing, Buyer shall deliver to Seller by wire transfer of
immediately available funds, to such account or accounts as are designated in
writing by Seller to Buyer, the sum of $21,400,000.00 (the "Purchase Price"),
which sum shall be (i) reduced by the amount of the Deposit, which is to be
retained by the Escrow Agent to secure payment by Seller of any indemnification
obligations to Buyer in accordance with the terms of an indemnity escrow
agreement in substantially the form attached hereto as Exhibit A (the "Indemnity
---------
Escrow Agreement") to be delivered by Buyer, Seller and Escrow Agent at Closing,
and (ii) subject to upward or downward adjustment, as the case may be, pursuant
to Sections 2.5. 2.6 and 2.7 below. At Closing, any interest which has accrued
-------------------------
on the Deposit shall be delivered to Buyer by Escrow Agent.
2.5. EBS Adjustment.
--------------
-8-
2.5.1 The Purchase Price shall be adjusted downward by an amount
equal to $1,237.00 multiplied by the number, if any, of Equivalent Basic
Subscribers of the System less than 17,300 as of the Closing Date (the "EBS
Adjustment Amount"); provided, however, that the EBS Adjustment Amount shall not
be greater than $804,050.00 except as provided below.
2.5.2 In the event that the number of EBS's estimated by Seller at
Closing as set forth in the Initial Adjustment Certificate (the "Subscriber
Estimate") is equal to or greater than 16,650 but is determined upon post-
Closing verification and adjustment under Section 2.7.2 (the "Final Subscriber
-------------
Count) to be fewer than 16,650, then the EBS Adjustment Amount shall not be
subject to the $804,050.00 limitation set forth above. In the event that the
Subscriber Estimate provided by Seller at Closing is less than 16,650 and Buyer
elects to proceed to Closing, and the Final Subscriber Count is less than the
Subscriber Estimate, then Buyer shall be entitled to a further Purchase Price
reduction equal to $1237.00 multiplied by the difference between the Subscriber
Estimate and the Final Subscriber Count notwithstanding the limitation on the
EBS Adjustment Amount set forth above.
2.5.3 In the event that the Subscriber Estimate is below 17,300 (an
"EBS Shortfall") and, as of the Closing Date, there are Tentative Subscribers
which may have otherwise prevented an EBS Shortfall, then, at the Closing, Buyer
shall deposit into a separate escrow account under the Indemnity Escrow
Agreement an amount equal to $1237.00 multiplied by the number of Tentative
Subscribers which would reduce or eliminate the EBS Shortfall if they qualify to
be included in the calculation of Equivalent Basic Subscribers for purposes of
the Final Adjustment as set forth in Section 2.7. For example, (i) if there is
-----------
an EBS Shortfall of 10 subscribers (i.e. 17,290 EBS at Closing) and their are 15
Tentative Subscribers that have not been included in the Subscriber Estimate,
Buyer shall deposit 10 times $1237.00 or $12,370 into such separate escrow
account; or (ii) if there is an EBS Shortfall of 10 subscribers (i.e., 17,290 at
Closing) and there are 5 Tentative Subscribers that have not been included in
the Subscriber Estimate, Buyer shall deposit 5 times $1,237.00, or $6,185, into
such separate escrow account.
2.6. Current Items Amount. Buyer or Seller, as appropriate, shall pay to
--------------------
the other (by increasing or decreasing the Purchase Price paid to Seller at the
Closing) the net amount of the adjustments and prorations effected pursuant to
Sections 2.6.1 and 2.6.2 below (the "Current Items Amount"). The adjustments
- ------------------------
provided for herein shall be made in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis as of the close of
business (11:59 p.m., mountain time) on the day immediately preceding the
Closing Date (the "Adjustment Time").
2.6.1. Accounts Receivable. Seller shall be entitled to an amount
-------------------
equal to the sum of (i) 100% of the face amount of all Accounts Receivable that
are current or 30 days or less past due as of the Adjustment Time, plus (ii) 90%
of the face amount of all Accounts
-9-
Receivable that are between 31 days and 60 days past due as of the Adjustment
Time, and (iii) 0% for all Accounts Receivable that are 60 days or more past due
as of the Adjustment Time. For purposes of making "past due" calculations, the
monthly billing statements of Seller shall be deemed to be due and payable on
the first day of the month during which the service to which such billing
statements relate is provided.
2.6.2 Advance Payments and Deposits. Buyer shall be entitled to a
-----------------------------
credit against the Purchase Price in an amount equal to the aggregate of (i) all
deposits of subscribers of the System for converters, decoders, and similar
items, and (ii) all payments for services to be rendered by Buyer to subscribers
of the System after the Adjustment Time.
2.6.3 Expenses. As of the Adjustment Time, the following expenses
--------
shall be prorated, in accordance with GAAP so that all expenses for periods
prior to the Adjustment Time shall be for the account of Seller, and all
expenses for periods after the Adjustment Time shall be for the account of
Buyer: (i) all payments and charges under the Franchises, the Licenses, and the
Assumed Contracts; (ii) Taxes levied or assessed against any of the Assets;
(iii) Taxes, if any, payable with respect to cable television service and
related sales to subscribers of the System; (iv) charges for utilities and other
goods or services furnished to the System: (v) copyright fees based on signal
carriage by the System; and (vi) all other items of expense relating to the
System; provided, however, that Seller and Buyer shall not prorate any (x) items
of expense payable under any Excluded Assets or (y) payroll expenses, including
accrued wages and vacation and sick pay for the employees of the System, all of
which shall remain and be solely for the account of Seller. In addition to the
foregoing, the cost of the Phase I Environmental Studies contemplated by Section
-------
5.12 of this Agreement shall be shared equally by the parties.
- ----
2.7. Adjustments and Current Items Amount Calculated.
-----------------------------------------------
2.7.1. Initial Adjustment Certificate. The Subscriber Estimate, the
------------------------------
EBS Adjustment Amount, if any, and the Current Items Amount shall be estimated
in good faith by Seller, and set forth, together with a detailed statement of
the calculation thereof, in a certificate (the "Initial Adjustment Certificate")
executed by a duly authorized representative of Seller and delivered, together
with such supporting documentation as the Buyer may reasonably request, to Buyer
not later than ten (10) days prior to the Closing. The Initial Adjustment
Certificate, as agreed to by the parties, shall constitute the basis on which
the EBS Adjustment Amount and the Current Items Amount are calculated for
purposes of the Closing. In the event that any item reflected on the Initial
Adjustment Certificate is in dispute as of the Closing Date, the disputed amount
shall be deposited into an escrow account by the party to be charged and held by
the Escrow Agent in accordance with the terms of the Indemnity Escrow Agreement
until the Final Adjustment is finally determined in accordance with the
provisions of Section 2.7.2 below.
-------------
-10-
2.7.2 Final Adjustment. On or before the date which is ninety (90)
----------------
days after the Closing Date, Seller shall deliver to Buyer a final calculation
of the adjustments calculated as of the Closing Date (the "Final Adjustment"),
together with such supporting documentation as Buyer may reasonably request,
which shall evidence in reasonable detail the nature and extent of each
adjustment. For the purposes of the Final Adjustment, Tentative Subscribers who
have paid a full monthly bill generated in the ordinary course of business
within 30 days following Closing will be included in the final calculation of
Equivalent Basic Subscribers. Seller shall cooperate with Buyer and provide
reasonable access to the necessary personnel and records of Seller and deliver
to Buyer copies of such records as Buyer may reasonably request, to review the
Final Adjustment. Should Buyer dispute Seller's Final Adjustment, Buyer shall
promptly, but in no event later than 30 days after receipt of the Final
Adjustment, deliver to Seller written notice describing in reasonable detail the
dispute, together with Buyer's determination as to the Final Adjustment in
reasonable detail. If the dispute is not resolved by the parties within 30 days
from the date of receipt by Seller of written notice from Buyer, the parties
agree to engage Ernst & Young or another "big six" accounting firm mutually
acceptable to Seller and Buyer (the "Independent Accountant") to resolve the
dispute within 30 days after such engagement. The Independent Accountant's
determination shall be final and binding on the parties. Buyer or Seller, as the
case may be, shall make (or, to the extent held in escrow, Buyer and Seller
shall instruct the Escrow Agent to make) appropriate payment to the other of the
difference between the Final Adjustment amount and the adjustment amount paid at
Closing pursuant to the Initial Adjustment Certificate within three business
days following (a) the agreement of the parties as to the Final Adjustment, (b)
the resolution of any dispute by the parties; or (c) the receipt of the
Independent Accountant's final determination, as the case may be. All fees and
costs of the Independent Accountant shall be borne by the non-prevailing party
as determined by the Independent Accountant; provided, however, that if the
Independent Accountant does not make such a determination, the costs and
expenses of the Independent Accountant shall be borne equally by the Seller and
the Buyer.
2.8. Assumption of Liabilities. As of the Closing Date, Buyer shall
-------------------------
assume, pay, discharge, and perform the following obligations and liabilities
(collectively, the "Assumed Liabilities"): (i) all liabilities and obligations
with respect to acts, omissions or events occurring subsequent to the Closing
Date under any Franchise, License, or Assumed Contract; (ii) other obligations
and liabilities of Seller relating to the Assets only to the extent that there
shall be an adjustment in favor of Buyer with respect thereto pursuant to
Section 2.6; and (iii) all obligations and liabilities arising out of Buyer's
- -----------
ownership of the Assets or operation of the System after the Closing Date. All
debts, liabilities, and obligations arising out of or relating to the Assets or
the operation of the System other than the Assumed Liabilities shall remain and
be the obligations and liabilities of Seller including any rate refund or
credit, penalty and/or interest payment with respect thereto, ordered by any
Governmental Authority with respect to the System for periods through and
including the Closing Date. Without limiting the foregoing, Buyer shall assume
no liability or obligation with respect to the payment of salary or severance or
provision of benefits, including but not limited to the benefits payable
-11-
under any employee benefit plan with respect to the employment of any employee
or independent contractor of the System or former employee of the System prior
to Closing. Seller shall be responsible for compliance with the COBRA notice and
continuation coverage requirements under Part 6 of Title I of ERISA, with
respect to all employees (and their beneficiaries) experiencing a qualifying
event (as defined in Section 603 of ERISA) on account of the transactions
contemplated by this Agreement or occurring prior to the Closing.
2.9. Allocation. For federal income and other applicable tax purposes, the
----------
Purchase Price shall be allocated among the Assets as agreed to by the parties
prior to the Closing Date. In the event that the parties have not agreed upon an
allocation of the Purchase Price prior to Closing, the allocation of the
Purchase Price shall be determined by an appraisal to be obtained within 120
days after the Closing Date. The appraiser performing the appraisal shall be
mutually selected and engaged by Seller and Buyer. The parties shall cause the
appraiser to consult with Buyer and Seller during the preparation of such
appraisal, and the appraiser shall deliver drafts and the final appraisal to
Buyer and Seller simultaneously. Buyer and Seller agree to be bound by such
allocation and to file all returns and reports in respect of the transactions
contemplated herein on the basis of such allocation. The cost of the appraisal
shall be borne equally by Buyer and Seller.
3. SELLER'S REPRESENTATIONS.
------------------------
Seller represents, warrants, covenants and agrees to and with Buyer as
follows:
3.1. Organization and Qualification. Seller is a partnership duly
------------------------------
organized and validly existing and in good standing under the laws of the State
of Colorado, is duly qualified or licensed to do business and is in good
standing in the State of California, and has all requisite partnership power and
authority to own and lease the properties and assets it currently owns and
leases and to conduct its activities and to carry on its business as such
activities and business are currently conducted.
3.2. Authorization. Seller has full partnership power and authority to
-------------
execute, deliver and perform this Agreement and to consummate the transactions
contemplated in this Agreement. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement on the part of Seller have been duly and validly authorized and
approved by all necessary action on the part of Seller and the general partner
of its constituent partners. This Agreement has been duly and validly executed
and delivered by Seller, and is the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms.
3.3. System Information. Schedule 3.3 sets forth a materially true and
------------------
accurate description of the following information as of the date specified in
such Schedule:
-12-
3.3.1 the approximate number of miles of activated aerial and
underground plant included in the Assets;
3.3.2 the approximate number of home passings of the System;
3.3.3 a description of the services available from the System,
including, Expanded Basic Service, basic tier, limited tier and other services
available from the System, the rates charged by Seller for each, together with
the approximate number of subscribers receiving each of the services, the
approximate number of Equivalent Basic Subscribers, and any other charges by
Seller for services to subscribers;
3.3.4 the System's subscribers receiving free and/or discounted
services;
3.3.5 the channel and megahertz capacity of the System, the stations
and signals carried by the System, the channel position of each such signal and
station, and all frequencies utilized by the System (including system radius and
designated coordinates reported to the FCC);
3.3.6 a list of names of the licensors of each System pole attachment
and conduit license, quantity of poles or feet of conduit licensed thereunder
and current annual licensing fee per pole or per occupied foot of conduit;
3.3.7 a list of all grantors of crossing permits, permit numbers, the
location for which the permit is granted and current annual licensing fee for
each such permits;
3.3.8. a description of current and proposed marketing programs,
policies and practices, and any proposed rate increases; and
3.3.9 a list of incorporated communities in the franchise areas.
3.4. No Other Operators. To the best of Seller's Knowledge, and except as
------------------
described on Schedule 3.4, as of the date of this Agreement: (i) the System is
the only multiple channel operator presently serving the communities which it
serves, (ii) no other multiple channel operator is presently contemplated by any
Person in the communities now served by the System, and (iii) no franchises or
other authorizations other than the Franchises have been issued or applied for
with respect to the communities served by the System. Except as set forth on
Schedule 3.4, Seller is not, nor is any affiliate of Seller, a party to any
agreement restricting the ability of a third party to operate a cable television
system in the franchise areas in which the System is currently operating.
3.5. Title to Personal Property. Schedule 3.5 contains a complete
--------------------------
description of all material items of Personal Property, including an inventory
of converters on hand, other than
-13-
the Excluded Assets, as of the date specified in such Schedule. Except as
described on Schedule 3.5, Seller has good and marketable title to all of the
Personal Property, free and clear of all Liens, except ad valorem Taxes not yet
due and payable, and at Closing Buyer will acquire good and marketable title to
all of the Personal Property, free and clear of all Liens, except ad valorem
taxes not yet due and payable. The Personal Property is in good operating
condition and repair (reasonable wear and tear excepted) and reasonably fit for
the purpose it is being used.
3.6. Franchises, Licenses, and Contracts.
-----------------------------------
3.6.1 Schedule 3.6 contains a description of all of the Franchises,
Licenses and Contracts, as of the date of this Agreement, except for: (i)
subscription agreements with individual residential subscribers for the cable
services provided by the System in the ordinary course of business which may be
canceled by the System without penalty on not more than 30 days notice; (ii)
miscellaneous service contracts terminable at will without penalty; (iii) other
Contracts not involving aggregate liabilities under all such Contracts exceeding
$50,000.00; and (iv) other Contracts not involving any material nonmonetary
obligation. Seller has delivered to Buyer true and complete copies of each of
the Franchises, Licenses, and written Contracts, including any amendments
thereto, other than Contracts described in clauses (i), (ii), (iii) and (iv)
above and motor vehicle leases.
3.6.2 Except as described on Schedule 3.6: (i) each of the
Franchises, Licenses, and Assumed Contracts is valid, in full force and effect,
and, enforceable in accordance with its terms against the parties thereto; (ii)
there has not occurred any material default (without regard to lapse of time,
the giving of notice, the election of any Person other than Seller, or any
combination thereof) by Seller nor, to the Knowledge of Seller, has there
occurred any default (without regard to lapse of time, the giving of notice, the
election of Seller, or any combination thereof) by any Person other than Seller
under any of the Franchises, Licenses, or Contracts, and neither Seller, nor to
Seller's Knowledge, any Person, has given or received notice of termination,
cancellation or dispute under any Franchises, Licenses or Contracts; and (iii)
neither Seller nor, to the Knowledge of Seller, any other Person is in arrears
in the performance or satisfaction of its material obligations under any of the
Franchises, Licenses, or Assumed Contracts, and no waiver or indulgence has been
granted by any of the parties thereto. None of the Contracts requires Buyer to
assume, or Seller to cause Buyer to assume, such Contract as a condition to the
transfer of the Assets and the System to Buyer.
3.7. No Conflicts; Consents. Except for the Consents described on Schedule
----------------------
3.7 or in any other Schedule to this Agreement, the expiration or earlier
termination of the waiting period under the HSR, or as otherwise provided
herein, the execution, delivery, and performance by Seller of this Agreement
does not and will not: (i) conflict with or violate any provision of the
partnership agreement of Seller or the certificate of limited partnership or
-14-
partnership agreement of either partner of Seller; (ii) conflict with, violate,
result in a breach of, constitute a default under (without regard to
requirements of notice, lapse of time, or elections of other Persons, or any
combination thereof), accelerate, or permit the acceleration, termination or
modification of the performance required by any Contract, Franchise or License;
(iii) result in the creation or imposition of any Lien against or upon any of
the Assets; or (iv) require any consent, approval, or authorization of, or
filing of any certificate, notice, application, report, or other document with,
any Governmental Authority or other Person. Except for the Consents described on
Schedule 3.7, or as otherwise provided in this Agreement, no consent, approval
or authorization of, or filing with, any Governmental Authority or Person is
required to be made or obtained by Seller in connection with the execution,
delivery and performance of this Agreement by Seller.
3.8. Litigation. Except as described on Schedule 3.8, (i) there is no
----------
outstanding Judgment against Seller requiring Seller to take, or refrain from
taking, any action of any kind with respect to the Assets or the operation of
the System, or to which the System or the Assets are subject or by which they
are bound or affected; and (ii) there is no Litigation pending or, to Seller's
Knowledge, threatened, against Seller which individually or in the aggregate
might result in any materially adverse change in the financial condition or
operation of the System or adversely affect the Assets or the ability of Seller
to perform its obligations under this Agreement. Except as described on Schedule
3.8, there are no proceedings pending to which Seller is a party or, to Seller's
Knowledge, threatened, nor have any demands been made by any Governmental
Authority, utility, pole or conduit lessor, or other Person, which seeks or
could result in the termination, modification, suspension or limitation of
Seller's rights or obligations with respect to the Franchises, Licenses, or
Assumed Contracts.
3.9. Employment Matters.
------------------
3.9.1 Neither Seller nor any Employee Benefit Plan or, any
Multiemployer Plan (as those terms are defined in ERISA) maintained by Seller or
to which Seller has or has had the obligation to contribute in respect of any of
Seller's employees that render services in connection with the System is in
violation of the provisions of ERISA; no reportable event, within the meaning of
Title IV of ERISA, has occurred and is continuing with respect to any such
Employee Benefit Plan or any such Multiemployer Plan; and no prohibited
transaction, within the meaning of Title I of ERISA, has occurred with respect
to any such Employee Benefit Plan or, any such Multiemployer Plan.
3.9.2 There are no collective bargaining agreements applicable to
any Persons employed by Seller that render services in connection with the
System, and Seller has no duty to bargain with any labor organization with
respect to any such Persons. There is not pending any unfair labor charges
against Seller, any demand for recognition or any other request or demand from a
labor organization for representative status with respect to any Persons
employed by Seller that render services in connection with the System.
-15-
3.9.3 Schedule 3.9 contains a true and complete list of the names,
positions and dates of initial employment of all employees of the System. Seller
has delivered to Buyer a true and correct list setting forth the present rates
of compensation, bonus or other direct or indirect compensation and employee
benefits of all employees of the System and any agreements, commitments or
arrangements, whether written or oral, affecting such employees other than
employee handbooks or other statements of employment policy. With respect to any
Persons employed by Seller that render services in connection with the System,
Seller is in material compliance with all applicable Legal Requirements
respecting employment conditions and practices, has withheld all amounts
required by any applicable Legal Requirements or Contracts to be withheld from
wages or salaries, and is not liable for any arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing.
3.10. Taxes. Except as described on Schedule 3.10, (i) Seller has duly and
-----
timely paid all Taxes with respect to the System and the Assets which have
become due and payable by it; (ii) Seller has received no notice of, nor does
Seller have any Knowledge of, any deficiency or assessment or proposed
deficiency or assessment from any taxing Governmental Authority with respect to
the Assets or the System; (iii) there are no audits pending with respect to the
Assets or the System and there are no outstanding agreements or waivers by
Seller that extend the statutory period of limitations applicable to any
federal, state, local, or foreign tax returns or Taxes with respect to the
System; and (iv) Seller has duly and timely filed all Tax returns and Tax
reports required to be filed by Seller and all such returns and reports are
accurate and complete in all material respects.
3.11. Financial Statements. Seller has delivered to Buyer true, complete
--------------------
and correct copies of the unaudited financial statements of the System for the
year ended December 31, 1995, the year ended December 31, 1996 and true, correct
and complete unaudited financial statements of the System for the six months
ended June 30, 1997, prepared in accordance with GAAP consistently applied (the
"Financial Statements"). The Financial Statements are true, correct and complete
in all material respects with respect to the subject matter contained therein,
and fairly present the results of the operations of the System for the periods
covered thereby, and do not and will not omit to state or reflect any material
fact required to be stated or reflected therein or necessary to make the
statements therein not misleading, subject, however, to year end audit
adjustments with respect to unaudited information, which adjustments are not
material individually or in the aggregate.
3.12. No Adverse Change. Except as described on Schedule 3.12, there has
-----------------
been no material adverse change in the business, Assets or the financial
condition or operations of the System since December 31, 1996, other than
changes arising from matters of a general economic nature or matters caused by
or arising from legislation, rulemaking or regulation affecting the cable
television industry in general, and since such date, (i) the Assets and the
financial condition and operations of the System have not been materially and
adversely
-16-
affected as a result of any fire, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation or act of God or public force or
otherwise, and (ii) no portion of the movable Personal Property has been removed
from the System except in the ordinary course of business.
3.13. Compliance with Legal Requirements.
----------------------------------
3.13.1 Except as described on Schedule 3.13, the operation of the
System as currently conducted does not violate or infringe in any material
respect any Legal Requirements currently in effect (other than the Legal
Requirements described in Section 3.13.2, as to which the representations and
--------------
warranties set forth in that subsection will apply). Except as described on
Schedule 3.13, Seller has received no notice of any violation by Seller or the
System of any Legal Requirement applicable to the operation of the System as
currently conducted. Seller is not in default of or in violation with respect to
any Judgment of any court, administrative agency or other Governmental
Authority.
3.13.2 Notwithstanding anything in this Agreement to the contrary,
and except as described on Schedule 3.13, the System is in compliance in all
material respects with the provisions of the Cable Act as such Legal
Requirements apply to the System; provided, however, that Seller does not make
any representations about rates charged to subscribers, other than the
representation about rates charged to subscribers set forth below. Except as
described on Schedule 3.13, Seller is in compliance in all material respects
with the must-carry and reconsent provisions of the 1992 provisions of the Cable
Act as they relate to the System. Seller has used reasonable good faith efforts
to establish rates charged to subscribers, effective since September 1, 1993,
that are or were allowable under the Cable Act and any authoritative
interpretation thereof now or then in effect, whether or not such rates are or
were subject to regulation at that date by any Governmental Authority, including
any local franchising authority and/or the FCC, unless such rates were not
subject to regulation pursuant to a specific exemption from rate regulation
contained in the Cable Act other than the failure of any franchising authority
to have been certified to regulate rates. Notwithstanding the foregoing, Seller
makes no representations or warranties that rates charged to subscribers (a) are
allowable under any rules or regulations of the FCC or any authoritative
interpretation thereof or (b) would be allowable under any rules and regulations
of the FCC or any authoritative interpretation thereof, promulgated after the
date of Closing. Seller has delivered to Buyer complete and correct copies of
all reports and filings for the past three years made or filed pursuant to the
Cable Act or FCC rules or regulations with respect to the System, including,
without limitation, FCC Forms 159 (Remittance Advice), 159C, 320, 325, 328, 329,
393, 395A, 854, 1200, 1205, 1210, 1215, 1220, 1225, 1230 and 1240, copies of
Seller's material correspondence with any Governmental Authority relating to
rate regulation generally or specific rates charged to subscribers of the System
including, without limitation, copies of any complaints filed with the FCC with
respect to Seller's rates charged to such subscribers (to the extent available
to Seller) and any other documentation supporting an exemption from the
-17-
rate regulation provisions of the Cable Act. As of the date of the Agreement,
Schedule 3.13 contains a list of all Franchise areas that are certified to
regulate rates pursuant to the laws and regulations of the FCC and a list of all
Franchises areas in which a complaint regarding cable programming services has
been filed with the FCC and received by Seller. A request for renewal has been
timely filed under Section 626(a) of the Cable Act with the proper Governmental
Authority with respect to each franchise of the System expiring within 36 months
of the date of this Agreement.
3.13.3 Seller has conducted all system and microwave performance
tests and all Cumulative Leakage Index ("CLI") related tests applicable to the
System. Seller has (i) maintained appropriate log books and other record keeping
which accurately and completely reflect in all material respects all results
required to be shown thereon; (ii) to the extent required by the rules and
regulations of the FCC, corrected any radiation leakage of the System required
to be corrected in connection with Seller's monitoring obligations under the
rules and regulations of the FCC; and (iii) otherwise complied in all material
respects with all applicable CLI rules and regulations in connection with the
operation of the System.
3.13.4 Seller is in compliance with the Copyright Act and the rules
and regulations of the Copyright Office with respect to the operation of the
System, except as to potential copyright liability arising from the performance,
exhibition or carriage of any music on the System as to which the Seller makes
no representation. Seller is entitled to hold and does hold the compulsory
copyright license described in Section 111 of the Copyright Act for all
television and radio broadcast stations which are carried by the System, which
compulsory copyright license is in full force and effect and has not been
revoked, canceled, encumbered or adversely affected in any manner.
3.13.5 The System is being operated in compliance with the Rules
and Regulations of the Federal Aviation Administration ("FAA"). All existing
towers of the System are obstruction marked and lighted in accordance with the
Rules and Regulations of the FAA and FCC or are exempt from such requirements.
3.14. Environmental Laws and Regulations.
----------------------------------
3.14.1 Except as set forth in Schedule 3.14, (i) Seller has not
generated, used, transported, treated, stored, released or disposed of any
Hazardous Substance in violation of any Legal Requirements; (ii) to Seller's
Knowledge, there has not been any generation, transportation, treatment,
storage, release or disposal of any Hazardous Substance by any Person in
connection with the operation of the System that has created or might reasonably
be expected to create any liability under any Legal Requirement; (iii) to
Seller's Knowledge, no underground storage tank is contained within any Real
Property owned by Seller; (iv) except for Hazardous Substances customarily used
in the cable industry and utilized in compliance with Legal Requirements, to
Seller's Knowledge, there is not located at, on, or under any real
-18-
property owned by Seller, any Hazardous Substance, including, but not limited
to, asbestos; and (v) any Hazardous Substance handled or dealt with by Seller in
any way in connection with the System has been and is being handled or dealt
with in all material respects in compliance with all applicable Legal
Requirements.
3.14.2 Seller has provided Buyer with complete and correct copies
of (a) all studies, reports, surveys, or other written materials in Seller's
possession relating to the presence or alleged presence of Hazardous Substances
at, on, under or affecting the Real Property, (b) all notices or other materials
in Seller's possession that were received from any Governmental Authority having
the power to administer or enforce any Legal Requirement relating to current or
past ownership, use or operation of the Real Property or activities at the Real
Property; and (c) all materials in Seller's possession relating to any
litigation or allegation by any private third party concerning Hazardous
Substances affecting the Property.
3.15. Real Property. Schedule 3.15 contains a description of all the Real
-------------
Property utilized by Seller in the operation of the System as now conducted.
Seller has delivered to Buyer true and complete copies of all deeds, leases,
easements, rights-of-way or other instruments pertaining to the Real Property
(including any and all amendments and other modifications of such instruments).
Seller has fee simple title to all of the fee estates (including the
improvements thereon), listed in Schedule 3.15, free and clear of all Liens and
encumbrances, except for (i) Liens for Taxes not yet due and payable; (ii)
easements, rights-of-way, restrictions, restrictive covenants, and other
encumbrances of record; (iii) any other claims or encumbrances which are
described in Schedule 3.15; and (iv) any matters which an accurate survey of the
fee estates would disclose. To the best of Seller's Knowledge, there are no
easements, rights-of-way, restrictions, restrictive covenants, or other
encumbrances of record which materially or adversely affect the use or value of
the fee estate owned by Seller or which interfere with the current use of, or
are violated by, any existing structure or use of the fee estates owned by
Seller. Except as described on Schedule 3.15, all Real Property (including the
improvements thereon) (A) is available to Seller for immediate use in the
conduct of the business or operations of the System, (B) complies in all
material respects with all applicable building or zoning codes and the
regulations of any Governmental Authority having jurisdiction and (C) has access
to and over public streets or private streets for which Seller has a valid right
of ingress and egress. There are no eminent domain proceedings pending, or to
Seller's Knowledge, threatened against the Real Property.
3.16. Non-Infringement. The operation of the System as currently conducted
----------------
does not infringe upon, or otherwise violate, the rights of any Person or entity
in any copyright, trade name, trademark right, service mark, service name,
patent, patent right, license, trade secret or franchise, and there is not
pending or, to Seller's Knowledge, threatened any action with respect to any
such infringement or breach.
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3.17. Accounts Receivable. Seller is the true and lawful owner of the
-------------------
Accounts Receivable and has good and clear title to each Account, free and clear
of all Liens, with the absolute right to transfer any interest therein. Each
such Account is (i) a valid obligation of the account debtor enforceable in all
material respects in accordance with its terms, and (ii) in all material
respects, a true and correct statement of the account for merchandise actually
sold and delivered to, or for actual services performed for and accepted by,
such account debtor in the ordinary course of business.
3.18. Books and Records. All of the books, records, and accounts of the
-----------------
System are in all material respects true and complete, are maintained in
accordance with good business practice and all applicable Legal Requirements,
and accurately present and reflect in all material respects all of the
transactions therein described.
3.19. Bonds. Schedule 3.19 contains an accurate and complete list of all
-----
bonds (franchise, construction, fidelity, or performance) of Seller which are
required to be maintained by Seller and which relate in any way to the ownership
or use of the Assets or the operation of the System.
3.20. Insurance. All insurance policies pertaining to the System which are
---------
required to be obtained by Seller are in full force and effect on the date
hereof, are valid and enforceable in accordance with their terms, are issued by
financially sound and reputable insurance companies, and collectively insure all
of the Assets of the System which are of an insurable character against loss or
damage to the extent and in the manner customary and prudent for companies
engaged in similar businesses or as required by any of the Franchises, Licenses,
Assumed Contracts or applicable Legal Requirements.
3.21. Sufficiency of Assets. Except as described in this Agreement,
---------------------
Schedule 3.21, or as disclosed on any other Schedule to this Agreement, together
with the Excluded Assets, the Assets collectively constitute all assets and
rights that relate directly or indirectly to, are used or usable in, and are
reasonably necessary to enable Buyer to operate the System as a going
enterprise.
3.22. Accuracy of Schedules. All Schedules to this Agreement are accurate
---------------------
and complete in all material respects as of the date of this Agreement.
3.23. Disclosure. No representation or warranty by Seller, or any
----------
statement or certificate furnished by Seller to Buyer pursuant to this Agreement
or in connection with the transaction contemplated by this Agreement, contains
or will at Closing contain any untrue statement of a material fact or omits or
will at Closing omit to state a material fact necessary to make the statements
contained therein not misleading.
-20-
3.24 Inventory. Seller has, and at the Closing will have, an inventory of
---------
spare parts and other materials relating to the System of the type and nature,
and maintained at a level, consistent with the past practices of the System.
4. BUYER'S REPRESENTATIONS.
-----------------------
Buyer hereby represents, warrants, covenants and agrees to and with Seller,
as follows:
4.1. Organization. Buyer is a limited liability company duly organized,
------------
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite power and authority to own and lease the properties and
assets it currently owns and leases and to conduct its activities and to carry
on its business as such activities and business are currently conducted.
4.2. Authorization. Buyer has full power and authority to execute,
-------------
deliver, and perform this Agreement and to consummate the transactions
contemplated in this Agreement. The execution, delivery, and performance of this
Agreement and the consummation of the transactions contemplated in this
Agreement on the part of Buyer have been duly and validly authorized and
approved by all necessary action on the part of Buyer, including appropriate
resolutions, if necessary, of the members of the limited liability company. This
Agreement has been duly and validly executed and delivered by Buyer, and is the
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms.
4.3. Disclosure. No representation or warranty of Buyer, or any statement
----------
or certificate furnished by Buyer to Seller pursuant to this Agreement or in
connection with the transaction contemplated by this Agreement, contains or will
contain at Closing any untrue statement of a material fact or omits or will at
Closing omit to state a material fact necessary to make the statements contained
therein not misleading.
5. COVENANTS.
---------
5.1. Seller's Pre-Closing Obligations. Seller covenants and agrees that,
--------------------------------
from and after the execution and delivery of this Agreement until and including
the Closing Date:
5.1.1 Access. Seller shall give Buyer and its representatives full
------
access during normal business hours to all of the properties, books, and records
relating to the System, and furnish Buyer with such information concerning the
Assets and the System as Buyer may reasonably request.
5.1.2 Conduct of Business. Seller shall operate and maintain the
-------------------
System in the ordinary and usual course and in accordance with past practices,
which shall include, without limitation, making capital expenditures in
substantial accordance with the existing budget and
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maintaining appropriate staff and management personnel (consistent with past
practices) at the System. Seller shall duly comply in all material respects with
all applicable Legal Requirements, perform all of its material obligations under
all of the Franchises, Licenses, and Contracts without default, and maintain the
books, records, and accounts relating to the System in the usual, regular, and
ordinary manner on a basis consistent with past practices. Seller shall use
reasonable efforts to keep available the services of its employees providing
services in connection with the System, continue normal marketing, advertising,
and promotional expenditures with respect to the System, and use commercially
reasonable efforts to preserve beneficial business relationships with all
customers, suppliers, and others having business or other dealings with Seller
relating to the System, including Governmental Authorities having jurisdiction
over Seller. Seller shall maintain the Assets in good condition and repair,
ordinary wear excepted, and Seller shall keep in effect the casualty and
liability insurance covering the Assets at a level that is reasonable and
appropriate and consistent with past practices. Seller shall not increase the
compensation payable to any consultant or contractor, except as required by the
terms of any contract or consistent with prior practices. Seller shall continue
to follow its normal disconnect and late charge policies as described on
Schedule 5.1.
5.1.3 Not Impair Performance. Without the prior written consent of
----------------------
Buyer, Seller shall not intentionally take any action that would cause the
conditions upon which the obligations of the parties hereto to effect the
transactions contemplated hereby are subject not to be fulfilled.
5.1.4 Negative Covenants. Seller shall not, except as Buyer may
------------------
otherwise consent in writing: (i) modify, terminate, renew, suspend, or abrogate
any Assumed Contract, provided that Seller may renew any retransmission consent
agreement relating to the System and make non-material modifications to any
Assumed Contract in the ordinary course of business without the consent of
Buyer; (ii) except as otherwise provided herein, modify, terminate, renew,
suspend, or abrogate any Franchise or License; (iii) transfer, convey, or
otherwise dispose of any of the Assets except in the ordinary course of business
(provided that Seller may use inventory and dispose of damaged or defective
equipment or material in the normal course of business); (iv) take any action
that would result in the creation of a Lien on any of the Assets; (v) engage in
any marketing, subscriber installation, or collection practices that are
inconsistent with the past practices of Seller; (vi) implement any increase or
decrease in the rates charged for the System's Expanded Basic or other cable
television services except as described on Schedule 3.3 or pursuant to a Legal
Requirement or Judgment; (vii) solicit or participate in negotiations or
knowingly permit any other person from so doing with any third party with
respect to the sale of the Assets or the System or any transaction inconsistent
with those contemplated hereby; or (viii) enter into any single Contract
involving a commitment of more than $30,000 or any Contracts which in the
aggregate involve a commitment of more than $50,000.
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5.1.5 Consents, Form 394's and Extension of Franchise. Except as
-----------------------------------------------
otherwise provided herein, Seller shall, at Seller's own cost and expense, use
commercially reasonable efforts to obtain as promptly as possible all approvals,
authorizations, and Consents required in order to consummate the transactions
contemplated by this Agreement, including approvals of the FCC, Governmental
Authorities, and other Persons to the transfer or assignment by Seller to Buyer
of all rights under and pursuant to the Franchises, Licenses, and Assumed
Contracts without material modification or change. As soon as practical after
the date of this Agreement, the parties will cooperate with each other to
complete, execute and deliver, or cause to be completed, executed and delivered
to the appropriate Governmental Authority, an FCC Form 394 with respect to each
System Franchise as to which such Form 394 is required. With respect to the
Franchise for the City of Clearlake, Seller shall use commercially reasonable
efforts and due diligence, and Buyer shall cooperate with and assist Seller in
all reasonable respects, to have the Franchise extended or a term of not less
than five (5) years on terms and conditions reasonably acceptable to Buyer and
Seller.
5.1.6 Employment Matters. Without Buyer's prior written consent,
------------------
Seller shall make no change in the compensation payable or to become payable by
Seller to any Person employed in connection with the conduct of the business or
operations of the System, except in accordance with past practices.
Notwithstanding the foregoing, Seller may incent employees to remain employees
of the System through the Closing Date without violating this covenant. Seller
shall not enter into any collective bargaining agreements with employees of the
System. Between the date of this Agreement and the Date of Closing, neither
Seller nor Jones Intercable, Inc. (collectively, the "Company") shall actively
solicit or recruit employees of the System for employment within any other cable
television systems directly or indirectly owned or operated by Seller or Jones
Intercable, Inc. Notwithstanding the foregoing, the Company shall be permitted
to continue to post job openings and opportunities within the Company to
employees of the System through electronic mail or other postings. Nothing
contained herein shall be construed to prevent the Company from discussing
and/or offering System employees employment within the Company in the event that
the Company is approached by employees of the System regarding employment
opportunities. In the event that the Company makes an offer of employment to any
System employee for a position outside of the System between the date of this
Agreement and the Date of Closing, Company shall promptly provide Buyer with
written notice of such offer at least thirty days prior to the date that such
position is to take effect. In no event shall the Company be obligated to
disclose the terms and conditions of such offer of employment to Buyer. During
such thirty day period, Buyer shall be entitled to approach such System employee
regarding employment opportunities with Buyer.
5.1.7 Changes in Condition. Seller shall promptly inform Buyer in
--------------------
writing of any material adverse change in the condition (financial or
otherwise), operations, assets, liabilities or business of the System.
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5.2. Financial Information. At Buyer's request, Seller shall deliver to
---------------------
Buyer, within 30 days after the end of each month, true and complete copies of
all financial, capital expenditure, subscriber reports and all other reports of
Seller generated in the ordinary course of business with respect to the System,
and such other reports as may be reasonably requested by Buyer and any reports
with respect to the operation of the System prepared by or for Seller at any
time from the date of this Agreement until the Closing.
5.3. Title Matters. Within 30 days following the date of this Agreement,
-------------
Seller shall obtain and furnish to Buyer, at Seller's cost, title insurance
commitments (the "Title Commitments") issued by a nationally recognized title
insurer showing the status of record title to each fee parcel of Real Property
owned by Seller, and agreeing to insure fee simple title to each such parcel, at
Seller's cost, subject only to (i) zoning restrictions, prohibitions, and other
requirements imposed by any Governmental Authority having jurisdiction over the
Real Property; (ii) public utility easements of record; (iii) Liens for Taxes
not yet due and payable; (iv) covenants, easements, rights-of-way, restrictions,
and other similar encumbrances of record; and (v) matters which would be
reflected on an accurate survey (collectively, the "Permitted Liens"). If Buyer
shall notify Seller within 20 days of its receipt of the Title Commitments of
any Lien or other matter affecting title to the Real Property which, in the
determination of Buyer, renders title uninsurable or unmerchantable, or which
could adversely affect the use or value of any parcel of the Real Property for
the purpose for which it is currently used by Seller or which is otherwise not a
Permitted Lien (each, a "Title Defect"), Seller shall exercise commercially
reasonable efforts to remove or cause the title company to commit to insure
over, each Title Defect prior to the Closing.
5.4. Employees of the System. Seller shall comply with the provisions of
-----------------------
the Worker Adjustment and Retraining Notification Act, as amended, 29 U.S.C. (S)
2101, et seq., as it relates to the transaction contemplated hereby, and shall
-- ----
indemnify and hold harmless Buyer from and against all Losses arising with
respect thereto. Seller acknowledges that Buyer may, but shall have no
obligation to, hire any of Seller's employees that render services in connection
with the operation of the System; provided, however, that Buyer shall give
Seller notice at least 60 days after the date of this Agreement or 45 days prior
to Closing, whichever is earlier, of the names of any employee of the System to
whom Buyer will not offer employment to on and after the Closing Date. Seller
shall remain solely responsible for, and shall indemnify and hold harmless Buyer
from and against all Losses arising with respect to, all salaries and all
severance, vacation, sick, holiday, and other benefits to which employees of
Seller may be entitled, as a result of consummation of the transaction
contemplated hereby or otherwise.
5.5. Cooperation in Obtaining of Consents.
------------------------------------
5.5.1 Buyer shall fully cooperate with Seller, do all things
reasonably necessary to assist Seller, and use its commercially reasonable
efforts to obtain all Consents
-24-
necessary for the transfer of or assignment to Buyer of the Franchises, Leases
and Assumed Contracts, including the furnishing of all financial and other
information reasonably required by the party whose Consent is being sought.
5.5.2 Subsequent to the Closing, Seller shall continue to use
commercially reasonable efforts to obtain in writing any Consent required to be
obtained by it that was not obtained on or before Closing, and deliver copies of
such to Buyer, in a form reasonably satisfactory to Buyer. The obligations set
forth in this subsection shall survive Closing and shall not be merged in the
consummation of the transactions contemplated hereby.
5.6. HSR Act Compliance. Promptly after the date of this Agreement, Seller
------------------
and Buyer shall prepare and file proper premerger notification forms and
affidavits in compliance with the HSR Act, if applicable. Seller and Buyer shall
each pay one-half of all fees payable to Governmental Authorities in connection
with such filings. If, following the filing of such forms, any Governmental
Authority shall challenge the transaction contemplated hereby, or request
additional filings or information, Seller and Buyer shall take preliminary steps
to attempt to ascertain the nature of the challenge and the likelihood that the
Governmental Authority will permit the transaction contemplated hereby to
proceed notwithstanding the challenge. After taking such preliminary steps, (i)
if the parties determine in good faith, that the Governmental Authority, may
permit the transaction to proceed, the parties shall cooperate to contest such
challenge and/or provide the additional filings or information; and (ii) if the
parties determine, in good faith, that the Governmental Authority is not likely
to permit the transaction to proceed, then neither Seller nor Buyer shall have
any obligation to contest such challenge or make or provide any such filing or
information, and, unless the other party determines to contest such challenge or
provide such information or filings at their cost and expense, each shall be
entitled, at its option, to withdraw its filing and terminate this Agreement;
provided, however, that the election to terminate this Agreement by either party
pursuant to the provisions hereof shall be made in good faith and shall not be
based upon a de minimis request for information from any Governmental Authority.
5.7. Bulk Sales. Buyer waives compliance by Seller with Legal Requirements
----------
relating to bulk sales applicable to the transaction contemplated hereby and
Seller shall indemnify Buyer with respect thereto.
5.8. Leased Vehicles. Seller shall pay the remaining balances on any
---------------
capital leases for motor vehicles and deliver title to such Personal Property to
Buyer at Closing free and clear of all Liens.
5.9. Use of Names and Logos. For a period of ninety (90) days after
----------------------
Closing, Buyer shall be entitled to use the trademarks, trade names, service
marks, service names, logos, and similar proprietary rights of Seller
(collectively, " Trademarks") to the extent incorporated in or on the Assets
transferred to it at Closing, provided that Buyer shall exercise
-25-
efforts to remove all such names, marks, logos, and similar proprietary rights
of the other from the Assets as soon as reasonably practicable following
Closing. Buyer agrees to indemnify and hold Seller harmless from and against any
and all Losses incurred by Seller in connection with Buyer's use of Seller's
Trademarks.
5.10. Transitional Billing Services. Seller shall provide to Buyer, upon
-----------------------------
written request and at the cost of Buyer, subscriber billing services
("Transitional Billing Services") in connection with the System for a period of
up to 120 days following Closing to allow for conversion of existing billing
arrangements. Buyer shall notify Seller in writing at least 30 days prior to
Closing as to whether it desires Seller to provide Transitional Billing
Services. Each party shall cooperate with all reasonable requests by the other
in connection with the first billing cycle following Closing. Buyer acknowledges
that Seller is in the process of converting its billing system from a TBOL
system to a DDP/SQL system. This conversion is currently scheduled to occur in
late January or early February of 1998. Buyer acknowledges that during such
conversion: (a) certain services of the System may be down for a period of time,
including, but not limited to, pay-per-view services; and (b) certain computer
terminals may be required to be replaced with personal computers. In the event
that such computer terminals are required to be replaced with personal computers
in connection with the conversion of the billing system, such replacement shall
be at the sole cost and expense of Buyer. In the event that the conversion of
the billing system occurs subsequent to Closing, Buyer shall cooperate with
Seller in completing the conversion and allow Seller's agents and employees
access to the System to effectuate the conversion.
5.11 Reporting Requirements. Seller covenants and agrees that from time
----------------------
to time, upon the request of Buyer, and at the expense of Buyer, Seller shall:
(i) make promptly available to Buyer such financial information with respect to
the System as Buyer may reasonably request in order to prepare any financial
statements and financial statement schedules relating to the System which Buyer
may be required to include in any registration statement, report, or other
document which it files with the Securities and Exchange Commission or any state
securities commission, in appropriate form as provided by applicable federal or
state securities laws and the rules and regulations promulgated thereunder, and
Seller shall request its present certified public accountants, Ernst & Young, to
cooperate with Buyer in connection therewith, and (ii) use its reasonable
efforts (without expense to Seller) to promptly obtain for Buyer any consent,
report, opinion or letter of accountants required to be filed in connection
therewith.
5.12 Environmental Matters.
---------------------
5.12.1 Seller has delivered to Buyer a Phase I Study for each
Parcel of Real Property owned by Seller as set forth on Schedule 3.15 (the
"Owned Property"). Within twenty (20) days after the execution of this
Agreement, Seller shall commission a qualified engineering firm to conduct a
Phase II Study for the Parcel of Owned Property designated as
-26-
Item 2 on Schedule 3.15 and an asbestos study for each Parcel of Owned Property.
The Phase I Study, the asbestos study and the Phase II Study are each sometimes
hereinafter referred to as a "Study." The cost of each Study shall be borne
equally by Seller and Buyer. Each Study shall be prepared in accordance with
ASTM Standard 1527-94. Within five (5) business days of its receipt of a
completed Study, Seller shall deliver such Study to Buyer. Buyer shall have
thirty (30) days from the date hereof, with respect to the Phase I Study, and 30
days from its receipt of any other Study to provide Seller with written notice
(an "Environmental Condition Notice") of (i) any violation of any Legal
Requirement disclosed by such Study, (ii) any facts disclosed by such Study
which would reasonably indicate that the Owned Property may be in violation of
any Legal Requirement at the time of such Study, (iii) any environmental
condition that could reasonably be expected to impair the use or value of the
affected Owned Property for the continued operation of the business of the
System as operated by Seller, (iv) any environmental condition that could
subject Buyer to any liability for fines, penalties or cleanup or response costs
if the transaction contemplated hereby is consummated, or (v) any environmental
condition that would cause a reasonable purchaser experienced in environmental
matters to perform further investigation or testing before proceeding with the
transfer of the Owned Property (collectively, "Environmental Conditions"). In
the event that Seller has not received an Environmental Condition Notice from
Buyer with respect to any Study in the manner and time period provided above,
Buyer shall, subject to Buyer's rights elsewhere contained in this Agreement, be
deemed to have accepted the environmental condition of the Owned Property
disclosed in such Study.
5.12.2 In the event that Buyer delivers an Environmental Condition
Notice to Seller, the parties shall use good-faith efforts to ascertain the
nature of the Environmental Condition, the potential liabilities to Seller and
Buyer associated therewith, and the potential costs of remediating the
Environmental Condition. In the event that: (a) Seller and Buyer mutually agree
that the nature of the Environmental Condition and the potential liabilities
associated therewith warrant further ascertainment and/or remediation; and (b)
Seller and Buyer mutually agree upon an ascertainment and remediation plan, then
Seller shall pay for the costs of further ascertainment and/or remediation
("Ascertainment and Remediation Costs") provided that in no event shall Seller's
obligation with respect to such Ascertainment and Remediation Costs exceed
$250,000. In the event that Seller and Buyer determine that the Ascertainment
and Remediation Costs would exceed $250,000, then Buyer may elect (x) to
terminate this Agreement with no cost or obligation on the part of Buyer or
Seller; or (y) proceed to Closing, in which event Buyer shall receive a credit
at Closing in the amount, if any, by which $250,000 exceeds the aggregate amount
paid by Seller to third parties for Ascertainment and Remediation Costs, in
which event Buyer shall assume all further obligations with respect to such
Ascertainment and Remediation Costs. Notwithstanding anything to the contrary
contained herein, in no event shall Seller be obligated to remediate or remove
any asbestos located upon the Owned Property in the event that such asbestos is
determined by the parties to be located upon the Owned Property in compliance
with Legal Requirements.
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5.12.3 In the event that Buyer provides Seller with an Environmental
Condition Notice and Seller and Buyer are unable to mutually agree upon an
ascertainment and remediation plan as provided in Section 5.12.2 above by the
--------------
Closing Date, then either party may terminate this Agreement upon written notice
to the other. Notwithstanding the foregoing, in the event that Seller elects to
terminate this Agreement as provided above, Buyer may waive its objection to the
Environmental Condition set forth in the Environmental Condition Notice by
delivering written notice to Seller on or before the date which is five (5)
business days after its receipt of Seller's termination notice, in which event
this Agreement shall remain in full force and effect and the parties shall
proceed to Closing as otherwise provided herein.
6. CONDITIONS PRECEDENT.
--------------------
6.1. Conditions Precedent to Buyer's Obligations. The obligations of
-------------------------------------------
Buyer under this Agreement with respect to the purchase of the Assets shall be
subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, any of which may be waived by Buyer:
6.1.1 Accuracy of Representations: Performance of Agreements;
-------------------------------------------------------
Closing Certificate. All of the representations and warranties of Seller
- -------------------
contained in this Agreement or any Transaction Document shall be true and
correct in all material respects at and as of the Closing Date as if given on
the Closing Date (except for representations and warranties expressly stated to
be made only at and as of some other date), and Seller shall have complied with
and performed in all material respects all of the agreements, covenants, and
conditions required by this Agreement to be performed or complied with by it on
or prior to the Closing. Seller shall have furnished Buyer with an executed
certificate of the general partners of Seller dated as of the Closing,
certifying to the fulfillment of the foregoing conditions.
6.1.2 Consents. Seller shall have obtained and delivered to Buyer
--------
each of the Consents designated on Schedule 3.7 as material (the "Material
Consents"), with no material modifications or adverse conditions imposed by such
Consent.
6.1.3 Title Commitments. Seller shall have furnished to Buyer the
-----------------
Title Commitments within the time period required by this Agreement.
6.1.4 No Litigation. There shall be no Legal Requirement, and no
-------------
Judgment shall have been entered and not vacated by a final, unappealable order
by any Governmental Authority of competent jurisdiction in any Litigation or
arising therefrom, which (i) enjoins, restrains, makes illegal, or prohibits
consummation of the transaction contemplated by this Agreement, or (ii) requires
separation or divestiture by Buyer of all or any portion of the
-28-
Assets after the Closing, and there shall be no Litigation pending or threatened
that seeks, or which if successful would have the effect of, any of the
foregoing.
6.1.5 HSR Act Compliance. All waiting periods under the HSR Act
------------------
applicable to this Agreement or the transaction contemplated hereby shall have
expired or been terminated.
6.1.6 Deliveries. Seller shall have made or stand willing to and able
----------
to make all of the deliveries to Buyer set forth in Section 7.2.
-----------
6.1.7 No Adverse Change. Between the date of this Agreement and the
-----------------
Closing Date, there shall have been (i) no material adverse change in the Assets
or the System or its financial condition, taken as a whole, other than any
change arising out of matters of a general economic nature or matters
(including, without limitation, competition caused by or arising from
multichannel multipoint distribution services and/or direct broadcast satellite
and legislation, rulemaking or regulation) affecting the cable television
industry generally, and (ii) no material loss, damage, impairment, confiscation
or condemnation of any of the Assets that has not been repaired or replaced.
6.1.8 Franchise Extension. The City of Clearlake shall have taken
-------------------
final action to extend the Franchise granted by the City of Clearlake and held
by Seller as provided in Section 5.1.5 hereof.
-------------
6.1.9 The Subscriber Estimate shall not be less than 16,650;
provided, that if the Subscriber Estimate is less than 16,650, Buyer may elect
to proceed with the Closing, in which event the EBS Adjustment Amount shall be
$804,050.00 at the Closing, subject to the provisions of Section 2.5(b) hereof.
--------------
6.2. Conditions Precedent to Seller's Obligations. The obligations of
--------------------------------------------
Seller under this Agreement with respect to the sale of the Assets shall be
subject to the fulfillment on or prior to the Closing of each of the following
conditions, which may be waived by Seller:
6.2.1 Accuracy of Representations; Performance of Agreements; and
-----------------------------------------------------------
Officer's Certificate. All of the representations and warranties of Buyer
- ---------------------
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date as if given on the Closing Date, and Buyer shall
have complied with and performed all of the agreements, covenants, and
conditions required by this Agreement to be performed or complied with by it on
or prior to the Closing. Buyer shall have furnished Seller with a member's
certificate dated as of the Closing and executed by Mediacom LLC, certifying to
the fulfillment of the foregoing conditions.
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6.2.2 No Litigation. There shall be no Legal Requirement, and no
-------------
Judgment shall have been entered and not vacated by any Governmental Authority
of competent jurisdiction in any Litigation or arising therefrom, that enjoins,
restrains, makes illegal, or prohibits consummation of the transactions
contemplated by this Agreement.
6.2.3 HSR Act Compliance. All waiting periods under the HSR Act
------------------
applicable to this Agreement or the transaction contemplated hereby shall have
expired or been terminated.
6.2.4 Deliveries. Buyer shall have made or stand willing and able to
----------
make all the deliveries to Seller set forth in Section 7.3.
-----------
6.2.5 Consents. Seller shall have obtained each of the Material
--------
Consents. Notwithstanding the foregoing, Buyer shall be entitled to waive
Seller's obligation to obtain any Material Consent other than those Consents
necessary to transfer the Franchises; provided that Seller shall have no
liability to Buyer for Seller's inability to procure such Consent.
7. CLOSING.
-------
7.1. Time and Place. The consummation of the transfer and delivery of the
--------------
Assets to Buyer and the receipt of the consideration therefore by Seller shall
constitute the "Closing." Unless otherwise mutually agreed to by the parties,
the Closing shall take place by mail and/or by facsimile. The parties agree that
a signature on a document received by the other party via facsimile shall be
deemed valid and binding if the original executed document is sent for delivery
to the other party by an overnight courier service that guarantees overnight
delivery. Closing shall occur on the first business day of the month immediately
following the month in which all conditions set forth in Sections 6.1 and 6.2
--------------------
have been satisfied or waived (provided that such date is no less than ten (10)
business days after all such conditions have been satisfied) or on such other
date as Buyer and Seller shall mutually agree (the "Closing Date"). All
allocations provided for hereunder shall be made as of the Adjustment Time on
the Closing Date, except as otherwise agreed in writing by the parties. In no
event shall the Closing be held later than February 27, 1998 (the "Outside
Closing Date"), unless Buyer and Seller otherwise mutually agree.
7.2. Seller's Deliveries. At the Closing, Seller shall deliver or cause to
-------------------
be delivered to Buyer the following:
7.2.1 Bill of Sale. An executed Bill of Sale, Assignment and
------------
Assumption Agreement in the form attached hereto as Exhibit B;
---------
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7.2.2 Vehicle Titles. Title certificates to all vehicles included
--------------
among the Assets, endorsed for transfer of title to Buyer, and separate bills of
sale therefor if required by the laws of the state in which such vehicles are
titled;
7.2.3 Deeds: Documents of Conveyance and Transfer. Executed grant
-------------------------------------------
deeds conveying to Buyer, subject only to Permitted Liens, each fee parcel of
the Real Property and assignments of all rights of Seller in any Real Property
not owned by Seller;
7.2.4 Certificate. The certificate described in Section 6.1.1;
----------- -------------
7.2.5 Consents. The original of each Consent received by Seller and
--------
the original (to the extent such original is reasonably available, and if not so
available, a copy) of each Material Consent.
7.2.6 Franchises, Licenses. Assumed Contracts. and Business Records.
-------------------------------------------------------------
To the extent not previously delivered, copies of all Franchises, Licenses,
Assumed Contracts, customer and subscriber lists, blueprints, schedules,
drawings, plans, projections, engineering records, and all files and records
used by Seller in connection with its operation of the System;
7.2.7 Opinions of Counsel. The opinion of Elizabeth M. Steele,
-------------------
Seller's counsel, addressed to Buyer and dated as of the Closing Date,
substantially in the form attached hereto as Exhibit C; and the opinion of Cole,
---------
Raywid, & Braverman, LLP, Seller's FCC Counsel, addressed to Buyer and dated as
of the Closing Date, substantially in the form attached here as Exhibit F;
---------
7.2.8 Noncompete. The Noncompetition Agreement substantially in the
----------
form attached hereto as Exhibit D, duly executed by Seller;
---------
7.2.9 Indemnity Escrow Agreement. An executed counterpart of an
--------------------------
Indemnity Escrow Agreement substantially in the form attached hereto as
Exhibit A; and
- ---------
7.2.10 Other Documents.
---------------
(a) Subject to the review and approval of Buyer, revised
Schedules, certified by Seller as being true and correct in all material
respects as of the Closing Date; and
(b) Such other documents and instruments as shall be necessary
to effect the intent of this Agreement and consummate the transaction
contemplated by this Agreement.
7.3. Buyer's Obligations. At the Closing, Buyer shall deliver or cause to
-------------------
be delivered to Seller the following:
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7.3.1 Purchase Price. The Purchase Price, payable as provided in
--------------
Section 2.4;
- -----------
7.3.2 Bill of Sale, Assignment and Assumption Agreement. An executed
-------------------------------------------------
counterpart of an Assumption Agreement, substantially in the form attached
hereto as Exhibit B;
---------
7.3.3 Officer's Certificate. The certificate described in Section
--------------------- -------
6.2.1;
- -----
7.3.4 Opinion of Counsel. An opinion of Cooperman Levitt Winikoff
------------------
Lester and Newman, P.C., Buyer's counsel, substantially in the form of
Exhibit E;
- ---------
7.3.5 Noncompete. An executed counterpart of the Noncompetition
----------
Agreement substantially in the form attached hereto as Exhibit D;
---------
7.3.6 Indemnity Escrow Agreement. An executed counterpart of an
--------------------------
Indemnity Escrow Agreement substantially in the form attached hereto as
Exhibit A; and
- ---------
7.3.7 Other Documents. Such other documents and instruments as shall
---------------
be necessary to effect the intent of this Agreement and consummate the
transaction contemplated by this Agreement.
8. TERMINATION.
-----------
8.1. Termination Events. This Agreement may be terminated and the
------------------
transaction contemplated by this Agreement may be abandoned:
8.1.1 at any time, by the mutual agreement of Buyer and Seller;
8.1.2 at any time, by either Buyer or Seller if the other is in
material breach or default of its respective covenants, agreements, or other
obligations in this Agreement, or if any of the other's representations in this
Agreement or any Transaction Document are not true and accurate in all material
respects when made or when otherwise required by this Agreement to be true and
accurate, except that the party in breach or default shall be given notice by
the other party and an opportunity to begin and a reasonable period of time to
diligently pursue a cure before the other party shall terminate this Agreement;
8.1.3 by either Buyer or Seller, upon written notice to the other, if
any of the conditions to its obligations set forth in Sections 6.1 and 6.2,
--------------------
respectively, shall not have been satisfied on or before the Outside Closing
Date for any reason other than a material breach or default by such party of its
respective covenants, agreements, or other obligations hereunder, or any of its
representations herein not being true and accurate in all material respects when
-32-
made or when otherwise required by this Agreement to be true and accurate in all
material respects;
8.1.4 by Seller or Buyer as provided in and subject to the provisions
of Section 5.12 hereof; or
------------
8.1.5 as otherwise provided in this Agreement.
8.2. Effect of Termination.
---------------------
8.2.1 Costs and Return of Information. Without limiting any other
-------------------------------
provision of this Section 8.2, if the transaction contemplated by this Agreement
-----------
is terminated and abandoned as provided herein: (i) each party shall pay the
costs and expenses incurred by it in connection with this Agreement, and no
party (or any of its officers, directors, employees, agents, representatives or
shareholders) shall be liable to any other party for any costs, expenses or
damages except as expressly specified herein; (ii) each party shall re-deliver
all documents, work papers and other materials of the other party relating to
the transaction contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same; (iii) all confidential
information received by either party hereto shall be treated in accordance with
Section 10.1 hereof; and (iv) neither party hereto shall have any liability or
- ------------
further obligation to the other party to this Agreement except (a) as stated in
subparagraphs (ii) and (iii) of this Section 8.2.1, and (b) to the extent
--------------
applicable, as set forth in Sections 8.2.2 and 8.2.3 below.
------------------------
8.2.2 Buyer's Remedies. If both (a) this Agreement is terminated
----------------
prior to Closing by Buyer pursuant to Section 8.1.2 or 8.1.3 as a result of a
----------------------
breach by Seller in any material respect of any of its representations and
warranties made herein or its covenants or agreements made herein and (b) Buyer
is not in breach in any material respect of any of its representations and
warranties made herein or its covenants or agreements made herein, the Deposit
and all accrued interest thereon shall be returned to Buyer, and Buyer shall
have, in addition to its right to receive the Deposit and all accrued interest
thereon, the right to seek monetary damages from Seller; provided, however, that
-------- -------
such damages shall be limited to $1,000,000.00; and provided further, that in no
----------------
event shall Buyer be entitled to make any claim against Seller for, nor be
entitled to damages from Seller for, any anticipated profits it lost as a result
of Buyer's not acquiring the System; and provided further, that nothing in this
----------------
Section 8.2.2 shall be an admission by Seller that Buyer shall be entitled to
- -------------
damages for anticipated profits under any circumstances. If Seller defaults in
the performance of its obligations under this Agreement, Buyer shall be
entitled, in addition to any other remedies that may be available, to request
Seller to specifically perform its obligations under this Agreement, if
necessary, through injunction, court order or other process, and to recover from
Seller any costs or expenses reasonably incurred by Buyer in connection
therewith.
-33-
8.2.3 Seller's Remedies. If both (a) this Agreement is terminated
-----------------
prior to the Closing by Seller pursuant to Section 8.1.2. or Section 8.1.3 as a
------------- -------------
result of a breach by Buyer in any material respect of any of its
representations and warranties made herein or its covenants or agreements made
herein and (b) Seller is not in breach in any material respect of any of its
representations and warranties made herein or its covenants or agreements made
herein, then Seller shall have as its sole and exclusive remedy the right to
receive the Deposit and all interest accrued thereon as liquidated damages and
not as a penalty.
9. SURVIVAL OF REPRESENTATIONS AND INDEMNITY.
-----------------------------------------
9.1. Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
representations, warranties, covenants and agreements contained in this
Agreement and in any Transaction Document shall be deemed continuing
representations, warranties, covenants and agreements and shall survive Closing
for a period ending on the date which is one year after the Closing Date, except
for representations and warranties set forth in Section 3.10 (Taxes), Section
------------ -------
3.5 (Title to Personal Property) and Section 3.14 (Environmental Laws and
- --- ------------
Regulations), which shall survive for the period of the applicable statutes of
limitations. If Closing occurs, neither party shall have liability to the other
(for indemnification or otherwise) with respect to any representation or
warranty unless, on or prior to the end of the applicable survival period, such
party is given notice of a claim with respect thereto and specifying the factual
basis of that claim in reasonable detail to the extent then known to the
claiming party.
9.2. Seller's Indemnity. Seller shall indemnify and hold Buyer, its
------------------
affiliates, officers, directors, employees, agents, and representatives, and any
Person claiming by or through any of them, as the case may be, harmless from and
against any Losses arising out of or resulting from:
9.2.1 all actual or purported liabilities and obligations of Seller,
and all claims and demands made in respect thereof, whether or not known or
asserted at or prior to the Closing (except the Assumed Liabilities);
9.2.2 the operation of the System, including, but not limited to, any
third party claims arising from or related to, periods prior to the Adjustment
Time; and
9.2.3 any misrepresentation, breach of warranty, or nonfulfillment of
any agreement or covenant on the part of Seller under this Agreement or any
Transaction Document.
Notwithstanding the provisions of Section 9.1 above, Seller's
-----------
indemnification obligations to Buyer for the matters set forth in Sections
--------
9.2.1 and 9.2.2 shall survive Closing indefinitely.
- ---------------
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9.3. Buyer's Indemnity. Buyer shall indemnify and hold Seller, its
-----------------
affiliates, officers, directors, employees, agents, and representatives, and any
Person claiming by or through any of them, as the case may be, from and against
any Losses arising out of or resulting from:
9.3.1 the Assumed Liabilities;
9.3.2 the operation of the System subsequent to the Adjustment Time;
and
9.3.2 any misrepresentation, breach of warranty, or nonfulfillment of
any agreement or covenant on the part of Buyer under this Agreement or any
Transaction Document.
9.4 Procedure for Indemnified Third Party Claim. Promptly after receipt
-------------------------------------------
by a party entitled to indemnification under this Agreement (the "Indemnitee")
of written notice of the assertion or the commencement of any Litigation with
respect to any matter referred to in Sections 9.2 and 9.3, the Indemnitee shall
--------------------
give written notice thereof to the party from whom indemnification is sought
pursuant hereto (the "Indemnitor") and thereafter shall keep the Indemnitor
reasonably informed with respect thereto. Failure of the Indemnitee to give the
Indemnitor notice as provided herein shall not relieve the Indemnitor of its
obligations hereunder unless the Indemnitee's failure to give the Indemnitor
timely notice materially limits or prejudices the Indemnitor's ability to
defend, in which case such failure of the Indemnitee to give the Indemnitor
notice shall relieve the Indemnitor of its indemnification obligations. In case
any Litigation shall be brought against any Indemnitee, the Indemnitor shall be
entitled to participate in such Litigation, such Litigation may not be settled
by the Indemnitee without the consent of the Indemnitor, and, at the request of
the Indemnitee, the Indemnitor shall assume the defense thereof with counsel
mutually satisfactory to the Indemnitor and the Indemnitee, at the Indemnitor's
reasonable expense. If the Indemnitor and the Indemnitee cannot agree on the
choice of a single counsel, both the Indemnitor and the Indemnitee shall have
separate counsel at the Indemnitor's expense provided that Indemnitor's
obligations hereunder with respect to expenses incurred by Indemnitee shall be
limited to expenses and fees reasonably incurred by the Indemnitee. If the
Indemnitor shall assume the defense of any Litigation, it shall not settle the
Litigation unless the settlement shall include as an unconditional term thereof
the giving by the claimant or the plaintiff of a release of the Indemnitee,
satisfactory to the Indemnitee, from all liability with respect to such
Litigation.
9.5 Determination of Indemnification Amounts. Seller and Buyer shall have
----------------------------------------
no liability under Sections 9.2 and 9.3, respectively, unless the aggregate
--------------------
amount of Losses otherwise subject to its indemnification obligations thereunder
exceeds $100,000 (the "Threshold Amount"); provided, however, that (i) when the
Losses of an Indemnitee exceed the Threshold Amount, the Indemnitor shall be
liable for the Indemnitee's aggregate Losses of
-35-
the Threshold Amount and any Losses in excess of the Threshold Amount and (ii)
the Threshold Amount shall not apply to claims for which Seller is required to
indemnify Buyer under Sections 9.2.1 and 9.2.2. All Losses shall be computed net
of any insurance proceeds received which reduces the Losses that would otherwise
be sustained.
9.6 Indemnity Escrow - Limitation on Damages. As described in Section 2.4
---------------------------------------- -----------
above, at Closing, the Deposit is to be retained by Escrow Agent and applied in
accordance with the terms of the Indemnity Escrow Agreement. In no event shall
any claims against Seller, or any general partner thereof, arising out of or
related to this Agreement exceed two million one hundred forty thousand dollars
($2,140,000) either individually or in the aggregate except for any claims
arising from (i) fraud on the part of Seller in connection with this Agreement
or the transactions contemplated hereby; (ii) claims for breach by Seller, or
any general partner thereof, of its Noncompetition Agreement; or (iii) claims
for which Seller is required to indemnify Buyer pursuant to the provisions of
Section 9.2.1 and 9.2.2 above.
- -----------------------
9.7. Determination of Indemnification Amounts and Related Matters.
------------------------------------------------------------
9.7.1 Amounts payable by the Indemnitor to the Indemnitee in respect
of any Losses under this Section 9 shall be payable by the Indemnitor to the
---------
Indemnitee promptly upon agreement by Indemnitor or final determination of the
validity of such claim for Losses.
9.7.2 In calculating amounts payable to an Indemnitee under this
Agreement, the amount of the indemnified Losses shall be "grossed-up" by the
amount of any increase in the Indemnitee's liability for Taxes resulting from
indemnification by the Indemnitor under this Agreement.
10. CONFIDENTIALITY AND PRESS RELEASES.
----------------------------------
10.1. Confidentiality. Except as may be required by law, each party shall
---------------
hold in strict confidence all documents, information, or data, whether written
or oral, relating to the System and furnished to the other party or its
employees, members, lenders, agents, advisors or consultants (collectively, the
"Confidential Information"). If the transaction contemplated hereby should not
be consummated, such confidence shall be maintained, and all such Confidential
Information and all copies thereof shall immediately be destroyed, or returned
to the appropriate party. For the purposes of this Agreement, the following
shall not be considered Confidential Information: (a) information that was known
by the receiving party, its directors, officers, employees, advisors,
consultants or affiliates prior to the disclosure thereof by the party
delivering such information; (b) information that is or becomes generally
available to the general public other than as a result of a disclosure made
directly or indirectly by the party receiving information hereunder in breach of
the provisions hereof; (c) information that is independently developed by the
party receiving information hereunder, its directors, officers, employees,
advisors, consultants or its affiliates; or (d) information that is
-36-
or becomes available to the party receiving information hereunder on a
nonconfidential basis from a source other than the party providing information
hereunder or its directors, officers, or employees, provided that such source is
not known by the party receiving information hereunder to be bound by any
obligation of confidentiality in relation thereto.
10.2. Press Releases. No press release or public disclosure, either
--------------
written or oral, of the existence or terms of this Agreement shall be made by
either Buyer or Seller prior to the Closing without the consent of the other,
and Buyer and Seller shall each furnish to the other advance copies of any
release which it proposes to make public concerning this Agreement or the
transactions contemplated hereby and the date upon which Buyer or Seller, as the
case may be, proposes to make such press release. This provision shall not,
however, be construed to prohibit any party from making any disclosures in
accordance with the rules and regulations of any Governmental Authority with
which it is required to comply under any Legal Requirement, or from filing this
Agreement with, or disclosing the terms of this Agreement to, any governmentally
regulated institutional lender to such party.
11. BROKERAGE FEES. Buyer and Seller represent and warrant to the other that it
--------------
has not incurred any obligations or liabilities, contingent or otherwise, for
brokerage or finder's fees or agent's commissions or other like payment in
connection with this Agreement or the transactions contemplated hereby for which
it will have any liability, except (i) Seller has retained The Jones Group, Ltd.
(the "Group") as its sole broker and finder in connection with this Agreement
and the transaction contemplated hereby, and Seller has agreed to pay the entire
commission of the Group. Buyer shall have no liability or responsibility for the
commission payable to Group. Seller shall indemnify and hold Buyer harmless
against and in respect of any breach by it of the provisions of this Section
-------
11, and Buyer shall indemnify and hold Seller harmless against and in respect of
- --
any breach by it of the provisions of this Section 11.
----------
12. CASUALTY LOSSES. The risk of any loss or damage to the Assets resulting
---------------
from fire, theft or any other casualty (except reasonable wear and tear) shall
be borne by Seller at all times prior to the Adjustment Time. In the event that
any such loss or damage shall be sufficiently substantial so as to preclude and
prevent within thirty (30) days from the occurrence of the event resulting in
such loss or damage resumption of normal operations of any material portion of
the System or replacement or restoration of the lost or damaged Assets, Seller
shall immediately notify Buyer in writing of its inability to resume normal
operations or to replace or restore the lost or damaged Assets, and Buyer, at
any time within 10 days after receipt of such notice, may elect by written
notice to Seller to either (i) waive such defect and proceed toward consummation
of the transaction in accordance with terms of this Agreement, or (ii) terminate
this Agreement. If Buyer elects to terminate this Agreement, Buyer and Seller
shall stand fully released and discharged of any and all obligations hereunder.
If Buyer shall elect to consummate the transaction contemplated by this
Agreement notwithstanding such loss or damage and does so, all insurance
proceeds payable as a result of
-37-
the occurrence of the event resulting in such loss or damage shall be delivered
by Seller to Buyer, or the rights thereto shall be assigned by Seller to Buyer
if not yet paid over to Seller and the Purchase Price shall be reduced by the
amount of any deductible.
13. MISCELLANEOUS.
-------------
13.1. Further Assurances. From time to time after the Closing, Seller
------------------
shall, if reasonably requested by Buyer, make, execute and deliver to Buyer such
additional assignments, bills of sale, deeds and other instruments of transfer,
as may be necessary or proper to transfer to Buyer all of Seller's right, title,
and interest in and to the Assets.
13.2. Notices. All notices, requests, demands, and other communications
-------
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if (i) mailed, registered or certified
mail, return receipt requested, postage prepaid, (ii) delivered by hand, (iii)
sent by facsimile transmission, or (iv) delivered by courier, to the following
addresses, or at such other address as a party may designate by notice given in
accordance with this Section 13.2:
------------
(i) If to Seller:
Jones Cable Income Fund 1-B/C Venture
c/o Jones Intercable, Inc.
9697 East Mineral Avenue
P.O. Box 3309
Englewood, Colorado 80155-3309
Attention: President
Facsimile: (303) 799-4675
With a copy to:
Jones Intercable, Inc.
9697 East Mineral Avenue
P.O. Box 3309
Englewood, Colorado 80155-3309
Attention: General Counsel
Facsimile: (303) 799-1644
-38-
(ii) If to Buyer:
Mediacom California LLC
c/o Mediacom LLC
90 Crystal Run Road Suite 406-A
Middletown, N.Y. 10940
Attn: Rocco B. Commisso
Facsimile: (914) 695-2699
With copies to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue, 30th Floor
New York, New York 10022
Attn: Robert L. Winikoff, Esq.
Facsimile: (212) 755-2839
Notices delivered personally or by courier shall be effective upon delivery
to the intended recipient. Notices transmitted by facsimile transmission shall
be effective when confirmation of transmission is received. Notices delivered by
registered or certified mail shall be effective on the delivery date set forth
on the receipt of registered or certified mail, or three days after deposit in
the mail, whichever is earlier.
13.3. Assignment: Binding Effect. Neither party may assign this Agreement
--------------------------
or any interest herein without the prior written consent of the other party,
except that Buyer may assign this Agreement to any entity controlling,
controlled by or under common control with Buyer, in which case Buyer shall have
no further liability or obligation under this Agreement. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
13.4. Expenses. Each party shall bear its own expenses and the fees and
--------
expenses of its legal counsel, accountants, and other experts incurred in
connection with the preparation of this Agreement and the consummation of the
transactions contemplated by this Agreement.
13.5. Taxes. Any sales, use, transfer or documentary taxes imposed in
-----
connection with the sale and delivery of the Assets and rights acquired by Buyer
under this Agreement shall be paid by Buyer; provided, however, that Seller
agrees to reimburse Buyer for one-half of any such taxes paid.
13.6. Collection of Accounts. Except as otherwise provided herein, from
----------------------
and after the Closing Date, Buyer shall have the right and authority, at its
expense, to collect for its account all items to which it is entitled as
provided in this Agreement and to endorse with the name of Seller any checks or
drafts received on account of any such items.
-39-
13.7. Entire Agreement; Amendments; Waivers. This Agreement merges all
-------------------------------------
previous negotiations between the parties hereto (including, but not limited to,
the terms and provisions of any letter of intent) and constitutes the entire
agreement and understanding between the parties with respect to the subject
matter of this Agreement. No alteration, modification or change of this
Agreement shall be valid except by an agreement in writing executed by the
parties hereto. No failure or delay by any party in exercising any right, power
or privilege hereunder (and no course of dealing between or among any of the
parties) shall operate as a waiver of any such right, power, or privilege. No
waiver of any default on any one occasion shall constitute a waiver of any
subsequent or other default. No single or partial exercise of any such right,
power, or privilege shall preclude the further or full exercise thereof.
13.8. Counterparts. This Agreement may be executed in one or more
------------
counterparts with the same effect as if all of the signatures on such
counterparts appeared on one document. All executed counterparts shall together
constitute one and the same agreement.
13.9. Severability. If any provision of this Agreement or the application
------------
thereof to any Person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provision to
other Persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
13.10. Schedules and Exhibits: Headings. All references herein to
--------------------------------
Schedules and Exhibits are to the Schedules and Exhibits attached hereto, which
shall be incorporated in and constitute a part of this Agreement by such
reference. The headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning of this Agreement.
13.11. Governing Law. The validity, performance, and enforcement of this
-------------
Agreement and all Transaction Documents, unless expressly provided to the
contrary, shall be governed by the laws of the State of California, without
giving effect to the principles of conflicts of law of such State.
13.12. Third Parties: Joint Ventures. This Agreement constitutes an
-----------------------------
agreement solely among the parties hereto, and, except as otherwise provided
herein, is not intended to and will not confer any rights, remedies,
obligations, or liabilities, legal or equitable, including any right of
employment, on any Person (including but not limited to any employee or former
employee of Seller) other than the parties hereto and their respective
successors, or assigns, or otherwise constitute any Person a third party
beneficiary under or by reason of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to or shall constitute the parties hereto
partners or participants in a joint venture.
13.13. Construction. This Agreement has been negotiated by Buyer and
------------
Seller and their respective legal counsel, and legal or equitable principles
that might require the
-40-
construction of this Agreement or any provision of this Agreement against the
party drafting this Agreement shall not apply in any construction or
interpretation of this Agreement.
13.14. Attorneys' Fees. Notwithstanding any other provision of this
---------------
Agreement, the prevailing party in any Litigation between Seller and Buyer with
respect to this Agreement or the transactions contemplated hereby shall be
entitled to recover from the nonprevailing party its reasonable attorneys' fees
and costs of Litigation.
13.15 Commercially Reasonable Efforts. For the purposes of this Agreement,
-------------------------------
"commercially reasonable efforts" will not be deemed to require a party to
undertake extraordinary measures, including the initiation or prosecution of
legal proceedings or the payment of amounts in excess of normal and usual filing
fees and processing fees, if any.
[Execution Page Follows]
-41-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
SELLER:
JONES CABLE INCOME
FUND 1-B/C VENTURE
a Colorado general partnership
By: Jones Cable Income Fund 1-B, Ltd.,
a General Partner
By: Jones Cable Income Fund 1-C, Ltd.,
a General Partner
By: Jones Intercable, Inc.,
their General Partner
By: /s/ Elizabeth M. Steele
-------------------------------
Name: Elizabeth M. Steele
-----------------------------
Title: Vice President
----------------------------
BUYER:
MEDIACOM CALIFORNIA LLC, a Delaware
limited liability company
By: Mediacom LLC, a New York limited liability
company, a Member
By: /s/ Rocco B. Commisso
-------------------------------
Name: Rocco B. Commisso
-----------------------------
Title: Manager
----------------------------
-42-
EXHIBIT 2.7
ASSET PURCHASE AGREEMENT
AS OF AUGUST 29, 1997
BY AND AMONG
U.S. CABLE TELEVISION GROUP, L.P.,
ECC HOLDING CORPORATION
MISSOURI CABLE PARTNERS, L.P.
CABLEVISION SYSTEMS CORPORATION
AND
MEDIACOM LLC
TABLE OF CONTENTS
Page
1. Definitions.................................................... 1
1.01 Certain Definitions...................................... 1
1.02 Other Definitional Provisions............................ 15
2. Purchase and Sale 15
2.01 Transfer of Assets....................................... 15
2.02 Purchase Price........................................... 15
2.03 Estimated Working Capital Statements..................... 16
2.04 Post Closing Adjustments................................. 16
2.05 Earnest Money Deposit.................................... 22
2.06 Sales and Transfer Taxes................................. 22
2.07 Indemnity Escrow......................................... 22
2.08 Determination and Allocation of Purchase
Price.................................................... 23
3. Representations and Warranties of Sellers...................... 23
3.01 Organization and Authority of Sellers.................... 23
3.02 Legal Capacity; Approvals and Consents................... 24
3.03 Financial Statements..................................... 25
3.04 Changes in Operation..................................... 26
3.05 Tax Returns.............................................. 26
3.06 Acquired Assets.......................................... 27
3.07 The CATV Business........................................ 29
3.08 Labor Contracts and Actions.............................. 32
3.09 Employee Benefit Plans................................... 32
3.10 Contracts and CATV Instruments........................... 34
3.11 Legal and Governmental Proceedings and
Judgments................................................ 35
3.12 Finders and Brokers...................................... 35
3.13 Miscellaneous Assets..................................... 35
3.14 Characteristics of the CATV Systems...................... 36
3.15 Insurance................................................ 37
3.16 Accounts Receivable...................................... 37
3.17 Overbuilds............................................... 37
3.18 Intangible Property...................................... 37
3.19 Retransmission Agreements................................ 37
3.20 Representation of Cablevision............................ 38
3.21 Tangible Capital Expenditures............................ 38
-i-
Page
----
4. Representations and Warranties of Buyer........................ 38
4.01 Organization and Authority of Buyer...................... 38
4.02 Legal Capacity; Approvals and Consents.................. 38
4.03 Legal and Governmental Proceedings and
Judgments................................................ 39
4.04 Finders and Brokers...................................... 39
4.05 Buyer Consents........................................... 39
4.06 Acquisition of Rights.................................... 39
4.07 Financing Commitment Letter.............................. 40
5. Covenants...................................................... 40
5.01 Business of Seller....................................... 40
5.02 Access to Information.................................... 42
5.03 Notification of Certain Matters.......................... 43
5.04 Forms 394................................................ 43
5.05 Monthly Financial Statements............................. 43
5.06 Covenant Not to Compete.................................. 44
5.07 No Solicitation.......................................... 45
5.08 Status of Financing Commitment Letter.................... 45
6. Deliveries at Closing.......................................... 46
6.01 Deliveries by Sellers.................................... 46
6.02 Deliveries by Buyer...................................... 47
7. Conditions to the Obligations of Buyer......................... 48
7.01 Receipt of Consents...................................... 48
7.02 Sellers' Authority....................................... 48
7.03 Performance by Sellers................................... 48
7.04 Absence of Breach of Warranties and
Representations.......................................... 48
7.05 Absence of Proceedings................................... 49
7.06 Financing Withdrawal..................................... 49
7.07 Limitation on Retained Basic Subscribers................. 50
8. Conditions to the Obligations of Sellers....................... 50
8.01 Receipt of Consents...................................... 50
8.02 Buyer's Authority........................................ 50
8.03 Performance by Buyer..................................... 51
-ii-
Page
----
8.04 Absence of Breach of Representations and
Warranties............................................... 51
8.05 Absence of Proceedings................................... 51
9. Covenants...................................................... 51
9.01 Compliance with Conditions............................... 51
9.02 Compliance with HSR Act and Rules........................ 51
9.03 Applications for Consent to Transfer the
Acquired Assets.......................................... 53
9.04 Records, Taxes and Related Matters....................... 54
9.05 Non-Assignment........................................... 55
9.06 Retained Franchises...................................... 55
9.07 Use of Names and Logos................................... 56
9.08 Audited Financial Statements............................. 56
10. Survival of Representations, Warranties, Covenants
and Other Agreements; Indemnification.......................... 56
10.01 Survival of Representations, Warranties,
Covenants and Other Agreements........................... 56
10.02 Indemnification by Sellers............................... 56
10.03 Indemnification by Buyer................................. 58
10.04 Third Party Claims....................................... 58
10.05 Environmental Matters.................................... 59
10.06 Sole Remedy Upon Closing................................. 60
11. Further Assurances............................................. 60
12. Closing 60
12.01 Closing.................................................. 60
12.02 Termination.............................................. 61
12.03 Remedies Upon Default.................................... 62
12.04 Return of Earnest Money Escrow........................... 64
13. Miscellaneous.................................................. 64
13.01 Amendments; Waivers..................................... 64
13.02 Entire Agreement........................................ 65
13.03 Binding Effect; Assignment.............................. 65
13.04 Construction; Counterparts.............................. 65
13.05 Notices................................................. 65
13.06 Expenses of the Parties................................. 67
13.07 Non-Recourse............................................ 67
-iii-
Page
----
13.08 Third Party Beneficiary................................. 67
13.09 Governing Law........................................... 67
13.10 Press Releases.......................................... 67
13.11 Severability............................................ 67
-iv-
CONTENTS OF OMITTED EXHIBITS AND SCHEDULES
- ------------------------------------------
EXHIBIT A - Intentionally Omitted
EXHIBIT B - Form of Bill of Sale, General Assignment and
Instrument of Assumption of Liabilities
EXHIBIT C - Form of Earnest Money Escrow Agreement
EXHIBIT D - Form of Opinion of Sellers' Counsel
EXHIBIT E - Form of Opinion of Buyer's Counsel
EXHIBIT F - Form of Retained Systems Escrow Agreement
EXHIBIT G - Form of Management Agreement
EXHIBIT H - Form of Indemnity Escrow Agreement
EXHIBIT I - Form of Opinion of Sellers' FCC Counsel
EXHIBIT J - Form of Earnest Money Letter of Credit
EXHIBIT K - Form of Retained Franchise Letter of Credit
-v-
Schedule 1.01(a) - CATV Licenses
Schedule 1.01(b) - Current Assets
Schedule 1.01(c) - Current Liabilities
Schedule 1.01(d) - Excluded Assets
Schedule 1.01(e) - Excluded Liabilities
Schedule 1.01(f) - Permitted Encumbrances
Schedule 3.02 - Sellers' Consents and Approvals
Schedule 3.05 - Tax Notices and Assessments
Schedule 3.06(b) - Real Property
Schedule 3.06(d) - Environmental Matters
Schedule 3.07(b) - Notice of Claims or Purported
Defaults in CATV Instruments
Schedule 3.07(c) - Non-Compliance with Communications
Act or FCC Regulations
Schedule 3.08(a) - Labor Contracts and Actions
Schedule 3.09 - Employee Benefit Plans
Schedule 3.10(a) - Contracts in Default
Schedule 3.11 - Legal Proceedings
Schedule 3.13 - Miscellaneous Assets
Schedule 3.14(a) - CATV Systems: Channel Capacity
Schedule 3.14(b) - CATV Systems: Physical
Characteristics
Schedule 3.15 - Insurance
Schedule 3.17 - Overbuilds
Schedule 3.18 - Intangibles
-vi-
Schedule 4.05 - Buyer's Consents and Approvals
Registrants agree to furnish supplementally a copy of such Exhibits and
Schedules to the Commission upon request.
-vii-
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement (the "Agreement") is made and entered into as
---------
of August 29, 1997, by and among U.S. Cable Television Group, L.P. ("U.S.
Cable"), a Delaware limited partnership, ECC Holding Corporation, a Delaware
corporation ("EEC"), Missouri Cable Partners, L.P., a Delaware limited
partnership ("Missouri L.P.", and together with U.S. Cable and ECC, the
"Sellers"), Cablevision Systems Corporation, a Delaware corporation
-------
("Cablevision"), and Mediacom LLC, a New York limited liability company
("Buyer");
-----
R E C I T A L S
---------------
Sellers own and operate cable television systems serving the communities
described in Schedule 1.01(a).
Sellers desire to sell to Buyer, and Buyer desires to purchase from
Sellers, the CATV Business and the assets used or held for the operation thereof
in accordance with the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows, each intending to be legally
bound as and to the extent herein provided.
1. DEFINITIONS.
-----------
1.01 Certain Definitions. For the purposes of this Agreement, the
-------------------
following terms shall have the meanings set forth below:
Accounts Receivable: All active subscriber and advertising accounts
-------------------
receivable relating to the CATV Business.
Acquired Assets: All of the properties, assets, privileges, rights,
---------------
interests, claims and goodwill, real and personal, tangible and intangible, of
every type and description, including Sellers' leasehold interests or rights to
possession, whether owned or leased or otherwise possessed, used or held for use
by Sellers in connection with the CATV Business, now in existence or hereafter
acquired by Sellers in compliance with the terms of this Agreement prior to the
Closing, including, without limitation, the Accounts Receiv able, the CATV
Instruments, the Equipment, the Real Property,
the Contracts, the Inventory and the Intangible Property; provided that Acquired
Assets shall exclude the Excluded Assets and any assets disposed of prior to the
Closing in the usual and ordinary course of business and not in violation of
this Agreement.
Agreement: This Agreement and the Schedules and Exhibits attached hereto.
---------
Alabama Regional CATV System: All of Sellers' CATV Systems described in
----------------------------
Schedule 1.01(a) under the caption "Alabama Regional CATV System".
Allocation Firm: As defined in Section 2.08.
---------------
Asserted Claim: As defined in Section 10.04.
--------------
Assumed Liabilities: All liabilities, obligations and commitments of
-------------------
Sellers (a) under the CATV Instruments, the CATV Licenses, the Equipment, the
Real Property, the Contracts, the Inventory, the Intangible Property and any
other Acquired Assets attributable to periods on and after the Closing Date, (b)
arising out of Buyer's ownership of the Acquired Assets attributable to periods
on and after the Closing Date and (c) to the extent (and only to the extent)
constituting Current Liabilities that are included in the Final Working Capital
Statement.
Balance Sheets: As defined in Section 3.03.
--------------
Basic Subscriber: As at any date of determination thereof, the sum of (a)
----------------
the total number of households (exclu sive of accounts which are provided free
service as a courtesy and "second outlets", as such term is commonly understood
in the cable television industry, and exclusive of customers billed on a bulk-
billing or commercial-account basis and exclusive of senior citizen subscribers
that do not pay the regular monthly rate in respect of the service provided)
subscribing on such date to at least the most basic tier of service offered by
the relevant CATV System and paying undiscounted regular monthly service fees
and charges imposed in respect of such service, and, if also subscribing to the
expanded basic tier, also paying undiscounted regular monthly service fees and
charges imposed in respect of such service, each of which has paid in full
without discount at least one monthly bill generated in the ordinary course of
business, none of which is pending disconnection for any reason, none of
-2-
which is, as of the date of determination, delinquent in payment for services
for more than sixty days (measured from the first day of the month in which the
service with respect to which an unpaid billing statement relates was provided);
and (b) the total number of Equivalent Subscribers on such date; provided, there
shall be excluded from the definition of Basic Subscriber any subscriber who
comes within the definition of Basic Subscriber because (i) its account has been
compromised or written off within the twelve month period preceding the date of
determination, other than in the ordinary course of business consistent with
past practices for reasons such as service interruption or waiver of late
charges but not for the purpose of making it qualify as a Basic Subscriber or
(ii) it was obtained through offers made, promotions conducted or discounts
given which were designed to temporarily increase the number of Basic
Subscribers.
Basic Subscriber Estimate: As defined in Section 2.03.
-------------------------
Basic Subscriber Statement: As defined in Section 2.04(b).
--------------------------
Benefit Plans: As defined in Section 3.09(a).
-------------
Buyer: As defined in the Preamble to this Agreement.
-----
Buyer Indemnified Party: As defined in Section 10.03(a).
-----------------------
Buyer's Basket: As defined in Section 10.02(c).
--------------
Buyer's Counsel: Cooperman Levitt Winikoff Lester & Newman, P.C.
---------------
Buyer's Objection: As defined in Section 2.04(b).
-----------------
Buyer's Working Capital Objection: As defined in Section 2.04(a).
---------------------------------
Cablevision: As defined in the Preamble to this Agreement.
-----------
CATV: Cable television.
----
CATV Business: The CATV business to be transferred to Buyer, currently
-------------
owned and operated by Sellers, which consists of the transmission, distribution
and local origination of
-3-
audio and video signals over the CATV Systems used by the respective CATV
business located in the System Area.
CATV Business Material Adverse Effect: Means a material adverse effect on
-------------------------------------
the assets, financial condition or results of operations of all of the CATV
Business taken as a whole other than any such effect resulting from changes in
general economic or political conditions or legal, governmental, regulatory or
competitive factors affecting CATV systems operators generally.
CATV Instruments: All franchises, ordinances or licenses granted to the
----------------
Sellers by any Governmental Authority; permits for wire crossings over or under
highways, railroads, and other property; construction permits and certificates
of occupancy; business radio, Earth Station and other FCC licenses; pole
attachment and other Contracts with utilities; federal, state, county and
municipal permits, orders, variances, exemptions, approvals, consents, licenses
and other authorizations; lease access agreements; and all other approvals,
consents and authorizations used or held for use in the CATV Business.
CATV Licenses: The franchises and licenses issued by any Governmental
-------------
Authority and the licenses issued by the FCC used in the CATV Business as
presently conducted by Sellers, all of which are listed in Schedule 1.01(a).
CATV System: A complete CATV reception and distribution system consisting
-----------
of one or more head-ends, one or more microwave receive sites, trunk cable,
subscriber drops and associated electronic equipment, which is, or is capable of
being, operated as an independent system without inter-connections to other
systems.
Closing: A meeting for the purpose of concluding the transactions
-------
contemplated by this Agreement held at the place and on the date fixed in
accordance with Section 12.01.
Closing Date; Date of Closing: The date fixed for the Closing in accordance
-----------------------------
with Section 12.01.
Code: The Internal Revenue Code of 1986, as amended.
----
Communications Act: As defined in Section 3.07(c).
------------------
-4-
Consents: Any registration or filing with, consent or approval of, notice
--------
to, or action by any Person or Governmental Authority required to permit the
transfer of the Acquired Assets to Buyer, the assumption by Buyer of the Assumed
Liabilities, or the performance by any Seller or Buyer of any of their
respective other obligations under this Agreement.
Contract: Any contract (other than a programming contract), mortgage, deed
--------
of trust, bond, indenture, lease, license, note, certificate, option, warrant,
retransmission agreement, must-carry election and lease access agreement (but
only to the extent such agreement or election is assignable in accordance with
its terms), right, or other instrument, document or written agreement relating
to the CATV Business to which the Sellers are parties or by which the Sellers or
the assets of the Sellers included within the CATV Business are bound, excluding
any CATV Instrument.
Copyright Act: As defined in Section 3.07(d).
-------------
Covenantors: As defined in Section 5.06.
-----------
CPA Firm: As defined in Section 2.04(a).
--------
Current Assets: Means one hundred percent (100%) of Accounts Receivable
--------------
that are sixty (60) days or less past due and zero percent (0%) of Accounts
Receivable more than sixty (60) days past due (measured in each case from the
first day of the month in which the service with respect to an unpaid billing
statement relates was provided), plus all deposits with utilities, under leases
or related to guides, billing service (to the extent the contract pursuant to
which such service is provided is assigned to Buyer), postage, the pro rata
portion of any prepaid taxes in respect of the Acquired Assets, all prepaid
expenses, including in respect of pole rental or equipment maintenance
agreements that are Acquired Assets, and in respect of rent, postage,
promotional expenditures, guides, security service or two-way radio, and other
current assets (exclusive of Inventory), in each case relating to the CATV
Business and each as determined in accordance with GAAP (unless otherwise
specified herein) and consistent with Schedule 1.01(b) hereto but excluding any
such assets that are also Excluded Assets, which Schedule sets forth the type
and amounts of Current Assets as of May 31, 1997.
-5-
Current Liabilities: Means accounts payable and accrued expenses relating
-------------------
to the CATV Business and determined in accordance with GAAP, and consistent with
Schedule 1.01(c) hereto, which Schedule sets forth the type and amounts of
Current Liabilities as of May 31, 1997; provided, however, that there shall be
-------- -------
excluded from Current Liabilities any payable or expense that relates to a
contract commitment or arrangement, or other asset of Sellers which is not being
transferred to Buyer hereunder.
DOJ: The United States Department of Justice.
---
Earnest Money Escrow: As defined in Section 2.05.
--------------------
Earnest Money Escrow Agent: As defined in Section 2.05.
--------------------------
Earnest Money Escrow Agreement: As defined in Sec tion 2.05.
------------------------------
Earth Station: A satellite earth receiving station consisting of one or
-------------
more "dish" antennas, usually operated in conjunction with a building which
houses electronic signal processing and amplification equipment, all of which is
also referred to as a "head end".
ECC: As defined in the Preamble to this Agreement.
---
Employees: Means all employees of Sellers employed in the operation of the
---------
CATV Business.
Encumbrances: Means any security agreement, conditional sale or other title
------------
retention agreement, any lease, consignment or bailment given for purposes of
security, any lien, mortgage, pledge, encumbrance, adverse interest,
constructive trust or other trust, attachment, exception to or defect in title
or other ownership interest (including, but not limited to, reservations, rights
of entry, possibilities of reverter, encroachments, easements, rights-of-way,
rights of first refusal, restrictive covenants, leases, and licenses) of any
kind that otherwise constitutes an interest in or claim against property,
whether arising pursuant to any Law, under any Contract or otherwise.
Environmental Law: Means any Law governing the protection of the
-----------------
environment, (including air, water, soil and natural resources) or the use,
storage, handling, release or disposal of any hazardous or toxic substance.
-6-
Environmental Reports: As defined in Section 10.05.
---------------------
Equipment: All tangible personalty; electronic devices; towers; trunk and
---------
distribution cable; decoders and spare decoders for scrambled satellite signals;
amplifiers; power supplies; conduit; vaults and pedestals; grounding and pole
hardware; installed subscriber's devices (including, without limitation, drop
lines, converters, encoders, transformers behind television sets, remote
controls and fittings); "head-ends" and "Hubs" (origination, transmission and
distribution system) hardware; tools; spare parts; maps and engineering data;
vehicles; supplies, tests and closed circuit devices; furniture and furnishings;
billing equipment, telephonic equipment and other equipment owned by Sellers and
used primarily in the CATV Business whether or not located at the CATV Systems;
and all other tangible personal property and facilities owned by Sellers and
used in the CATV Business.
Equivalent Subscriber: At any date of determination thereof, the number of
---------------------
Equivalent Subscribers shall be equal to the aggregate number of Equivalent
Subscribers in the Regional CATV Systems. The number of Equivalent Subscribers
in each Regional CATV System shall be equal to the quotient of (a) the aggregate
billings by such Regional CATV System for basic and expanded basic service
provided by that Regional CATV System based on billing reports prepared in the
ordinary course of business, during the last full month ending on or prior to
such date, to residential multiple dwelling units, commercial accounts, other
subscribers that are billed for such service on a bulk basis and single family
households (including senior citizen subscribers that do not pay the regular
monthly rate in respect of the service provided) which pay less than that
Regional CATV System's regular monthly rate for basic and expanded basic service
and are not included in Clause (a) of the definition of "Basic Subscriber"
above, divided by (b) that Regional CATV System's regular monthly subscriber
rate for basic and expanded basic service, which for purposes of this definition
shall be the weighted average rate of those charges within that Regional CATV
System in effect for such month. For purposes of the foregoing, there shall be
excluded (A) all billings from premium services, installation or other non-
recurring charges, converter rental or from any outlet or connection other than
the first or from any pass-through charge for sales taxes, line-itemized
franchise fees, fees charged by the FCC and the like, and (B) all billings to a
commercial or bulk account or discounted family household (i) which has not paid
in full at least one
-7-
monthly bill generated in the ordinary course of business, (ii) which is
delinquent in payment for services for more than sixty (60) days measured from
the first day of the month in which the service with respect to which an unpaid
billing statement relates was provided (exclusive of account balances of $8.00
or less attributed to late fees) based on billing reports prepared in the
ordinary course of business, (iii) which is pending disconnection for any reason
or (iv) which was obtained through offers made, promotions conducted or
discounts given which, in each case, were designed to temporarily increase the
number of Basic Subscribers.
ERISA: The Employee Retirement Income Security Act of 1974, as the same
-----
has been and may be amended from time to time.
ERISA Affiliate: As defined in Section 3.09(c).
---------------
Estimated Working Capital Amount: Means (i) if Current Liabilities exceed
--------------------------------
Current Assets as reflected on the Estimated Working Capital Statements, such
excess, expressed as a negative number, or (ii) if Current Assets exceed Current
Liabilities as reflected on the Estimated Working Capital Statements, such
excess, expressed as a positive number.
Estimated Working Capital Statements: As defined in Sec tion 2.03.
------------------------------------
Excluded Assets: Means (i) the partnership and corporate and financial
---------------
books, records and documents of Sellers (including tax records), (ii) all cash
and cash equivalents, (iii) all notes, accounts and other claims receivable
among the Sellers, (iv) all current assets (other than Inventory) of Sellers
(determined in accordance with GAAP) as of the Closing Date that are not
included in Current Assets, (v) all agreements of Sellers other than those
relating to the CATV Business and including any agreements in respect of
borrowings of the Sellers, (vii) all claims (other than such as are included in
Current Assets) with respect to tax abatements and refunds relating to periods
prior to the Closing Date, (viii) programming agreements (other than assignable
retransmission consents, must carry elections and lease access agreements
applicable to the CATV Business),(ix) Benefit Plans and interests in multi-
employer plans, (x) insurance policies, (xi) bonds, (xii) the name
"Cablevision", "Cablevision Systems" or "U.S. Cable" and all logos, trademarks
and
-8-
intellectual property associated with such names, (xiii) the capital stock of
ECC and the partnership interests in Missouri, L.P., and (xiv) the assets and
properties of Sellers listed on Schedule 1.01(d).
Excluded Liabilities: Means all liabilities, obligations and commitments
--------------------
of the Sellers, other than the Assumed Liabilities, including, but not limited
to, all liabilities, obligations and commitments arising out of or relating to
Sellers' ownership of the Acquired Assets and operations of the CATV Business
attributable to periods prior to the Closing Date, any taxes not in respect of
the Acquired Assets, indebtedness for money borrowed, obligations to Seller's
partners, officers, directors and advisors, obligations relating to Excluded
Assets, and the liabilities, obligations and commitments of Sellers identified
on Schedule 1.01(e) in each case other than any Current Liabilities taken into
account in determining the Final Working Capital Amount.
FCC: The Federal Communications Commission.
---
Final Basic Subscriber Statement: As defined in Sec tion 2.04(b).
--------------------------------
Final Tangible Capital Expenditures Statement: As defined in Section
---------------------------------------------
2.04(b).
Final Working Capital Amount: Means (i) if Current Liabilities exceed
----------------------------
Current Assets as reflected on the Final Working Capital Statements, such
excess, expressed as a negative number, or (ii) if Current Assets exceed Current
Liabilities as reflected on the Final Working Capital Statements, such excess,
expressed as a positive number.
Final Working Capital Statement: As defined in Sec tion 2.04(a).
-------------------------------
Financial Statements: As defined in Section 3.03.
--------------------
Financing Commitment Letter: As defined in Section 4.07.
---------------------------
Florida Regional CATV System: All of Sellers' CATV Systems described in
----------------------------
Schedule 1.01(a) under the caption "Florida Regional CATV System".
FTC: The Federal Trade Commission.
---
-9-
GAAP: Means U.S. generally accepted accounting principles consistently
----
applied.
Governmental Authority: Means the Federal Government, any state, county,
----------------------
municipal, local or foreign government and any governmental agency, bureau,
court, tribunal, department, board, commission, authority or body or any
arbitrators or panel of arbitrators having jurisdiction with respect to a
particular matter.
Hazardous Substance: Means any substance listed, defined, designated or
-------------------
classified as hazardous, toxic or radioactive under any applicable Environmental
Law, including petroleum and petroleum related products.
HSR Act and Rules: The Hart-Scott-Rodino Antitrust Improvements Act of
-----------------
1976 and the rules and regulations promulgated thereunder, as from time to time
in effect prior to the Closing.
HSR Report: The Notification and Report Form for certain mergers and
----------
acquisitions mandated by the HSR Act and Rules.
Income Statements: As defined in Section 3.03.
-----------------
Indemnitee: As defined in Section 10.04.
----------
Indemnitor: As defined in Section 10.04.
----------
Indemnity Escrow: As defined in Section 2.07.
----------------
Indemnity Escrow Agent: As defined in Section 2.07.
----------------------
Intangible Property: The copyrights, patents, trade marks, service marks
-------------------
and trade names used in the CATV Business and all applications for, or licenses,
permits or other rights to use any thereof, and the value associated therewith,
which are owned, used or held for use by Sellers and used in the CATV Business.
Interim Financial Statements: As defined in Sec tion 3.03.
----------------------------
Inventory: Means all inventory as defined under GAAP, plus, without
---------
limitation, all supplies, all maintenance equipment, all uninstalled converters
and other uninstalled subscriber devices, all cables and all amplifiers owned by
-10-
Sellers on the Closing Date as determined by the Sellers' inventory control
systems and used in the CATV Business.
Judgment: Any judgment, writ, order, injunction, award or decree of or by
--------
any court, or judge, justice or magistrate, including any bankruptcy court or
judge, and any order of or by any Governmental Authority.
Kentucky Regional CATV System: All of Sellers' CATV Systems described in
-----------------------------
Schedule 1.01(a) under the caption "Kentucky Regional CATV System."
Law: The common law and any statute, ordinance, code or other law, rule,
---
regulation, order, technical or other standard, requirement or procedure
enacted, adopted, promulgated, applied or followed by any Governmental Authority
or court, including, without limitation, Judgments and the CATV Licenses.
LMDS: As defined in Section 5.06(a).
----
Losses: As defined in Section 10.02(a).
------
Management Agreement: As defined in Section 9.06(a).
--------------------
Material CATV Instruments: Means all franchises, FCC Licenses and pole
-------------------------
attachment agreements that are used in the CATV Business as presently conducted
and any other CATV Instruments that are used in the CATV Business as presently
conducted, the loss of which would materially and adversely affect or interfere
with the operation of a Regional CATV System as presently conducted.
Material Contracts: Means the leases in respect of Real Property that have
------------------
been marked with an asterisk on Schedule 3.02 (or any replacements thereof) and
any other Contracts requiring in any calendar year payments or receipts
exceeding $100,000 individually and that cannot be terminated on thirty (30)
days' notice without liability.
Missouri L.P.: As defined in the Preamble to this Agreement.
-------------
Missouri Regional CATV System: All of Sellers' CATV Systems described in
-----------------------------
Schedule 1.01(a) under the caption "Missouri Regional CATV System."
-11-
MMDS: As defined in Section 5.06(a).
----
North Carolina Regional CATV System: All of Sellers' CATV Systems
-----------------------------------
described in Schedule 1.01(a) under the caption "North Carolina Regional CATV
System."
Organizational Documents: As defined in Section 3.02(b).
------------------------
Outside Date: As defined in Section 12.01.
------------
Overdue Receivables: The Accounts Receivable for which Buyer is paying
-------------------
Sellers zero percent (0%) of face value under Section 2.02 and the definition of
Current Assets.
Permitted Encumbrances: Means those Encumbrances set forth in Schedule
----------------------
1.01(f) hereto and all other Encumbrances, if any, which do not materially
detract from the value of the tangible property subject thereto and which do not
materially interfere with the present and continued use of such property in the
operation of the CATV Business.
Person: Any natural person, Governmental Authority, corporation, general
------
or limited partner, partnership, joint venture, trust, association, limited
liability company or unincorporated entity of any kind.
Preliminary Working Capital Statements: As defined in Section 2.04(a).
--------------------------------------
Purchase Price: As defined in Section 2.02.
--------------
Rate Refund Adjustment: Means a final nonappealable order issued by a
----------------------
Governmental Authority (i) in which a regulated rate charged and collected by a
Seller in any of the CATV Systems is found to have been higher than the amount
permitted by Law and (ii) requiring the payment of refunds (in cash or by
credit) to subscribers to a CATV System transferred to Buyer at Closing in
respect of payments by those subscribers prior to the Closing Date and which
have not been so refunded prior to the Closing Date together with any interest
in respect of such refund but only if interest has been ordered paid by such
Governmental Authority.
Real Property: All realty, fixtures, easements, rights-of-way, leasehold
-------------
and other interests in real property, buildings and improvements owned, used or
held for use in the CATV Business.
-12-
Regional CATV Systems: The Alabama Regional CATV System, the Florida
---------------------
Regional CATV System, the Kentucky Regional CATV System, the Missouri Regional
CATV System, and the North Carolina Regional CATV System (each, a "Regional CATV
System").
Regional Material Adverse Effect: Means a material adverse effect on the
--------------------------------
assets, financial condition or results of operations of a Regional CATV System
taken as a whole other than any such effect resulting from changes in general
economic or political conditions or legal, governmental, regulatory or
competitive factors affecting CATV systems operators generally.
Relevant States: The states of Alabama, Florida, Illinois, North Carolina,
---------------
Mississippi, Missouri, Kansas, Kentucky, Oklahoma and Tennessee which are those
states in which the CATV Business is presently conducted.
Replacement Commitment Letter(s): A letter between Buyer and (i) any bank
--------------------------------
operating under the laws of the United States of America or any state thereof
which has combined capital and surplus of at least $150,000,000, (ii) any "bulge
bracket" investment bank, or (iii) any nationally recognized investment bank
that regularly provides financing in connection with transactions of the size
contemplated by this Agreement, or any combination thereof, that provides, on
terms not different in substance from the Financing Commitment Letter, that such
bank or investment bank will finance or underwrite the purchase of the Acquired
Assets by Buyer.
Required Consents: The Consents designated as such on Schedules 3.02 and
-----------------
4.05 by an asterisk.
Retained Basic Subscriber: As defined in Section 7.07.
-------------------------
Retained Franchises: As defined in Section 9.06.
-------------------
Retained Franchise Price: An amount equal to $1,189.00 times the number of
------------------------
Retained Basic Subscribers.
Retained Systems Escrow Agreement: As defined in Section 2.02.
---------------------------------
Section 626 Request: Means a request for renewal under Section 626 of the
-------------------
Communications Act.
-13-
Seller Indemnified Party: As defined in Section 10.02(a).
------------------------
Sellers: As defined in the Preamble to this Agreement.
-------
Seller's Basket: As defined in Section 10.03(c).
---------------
Sellers' Counsel: Sullivan & Cromwell and such other counsel in one or
----------------
more jurisdictions as Sellers may determine. For purposes of Section 6.01(d),
Sellers' Counsel may also include in-house counsel to Sellers and/or
Cablevision.
Sellers' FCC Counsel: Piper & Marbury L.L.P.
--------------------
Side: As defined in Section 9.02(c).
----
SMATV: As defined in Section 5.06(a).
-----
Subscriber Adjustment: An amount equal to $1,189.00 times the difference
---------------------
between 265,000 and the number of Basic Subscribers of the CATV Business
actually delivered on the Closing Date, if less than 265,000, such adjustment to
be allocated by the Sellers to the appropriate Seller.
System Areas: The geographical areas covered by the cable television
------------
franchises in Schedule 1.01(a).
Tangible Capital Expenditures: Expenditures made by Sellers with respect
-----------------------------
to the CATV Systems included in the CATV Business, generally in accordance with
the 1997 budget relating thereto delivered by Sellers to Buyer, to acquire or
construct fixed assets, plant and equipment (including renewals, improvements
and replacements, but excluding repairs) computed in accordance with GAAP less
----
capitalized labor which has been reflected in income statements in accordance
with GAAP.
Tangible Capital Expenditures Adjustment: An amount equal to the
----------------------------------------
difference between $11,770,000 and the Tangible Capital Expenditures made by
Sellers between January 1, 1997 and December 31, 1997 (or the Closing Date, if
earlier) but only if such Tangible Capital Expenditures are less than
$11,770,000.
Tangible Capital Expenditures Estimate: As defined in Section 2.03.
--------------------------------------
-14-
Tangible Capital Expenditures Statement: As defined in Section 2.04(b).
---------------------------------------
Tax Returns: As defined in Section 3.05.
-----------
U.S. Cable: As defined in the Preamble to this Agreement.
----------
1.02 Other Definitional Provisions. Terms defined in the singular shall
-----------------------------
have a comparable meaning when used in plural, and vice versa.
2. PURCHASE AND SALE.
-----------------
2.01 Transfer of Assets. At the Closing, upon the terms and conditions
------------------
set forth in this Agreement, Sellers shall sell, convey, transfer, assign and
deliver to Buyer, and Buyer shall purchase, accept and receive, all of Sellers'
right, title and interest in and to the Acquired Assets, such transaction to be
effective as of 12:01 a.m. on the Closing Date.
2.02 Purchase Price. In consideration for the transfer of the Acquired
--------------
Assets pursuant to Section 2.01, and the other covenants, agreements,
representations and warranties con tained herein, Buyer shall at Closing (i)
pay to Sellers a purchase price of three hundred and fifteen million Dollars
($315,000,000) (A) plus, if a positive number, or minus, if a negative number,
--------
the Estimated Working Capital Amount to or from Sellers as provided in Section
2.03, less (B) the Subscriber Adjustment, if any, and less (C) the Tangible
---- ----
Capital Expenditures Adjustment, if any, (such price, together with (A), (B) and
(C), the "Purchase Price") less the Indemnity Escrow, which shall be deposited
----
by Buyer with the Indemnity Escrow Agent at Closing, by, subject to the
following sentence, federal funds wire transfer of immediately available funds
to such account at a United States bank as shall be designated by Sellers, and
(ii) assume and agree to pay, discharge and perform the Assumed Liabilities as
and when due in accordance with the Bill of Sale, General Assignment and
Instrument of Assumption of Liabilities attached as Exhibit B hereto. In the
event that at Closing there are any Retained Basic Subscribers, Buyer shall at
Closing deposit into escrow an irrevocable letter of credit, in substantially
the form attached as Exhibit J hereto, in an amount equal to the Retained
Franchise Price and shall reduce the amount of any wire transfer required to pay
the Purchase Price by the
-15-
Retained Franchise Price. A form of escrow agreement (the "Retained Systems
Escrow Agreement") with respect to the Retained Franchise Price is attached as
Exhibit F hereto. Payment of the net amount provided for in this Section 2.02
shall be made to U.S. Cable, to ECC and to Missouri, L.P., subject to the
foregoing adjustments, as U.S. Cable may determine prior to Closing.
2.03 Estimated Working Capital Statements. At least fifteen (15)
------------------------------------
business days prior to the Closing Date, Sellers shall deliver to Buyer (i) a
working capital statement of Sellers' CATV Business as of the Closing Date,
which statement shall be prepared in a manner consistent with the preparation of
the Financial Statements, except as otherwise provided in this Agreement, and
shall set forth the Sellers' good faith estimate of the Current Assets and
Current Liabilities of the Sellers' CATV Business as of the Closing Date (the
"Estimated Working Capital Statements"), (ii) an estimate of the number of Basic
- -------------------------------------
Subscribers to be transferred on the Closing Date (the "Basic Subscriber
----------------
Estimate") and an estimate of the Subscriber Adjustment, if any, to be made at
- --------
Closing and (iii) an estimate of Tangible Capital Expenditures made by the
Sellers during the period January 1, 1997 through December 31, 1997 (or the
Closing Date, if earlier) (the "Tangible Capital Expenditures Estimate") and an
--------------------------------------
estimate of the Tangible Capital Expenditure Adjustment, if any, to be made at
Closing. Prior to Closing, the Sellers shall provide Buyer or Buyer's
representatives with copies of all books and records as Buyer may reasonably
request for purposes of verifying the Estimated Working Capital Statements, the
Basic Subscriber Estimate and the Tangible Capital Expenditures Estimate and
shall meet at Buyer's reasonable request on reasonable notice with Buyer's
accountants and other representatives; provided, however, that if Sellers
-------- -------
determine in good faith that providing copies of any books and records requested
by Buyer pursuant to this Section 2.03 would be unduly burdensome to Sellers,
then Sellers shall make available, on reasonable notice, any such books and
records that it has not copied for Buyer, at the offices of the Sellers at One
Media Crossways, Woodbury, New York.
2.04 Post Closing Adjustments.
------------------------
(a)(i) Within ninety (90) days after the Closing Date, the Sellers
shall prepare, or cause to be prepared, and deliver to Buyer a working
capital statement of Sellers' CATV Business as of the Closing Date, which
-16-
statement shall be prepared in accordance with GAAP and in a manner
consistent with the preparation of the Financial Statements, except as
otherwise required by this Agreement, and shall set forth the Current
Assets and Current Liabilities of Sellers' CATV Business as of the Closing
Date (the "Preliminary Working Capital Statements"). Buyer shall cooperate
--------------------------------------
in providing to Sellers access, on reasonable notice, to all relevant
books, records and personnel of the CATV Business in order to facilitate
the preparation of the Preliminary Working Capital Statements.
(ii) During the succeeding thirty (30) day period, Buyer shall have
the right to examine the Preliminary Working Capital Statements and all
records used to prepare the Preliminary Working Capital Statements. Sellers
shall provide Buyer or Buyer's representatives with copies of all books and
records that Buyer may reasonably request for purposes of Buyer's review of
the Preliminary Working Capital Statements; provided, however, that if
-------- -------
Sellers determine in good faith that providing copies of any books and
records requested by Buyer pursuant to this Section 2.04(a)(ii) would be
unduly burdensome to Sellers, then Sellers shall make available, on
reasonable notice, any such books and records that it has not copied for
Buyer, at the offices of the Sellers at One Media Crossways, Woodbury, New
York.
(iii) In the event Buyer determines that the Preliminary Working
Capital Statements have not been prepared on the basis set forth in Section
2.04(a)(i) hereof, Buyer shall so inform Sellers in writing (the "Buyer's
-------
Working Capital Objection"), setting forth a reasonably specific
-------------------------
description of the basis of the Buyer's Working Capital Objection on or
before the last day of the thirty (30) day period referred to in Section
2.04(a)(ii) hereof. If Buyer delivers a Buyer's Working Capital Objection,
Buyer and Sellers shall attempt to resolve the differences underlying the
Buyer's Working Capital Objection within twenty (20) days of Sellers'
receipt thereof. If Sellers and Buyer are unable to resolve all their
differences within such twenty (20) day period, they shall refer their
remaining differences to Ernst & Young LLP, or such other nationally
recognized firm of independent public accountants as to which Buyer and
Sellers may mutually agree (the "CPA Firm"), who
--------
-17-
shall, acting as experts and not as arbitrators, determine on the basis of
the standard set forth in Section 2.04(a)(i) hereof and only with respect
to the remaining differences so submitted, whether and to what extent, if
any, the Preliminary Working Capital Statements require adjustment. The CPA
Firm will base its determination only on evidence brought to it by the
parties and shall not conduct an audit. The CPA Firm shall deliver its
written determination to Buyer and Sellers no later than the twentieth
(20th) business day after the remaining differences underlying the Buyer's
Working Capital Objection are referred to the CPA Firm. The CPA Firm's
determination shall be conclusive and binding upon the parties. The fees
and disbursements of the CPA Firm shall be allocated between Buyer and
Sellers in the same proportion that the aggregate amount of any disputed
items submitted to the CPA Firm that are unsuccessfully disputed by each
(as finally determined by the CPA Firm) bears to the total amount of any
disputed items so submitted. Buyer and Sellers shall make readily available
to the CPA Firm all relevant books and records and any work papers relating
to the Preliminary Working Capital Statements and all other items
reasonably requested by the CPA Firm. A "Final Working Capital Statement"
-------------------------------
shall be (i) the Preliminary Working Capital Statement in the event that
(x) a Buyer's Working Capital Objection is not delivered to the Sellers in
the period set forth in Section 2.04(a)(ii) hereof, or (y) the Sellers and
Buyer so agree; or (ii) the Preliminary Working Capital Statement as
adjusted by either (x) the agreement of the Sellers and Buyer or (y) the
CPA Firm.
(iv) On the fifth (5th) business day following the determination of
Sellers' Final Working Capital Statement pursuant to Section 2.04(a)(iii),
(i) if both the Estimated and Final Working Capital Amounts of Sellers are
positive, then (AA) if the Final Working Capital Amount exceeds the
Estimated Working Capital Amount, then Buyer shall pay to Sellers an amount
equal to such excess; and (BB) if the Estimated Working Capital Amount
exceeds the Final Working Capital Amount, then Sellers shall pay to Buyer
an amount equal to such excess; (ii) if both the Estimated and Final
Working Capital Amounts of Sellers are negative, then (AA) if the absolute
value of the Final Working Capital Amount exceeds the absolute value of the
Estimated Working Capital Amount, then Sellers shall pay to Buyer an amount
equal to such
-18-
excess; and (BB) if the absolute value of the Estimated Working Capital
Amount exceeds the absolute value of the Final Working Capital Amount, then
Buyer shall pay to Sellers an amount equal to such excess; (iii) if the
Estimated Working Capital Amount is negative and the Final Working Capital
Amount is positive, then Buyer shall pay to Sellers an amount equal to the
sum of the absolute values thereof; and (iv) if the Estimated Working
Capital Amount is positive and the Final Working Capital Amount is
negative, then Sellers shall pay to Buyer an amount equal to the sum of the
absolute values thereof.
(v) Any amount payable pursuant to Section 2.04(a)(iv) hereof shall
be paid by wire transfer of immediately available funds to a bank account
designated by Buyer or Sellers, as the case may be.
(b)(i) Within ninety (90) days after the Closing Date, the Sellers
shall prepare, or cause to be prepared, and deliver to Buyer a statement
setting forth (x) the number of Basic Subscribers as of the Closing Date,
which statement shall be prepared in conformity with the definition of
Basic Subscriber contained herein (the "Basic Subscriber Statement") and
--------------------------
(y) the Tangible Capital Expenditures made by Sellers from January 1, 1997
through December 31, 1997 (or the Closing Date, if earlier) (the "Tangible
--------
Capital Expenditures Statement"). Buyer shall cooperate in providing to
------------------------------
Sellers access, upon reasonable notice, to all relevant books, records and
personnel of the CATV Business in order to facilitate the preparation of
the Basic Subscriber Statement.
(ii) During the succeeding thirty (30) day period, Buyer shall have
the right to examine the Basic Subscriber Statement and the Tangible
Capital Expenditures Statement and all records used to prepare the Basic
Subscriber Statement and the Tangible Capital Expenditures Statement.
Sellers shall provide Buyer or Buyer's representatives with copies of all
books and records that Buyer may reasonably request for purposes of Buyer's
review of the Basic Subscriber Statement and Tangible Capital Expenditures
Statement; provided, however, that if Sellers determine in good faith that
-------- -------
providing copies of any books and records requested by Buyer pursuant to
this Section 2.04(b)(ii) would be unduly burdensome to Sellers, then
Sellers shall make
-19-
available, on reasonable notice, any such books and records that it has not
copied for Buyer, at the offices of the Sellers at One Media Crossways,
Woodbury, New York.
(iii) In the event Buyer determines that (x) the Basic Subscriber
Statement has not been prepared on the basis set forth in Section
2.04(b)(i) hereof or (y) that the Tangible Capital Expenditures Statement
is incorrect, Buyer shall so inform Sellers in writing (the "Buyer's
-------
Objection"), setting forth a reasonably specific description of the basis
---------
of the Buyer's Objection on or before the last day of the thirty (30) day
period referred to in Section 2.04(b)(ii) hereof. If Buyer delivers a
Buyer's Objection, Buyer and Sellers shall attempt to resolve the
differences underlying the Buyer's Objection within twenty (20) days of
Sellers' receipt thereof. If Sellers and Buyer are unable to resolve all
their differences within such twenty (20) day period, they shall refer
their remaining differences to the CPA Firm, who shall determine on the
basis of the standard set forth in Section 2.04(b)(i) hereof and only with
respect to the remaining differences so submitted, whether and to what
extent, if any, the Basic Subscriber Statement or the Tangible Capital
Expenditures Statement requires adjustment. The CPA Firm will base its
determination only on evidence brought to it by the parties and shall not
conduct an audit. The CPA Firm shall deliver its written determination to
Buyer and Sellers no later than the twentieth (20th) business day after the
remaining differences underlying the Buyer's Objection are referred to the
CPA Firm. The CPA Firm's determination shall be conclusive and binding
upon the parties. The fees and disbursements of the CPA Firm shall be
allocated between Buyer and Sellers in the same proportion that the
aggregate amount of any disputed Basic Subscribers or the amount of
disputed Tangible Capital Expenditures submitted to the CPA Firm that are
unsuccessfully disputed by each (as finally determined by the CPA Firm)
bears to the total amount of any Basic Subscribers or Tangible Capital
Expenditures so submitted. Buyer and Sellers shall make readily available
to the CPA Firm all relevant invoices, books and records and any work
papers relating to the Basic Subscriber Statement and all other items
reasonably requested by the CPA Firm. A "Final Basic Subscriber Statement"
--------------------------------
and a "Final Tangible Capital Expenditures
-----------------------------------
-20-
Statement" shall in each case be (i) the Basic Subscriber Statement and
---------
the Tangible Capital Expenditures Statement, respectively, in the event
that (x) a Buyer's Objection is not delivered to the Sellers in the period
set forth in Section 2.04(b)(ii) hereof, or (y) the Sellers and Buyer so
agree; or (ii) the Basic Subscriber Statement and the Tangible Capital
Expenditures Statement, respectively, as adjusted by either (x) the
agreement of the Sellers and Buyer or (y) the CPA Firm.
(iv) On the fifth (5th) business day following the determination of
the Final Basic Subscriber Statement pursuant to Section 2.04(b)(iii), if
the number of Basic Subscribers included in the Final Basic Subscriber
Statement is less than 265,000 and less than the number of Basic
Subscribers included in the Basic Subscriber Estimate, then Sellers shall
pay the Buyer an amount equal to $1,189.00 times the difference between the
number of Basic Subscribers included in the Basic Subscriber Estimate (but
not above 265,000) and the number of Basic Subscribers included in the
Final Basic Subscriber Statement. If the number of Basic Subscribers
included in the Final Basic Subscriber Statement is more than the number of
Basic Subscribers included in the Basic Subscriber Estimate and the number
of Basic Subscribers in the Basic Subscriber Estimate was less than
265,000, then on such fifth (5th) business day, Buyer shall pay to Sellers
an amount equal to $1,189.00 times the difference between the number of
Basic Subscribers included in the Final Basic Subscriber Statement (but not
above 265,000) and the number of Basic Subscribers included in the Basic
Subscriber Estimate. On the fifth (5th) business day following the
determination of the Final Tangible Capital Expenditures Statement pursuant
to Section 2.04(b)(iii), if the amount of Tangible Capital Expenditures
included in the Final Tangible Capital Expenditures Statement is less than
$11,770,000 and less than the amount of Tangible Capital Expenditures
included in the Tangible Capital Expenditures Estimate, then Sellers shall
pay the Buyer an amount equal to the difference between the amount of
Tangible Capital Expenditures included in the Final Tangible Capital
Expenditures Statement and the amount of Tangible Capital Expenditures
included in the Tangible Capital Expenditures Estimate (but not above
$11,770,000). If the amount of Tangible Capital Expenditures included in
the Final Tangible Capital
-21-
Expenditures Statement is more than the amount of Tangible Capital
Expenditures included in the Tangible Capital Expenditures Estimate and the
Tangible Capital Expenditure Estimate was less than $11,770,000, then on
such fifth (5th) business day, Buyer shall pay to Sellers the difference
between the amount of Tangible Capital Expenditures included in the Final
Tangible Capital Expenditures Statement (but not above $11,770,000) and the
amount of Tangible Capital Expenditures included in the Tangible Capital
Expenditures Estimate.
(v) Any amount payable pursuant to Section 2.04(b)(iv) hereof shall
be paid by wire transfer of immediately available funds to a bank account
designated by Buyer or Sellers, as the case may be.
2.05 Earnest Money Deposit. Concurrently herewith, Buyer has deposited
---------------------
with The Chase Manhattan Bank as escrow agent ("Earnest Money Escrow Agent"), an
--------------------------
irrevocable letter of credit in the amount of $15,000,000, in substantially the
form attached hereto as Exhibit J, for the Earnest Money Escrow ("Earnest Money
-------------
Escrow") to be held pursuant to an escrow agreement (the "Earnest Money Escrow
- ------ --------------------
Agreement") substantially in the form of Exhibit C hereto. Such letter of
- ---------
credit shall be held and administered under the Earnest Money Escrow as provided
in the Earnest Money Escrow Agreement. The Earnest Money Escrow shall be
distributed as provided in the Earnest Money Escrow Agreement and Article 12
hereof.
2.06 Sales and Transfer Taxes. All sales and use taxes and transfer
------------------------
taxes, if any, arising from the transfer of the Acquired Assets shall be shared
equally between Buyer and Sellers.
2.07 Indemnity Escrow. At the Closing, Buyer shall deposit out of the
----------------
Purchase Price, the sum equal to $15,000,000 ("Indemnity Escrow") with The Chase
----------------
Manhattan Bank, as Escrow Agent (the "Indemnity Escrow Agent"), pursuant to the
----------------------
Indemnity Escrow Agreement in the form annexed hereto as Exhibit H, to secure
Buyer's rights with respect to claims to indemnification under Section 10.2. On
the 366th day following the Closing Date, or, if such date is not a business day
in New York, New York, the following business day, any amounts then in the
custody of the Escrow Agent under the Indemnity Escrow Agreement less the amount
of any claims made by Buyer prior thereto and not resolved in accordance with
the terms thereof, shall be released to the Sellers pursuant to
-22-
their written instructions and in conformity with the Indemnity Escrow
Agreement.
2.08 Determination and Allocation of Purchase Price. For federal income
----------------------------------------------
and other applicable tax purposes, the Purchase Price shall be allocated among
the Acquired Assets as agreed to by the parties prior to the Closing Date. In
the event that the parties have not agreed upon an allocation of the Purchase
Price prior to Closing, the allocation of the Purchase Price shall be determined
by an appraisal to be obtained within 120 days after the Closing Date. The
appraiser performing the appraisal shall be expert in the appraisal of cable
television systems and shall be mutually selected and engaged by Sellers and
Buyer. The parties shall cause the appraiser to consult with Buyer and Sellers
during the preparation of such appraisal, and the appraiser shall deliver drafts
and the final appraisal to Buyer and Sellers simultaneously. Buyer and Sellers
agree to be bound by such allocation and to file all returns and reports in
respect of the transactions contemplated herein on the basis of such allocation.
The cost of the appraisal shall be borne equally by Buyer, on one hand, and
Sellers, on the other hand. Sellers and Buyer agree to prepare and file an IRS
Form 8594 in a timely fashion in accordance with the rules under Section 1060 of
the Code. To the extent that the Purchase Price is adjusted after the Closing
Date, the parties agree to revise and amend IRS Form 8594 in the same manner and
according to the same procedure. The determination and allocation of the
Purchase Price derived pursuant to this subsection shall be binding on Sellers
and Buyer for all tax reporting purposes.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS.
-----------------------------------------
To induce Buyer to enter into this Agreement, Sellers represent and warrant
to Buyer as follows:
3.01 Organization and Authority of Sellers. U.S. Cable is a Delaware
-------------------------------------
limited partnership, ECC is a Delaware corporation and Missouri L.P. is a
Delaware limited partnership, each duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization, and each
is duly qualified and licensed to do business and is in good standing under the
laws of Relevant States in which such Seller does business except where such
failures to be so qualified, licensed or in good standing in a jurisdiction,
individually or in the aggregate, do not have, has not had and would not
reasonably be expected to have, a
-23-
Regional Material Adverse Effect or do not or would not materially adversely
affect Sellers' ability to perform their obligations hereunder. Sellers have all
requisite corporate or limited partnership power and authority to own, lease and
use the Acquired Assets as they are currently owned, leased or used and to
conduct the CATV Business as it is currently conducted.
3.02 Legal Capacity; Approvals and Consents.
--------------------------------------
(a) Authority and Binding Effect. Subject to Section 9.02 hereof and
----------------------------
the receipt of Consents set forth on Schedule 3.02, each Seller has all
requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution and delivery of this
Agreement and the performance of each Seller's obligations hereunder have
been duly and validly authorized by all necessary corporate or limited
partnership action on the part of each Seller. This Agreement has been
duly executed and delivered by each Seller and is the valid and binding
obligation of such Seller enforceable in accordance with its terms, except
as such enforceability may be affected by the laws of bankruptcy,
insolvency, reorganization and creditors' rights generally and by the
availability of equitable remedies.
(b) No Breach or Violation. Subject only to obtaining the Consents
----------------------
set forth on Schedule 3.02, the execution, delivery and performance of this
Agreement do not, and will not, contravene the certificate of incorporation
or by-laws of ECC or the certificate of limited partnership or the
agreement of limited partner ship of U.S. Cable or Missouri (collectively,
the "Organizational Documents"), and do not, and will not: (i) conflict
------------------------
with or result in a breach or violation by any Seller of, or (ii)
constitute a default (without regard to any requirement of notice, passage
of time or elections by any Person) by any Seller under, or (iii) permit or
result in the termination, suspension, modification or impairment of, or
adversely affect any Seller's ability to perform its obligations under, any
CATV Instrument, Law, Judgment, or Contract to which any Seller is a party
or by which any Seller, the CATV Business or any of the Acquired Assets is
subject or bound or may be affected, or (iv) create or impose, or result in
the creation or imposition of, any Encumbrance
-24-
(other than Permitted Encumbrances) upon any of the Acquired Assets, in
each case under clause (i) through (iv) above, except such conflicts,
breaches, violations, defaults, terminations, suspensions, modifications or
impairments which, individually or in the aggregate, has not had, do not
have or would not reasonably be expected to have, a Regional Material
Adverse Effect or does not or would not materially adversely affect
Sellers' ability to perform their obligations hereunder.
(c) Required Consents. Except for the parties listed in Schedules
-----------------
3.02 and 4.05, there are no parties whose Consent, or with whom the filing
of any certificate, notice, application, report or other document, is
legally or contractually required or other wise is necessary in connection
with the execution, delivery or performance of this Agreement by Sellers,
except where failure to obtain such Consent or approval or failure to make
such filing, individually or in the aggregate, has not had, does not have
or would not reasonably be expected to have, a Regional Material Adverse
Effect or does not or would not materially adversely affect Sellers'
ability to perform their obligations hereunder.
3.03 Financial Statements. U.S. Cable has delivered to Buyer true and
--------------------
complete copies of its audited consolidated balance sheets as at December 31,
1996, December 31, 1995, and December 31, 1994 (collectively the "Balance
-------
Sheets"); U.S. Cable has delivered to Buyer true and complete audited
consolidated statements of income for the years ending December 31, 1996, 1995
and 1994 (collectively the "Income Statements" and, collectively with the
-----------------
Balance Sheets, the "Financial Statements"). U.S. Cable's audited consolidated
--------------------
Financial Statements include in the consolidation the financial position and
results of operations of ECC and Missouri L.P. and do not include the financial
position and results of operations of any other entity, whether or not a
subsidiary of any of Sellers. The Financial Statements were prepared in
accordance with GAAP and present fairly in all material respects the
consolidated financial position of U.S. Cable as of those dates and the
consolidated results of U.S. Cable's operations for the periods then ended.
U.S. Cable has also provided to Buyer a consolidated balance sheet and
consolidated income statement as of June 30, 1997 (the "Interim Financial
-----------------
Statements"), which Interim Financial Statements were prepared in accordance
- ----------
with GAAP (except
-25-
for the absence of footnotes) and in accordance with the practices customarily
followed by U.S. Cable in preparing its interim statements and, subject to
normal year-end adjustments and the procedures followed in interim statements,
present fairly in all material respects the consolidated financial position and
the consolidated results of operation of U.S. Cable, ECC and Missouri, L.P. (and
no other entities) as at the date and for the period indicated and are stated on
a basis generally consistent with the above-described Financial Statements.
3.04 Changes in Operation. Since the date of the Interim Financial
--------------------
Statements, there has not been any event or circumstance which, individually or
in the aggregate, has had, does have or would reasonably be expected to have, a
Regional Material Adverse Effect.
3.05 Tax Returns. Each Seller has, and will have as of the Closing Date,
-----------
duly filed all federal, state, local and foreign income, information, franchise,
sales, use, property, excise and payroll and other tax returns or reports
(herein "Tax Returns") required to be filed by such Seller on or prior to the
-----------
date hereof or which are required to be filed on or prior to the Closing Date
and all such Tax Returns were prepared in good faith and are accurate and
complete in all material respects. All taxes, fees and assessments that are
shown on such Tax Returns as due or payable by each Seller on or before the date
hereof or the Closing Date, as the case may be, and that might result in an
Encumbrance upon any of the Acquired Assets have been or will be duly paid.
Except as set forth in Schedule 3.05, no Seller has received a notice or
assessment to the effect that there is any unpaid tax, interest, penalty or
addition to tax due or claimed to be due from the Seller in respect of such Tax
Returns; no Seller has received a notice of the assertion or threatened
assertion of any Encumbrances with respect to any Acquired Assets on account of
any unpaid taxes; and no audits of such Tax Returns by any Governmental
Authority are pending or, so far as any Seller knows, threatened. Except as set
forth in Schedule 3.05, no Seller has outstanding a request for extension of
time within which to pay taxes; there has been no waiver or extension by any
Seller of any applicable statute of limitations for the collection or assessment
of taxes; and each Seller has withheld and paid in a timely manner all payments
for withholding taxes, unemployment insurance and other amounts required to be
withheld and paid.
-26-
3.06 Acquired Assets.
---------------
(a) Title; Encumbrances. Each Seller has (i) good title to all of its
-------------------
Equipment, Inventory and other personal property and good and marketable
title to all of its Real Property owned in fee, and (ii) the right and
authority (subject to the receipt of the Consents specified herein) to
transfer to Buyer all of the Seller's right, title and interest in and to
the other property or rights included in the Acquired Assets, in each
instance in (i) and (ii) above free and clear of any Encumbrances except
Permitted Encumbrances, except for any instance in which the failure to
have such title, right or authority, individually or in the aggregate with
such other instances, has not had, does not have, and would not reasonably
be expected to have, a Regional Material Adverse Effect.
(b) Real Property. Schedule 3.06(b) sets forth a list, complete and
-------------
correct in all material respects, of all Real Property owned, leased,
occupied or used by Sellers in connection with the operation of the CATV
Business as presently conducted. The Real Property comprises all real
property interests necessary to conduct the CATV Business as currently
conducted. Except for any instances where the failure to be true of the
below items (i) through (ix), individually or in the aggregate, has not
had, does not have, or would not reasonably be expected to have, a Regional
Material Adverse Effect: (i) except for routine repairs, all of the
improvements, leasehold improvements and the premises of the Real Property
are in good condition and repair and suitable for the purposes used, (ii)
each parcel of Real Property (w) has access to and over public streets, or
private streets for which a Seller has a valid right of ingress and egress,
(x) conforms in its current use to all zoning requirements without reliance
on a variance or a classification of the parcel in question as a
nonconforming use, (y) conforms in its use to all restrictive covenants, if
any, or other Encumbrances affecting all or part of such parcel, and (z)
has access (directly or by easement, right of way, or similar right
included in the Acquired Assets) to all utilities and services to the
extent necessary for the operation of the current operations of the CATV
System with respect to such parcel, (iii) Sellers have all easements, and
all leases, fee interests, access agreements, and other
-27-
rights required by Law for the use of all Real Property used in the CATV
Business, including all Real Property over, under, or on which the CATV
Business is conducted, (iv) there are not pending or, to the best of
Sellers' knowledge, threatened, any condemnation actions, increases in tax
assessments or adverse zoning changes, with respect to, in each case, such
Real Property or any part thereof, (v) no Seller has received written
notice of the desire of any public authority or other entity to take or use
any Real Property or any part thereof, (vi) all leases and subleases
pursuant to which any of the Real Property is occupied or used are set
forth on Schedule 3.06(b) and are valid and binding and in full force and
effect, (vii) no Seller has and, to the best of each Seller's knowledge
after reasonable inquiry, no other party to any Contract, lease or sublease
relating to any Real Property has given or received notice of breach or
termination except any which may have been waived or withdrawn, (viii) all
easements, rights-of-way and other similar rights which are necessary for
each Seller's current use of any Real Property are valid and in full force
and effect, and (ix) no Seller has received any notice with respect to the
termination or breach of any such easements, rights-of-way or other similar
rights except any which may have been waived or withdrawn or which are no
longer relevant.
(c) Acquired Assets. The Acquired Assets include all assets owned,
---------------
used or held for use by the Sellers and that are necessary to conduct the
CATV Business as it is presently being conducted except where the failure
to own, use or hold such assets, individually or in the aggregate, has not
had, does not have or would not reasonably be expected to have, a Regional
Material Adverse Effect.
(d) Environmental Matters. Except as disclosed in Schedule 3.06(d):
---------------------
(i) the Acquired Assets and the operation of the CATV Business comply in
all material respects with applicable Environmental Laws; (ii) no Seller
has received any written notice from any Governmental Authority alleging
that, and Sellers have no knowledge, after reasonable inquiry, that, the
Acquired Assets and the operation of the CATV Business are in vio lation
in any material respect of any applicable Environmental Law; (iii) the
Acquired Assets and the operation of the CATV Business are not the subject
of any
-28-
written notice actually received by a Seller, or any Judgment arising under
any Environmental Law; and (iv) during the period of the relevant Seller's
ownership and, to the best of Sellers' knowledge after reasonable inquiry,
prior to the period of the relevant Seller's ownership, the Acquired Assets
have not been used for the generation, storage, discharge or disposal of
any Hazardous Substances except as permitted by applicable Environmental
Laws.
3.07 The CATV Business. With respect to the CATV Business, each Seller
-----------------
makes the following warranties and representations:
(a) Since the date of the Interim Financial Statements, (i) the CATV
Business has been operated only in the ordinary course; (ii) there has been
no sale, assignment or transfer of any assets or properties related to the
CATV Business other than on an arms' length basis in the ordinary course of
business; (iii) there has been no amendment or termination of any Contract
or CATV Instrument; (iv) there has been no waiver or release of any right
or claim of any Seller against any third party; (v) there has been no
agreement by any Seller to take any of the actions described in the
preceding clauses (i) through (iv), except as contemplated by this
Agreement and except for any instances that, individually or in the
aggregate, have not had, do not have or would not reasonably be expected to
have, a Regional Material Adverse Effect.
(b) Except for such instances where the failure to be true of the
below items (i) through (iv), individually or in the aggregate, have not
had, does not have, or would not reasonably be expected to have, a Regional
Material Adverse Effect and except as set forth in Schedule 3.07(b): (i)
each Seller holds all of the franchises, licenses, permits and other CATV
Instruments reasonably necessary to enable each of them to operate the CATV
Business as presently conducted, (ii) Sellers are in compliance with the
terms and conditions of all such CATV Instruments and Contracts, (iii)
Sellers have not given or received any notice of any claimed or purported
default in, or termination of, any Contracts or CATV Instruments and there
are no proceedings pending, or, to the knowledge of Sellers, threatened, to
cancel, modify or change any such Contracts or CATV Instruments,
-29-
and (iv) exclusive of any change in a CATV License subsequent to the date
hereof that Buyer has otherwise requested or agreed to, none of the CATV
Licenses contain any commitments requiring rebuilds, upgrades, increase in
franchise fees payable or local origination commitments.
(c) Except in each case where the failure to be true of any of the
below items, individually or in the aggregate, has not had, does not have,
or would not reasonably be expected to have, a Regional Material Adverse
Effect, the CATV Business is conducted by each Seller in compliance with
all applicable Laws and CATV Instruments, including without limitation, the
Communications Act of 1934, as amended (the "Communications Act"), and the
rules and regulations of the FCC, and, without limiting the generality of
the foregoing, except as set forth in Schedule 3.07(c) hereto:
(i) Each of the system areas has been registered with the FCC;
(ii) All of the semi-annual performance tests on the CATV Systems
required under the rules and regulations of the FCC have been performed and
the results of such tests demonstrate satisfactory compliance with the
applicable technical requirements being tested in all material respects;
(iii) The CATV Systems are being operated in compliance with the
provisions of 47 C.F.R. Sections 76.610 through 76.619 (mid-band and super-
band signal carriage), including the filing of all required notifications
and the receipt of all necessary authorizations and compliance with the
cumulative signal leakage index;
(iv) A valid request for renewal has been duly and timely filed under
Section 626 of the Communications Act with the proper Governmental
Authority with respect to all franchises to operate the CATV Systems that
have expired or will expire within 36 months after the date of this
Agreement;
(v) Each Seller has all of the CATV Licenses necessary to operate the
CATV Systems as the CATV Business is currently conducted, all of which
licenses
-30-
are listed in Schedule 1.01(a), and Sellers operate the CATV Business in
conformance with the terms and conditions of such licenses;
(vi) Each Seller has made all annual filings required to be made with
the FCC;
(vii) The carriage of all televison station signals is in compliance
with the must-carry and retransmission consent provisions of the
Communications Act, as applicable;
(viii) The employment units covered by the Cable Systems and operated
by each Seller have been certified by the FCC for compliance with equal
opportunity requirements in each of calendar years 1992 through 1996; and
(ix) All necessary FAA approvals have been obtained with respect to
the height and location of towers used in connection with the operation of
the CATV Business and such towers are being operated in compliance in all
material respects with applicable FCC and FAA rules, including antenna
structure registrations with the FCC.
(d) Except in each case where the failure to be true of the items (i)
through (iv) below, individually or in the aggregate, has not had, does not
have or would not reasonably be expected to have, a Regional Material
Adverse Effect: (i) each Seller is in compliance with Title 17 of the
United States Code, as amended, and the rules and regulations promulgated
thereunder (the "Copyright Act") and the rules and regulations of the
-------------
United States Copyright Office with respect to the operation of the CATV
Business, (ii) without limiting the generality of the foregoing, for each
relevant semi-annual reporting period, Sellers have timely filed with the
United States Copyright Office all required statements of account in true
and correct form, and have paid when due all required copyright royalty fee
payments in correct amount, relating to the CATV Business' carriage of
television broadcast signals, and each Seller is otherwise in compliance
with all applicable rules and regulations of the Copyright Office, (iii)
Sellers do not possess any patent, patent right, trademark, or copyright
and are not parties to any license or royalty agreement with respect to any
patent, trademark or copyright,
-31-
except for licenses respecting program material and obligations under the
Copyright Act applicable to cable television systems generally, and (iv)
the CATV Business is free of any rightful claim of any third party by way
of copyright infringement or the like (except for claims involving music
performance rights).
3.08 Labor Contracts and Actions.
---------------------------
(a) Except as set forth in Schedule 3.08(a), no Seller is a party to
any Contract with any labor organization, nor has any Seller agreed to
recognize any union or other collective bargaining unit, nor has any union
or other collective bargaining unit been certified as representing any of
the employees of any Seller with respect to the operation of the CATV
Business;
(b) Except for such instances where the failure to be true of items
(i) through (iii) below, individually or in the aggregate, has not had,
does not have or would not reasonably be expected to have, a Regional
Material Adverse Effect: (i) each Seller has complied with all Laws
relating to the employment of labor, including any provisions thereof
relating to wages, hours, collective bargaining and the payment of social
security and other taxes, (ii) no Seller is subject to any liability for
any arrearages of wages or any taxes or penalties for failure to comply
with any of the foregoing, and (iii) Sellers have delivered to Buyer a list
of the names, job title, and present annual rates of compensation,
including the date of hire of Employees and whether such Employee is full-
time or part-time, of all personnel whose work is performed wholly or
substantially for the CATV Business, and any employment agreements,
commitments, arrangements or understandings, written or oral, affecting
such personnel; and
(c) Sellers are not currently experiencing any strikes, work
stoppages, significant grievance proceedings or claims of unfair labor
practices.
3.09 Employee Benefit Plans.
----------------------
(a) All "employee benefit plans" within the meaning of Section 3(3) of
ERISA covering Employees, other than "multiemployer plans" within the
meaning of Section 3(37) of ERISA, and other benefit plans, contracts or
-32-
arrangements covering Employees (collectively, the "Benefit Plans") are
-------------
listed on Schedule 3.09. True and complete copies of all Benefit Plans and
all amendments thereto have been provided or made available to Buyer.
Schedule 3.09 also lists all multiemployer plans covering Employees.
(b) All Benefit Plans, to the extent subject to ERISA, are in
compliance with ERISA except where the failure to be in compliance would
not, individually or in the aggregate, reasonably be expected to have a
Regional Material Adverse Effect, or subject Buyer to any liability with
respect thereto after Closing. There is no pending or, to the knowledge of
Sellers, threatened litigation relating to the Benefit Plans. Sellers have
not engaged in a transaction with respect to any Benefit Plan that,
assuming the taxable period of such transaction expired as of the date
hereof or as of the Closing Date (as the case may be), would reasonably be
expected to subject Sellers to a tax or penalty imposed by either Section
4975 of the Code or Section 502(i) of ERISA.
(c) No liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by Sellers with respect to any ongoing,
frozen or terminated "single-employer plan", within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by it, or the
single-employer plan of any entity which is considered one employer with
either Seller under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA Affiliate"). Sellers have not incurred and do not expect to incur
----------------
any material withdrawal liability with respect to a multiemployer plan
under Subtitle E of Title IV of ERISA and in no event shall Buyer have any
withdrawal liability or obligation with respect to any multi-employer plan
in which Sellers participate. No notice of a "reportable event", within
the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any
Benefit Plan subject to Title IV of ERISA or by any ERISA Affiliate within
the 12-month period ending on the date hereof.
(d) Neither any Benefit Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (whether or not waived)
within the
-33-
meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA
Affiliate has an outstanding funding waiver. Sellers have not provided, nor
are they required to provide, security to any Benefit Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29)
of the Code.
3.10 Contracts and CATV Instruments.
------------------------------
(a) Except for such instances where the failure to be true of items
(i) through (v) below, individually or in the aggregate, has not had, does
not have or would not reasonably be expected to have, a Regional Material
Adverse Effect: (i) except as set forth in Schedule 3.10(a), there are no
defaults by any Seller under the Contracts or CATV Instruments (nor has any
Seller received written notice of a threatened default or notice of
default), and to the best of Sellers' knowledge, after reasonable inquiry,
there is no default by any other party to a Contract or a CATV Instrument,
(ii) each Contract and CATV Instrument, including those that are entered
into after the date hereof, is or will be in full force and effect, binding
and enforceable in accordance with its terms, and is or will be valid under
and in compliance in all respects with all applicable Laws, (iii) each
Seller is the authorized legal holder of the CATV Licences applicable to
its CATV Business, (iv) no Seller and, to the best of the Sellers'
knowledge after reasonable inquiry, no other party to any Contract or CATV
Instrument is in default thereunder or has given or received notice of
termination, cancellation, dispute or default or, to the best of the
Sellers' knowledge after reasonable inquiry, has taken any action
inconsistent with the continuance of any Contract or CATV Instrument, and
(v) except for the Consents, no approval, application, filing,
registration, consent or other action of any Governmental Authority is
required to enable the Sellers to take advantage of the rights and
privileges intended to be conferred by any Contract or CATV Instrument.
(b) True, correct and complete copies of each Contract and CATV
Instrument that Buyer is assuming or acquiring, as the case may be, have
been made available to Buyer and its representatives at the Sellers'
offices at One Media Crossways, Woodbury, New York, and with respect to
those executed after the date hereof, copies
-34-
will be made available to Buyer promptly following such execution and in
any event prior to the Closing Date.
3.11 Legal and Governmental Proceedings and Judgments. Except for such
------------------------------------------------
instances where the failure to be true of items (a) and (b) below, individually
or in the aggregate, has not had, does not have or would not reasonably be
expected to have, a Regional Material Adverse Effect: (a) except as may affect
the cable television industry generally in the United States, or as set forth in
Schedule 3.11, there is no legal action, or proceeding pending or, to the
knowledge of Sellers, threatened against the Sellers, the CATV Business or the
Acquired Assets, nor is there any Judgment outstanding against the Sellers or to
or by which the Sellers, any of the Acquired Assets or the CATV Business is
subject or bound, which (i) results or is reasonably likely to result in any
modification, termination, suspension, impairment or reformation of any Contract
or CATV Instrument or any right or privilege thereunder, or (ii) adversely
affects the ability of Sellers to consummate any of the transactions
contemplated hereby, and (b) no Seller is in default or violation, and no event
or condition exists which, with notice or lapse of time or both, could become or
result in a default or violation, of any Judgment.
3.12 Finders and Brokers. Sellers have employed Waller Capital
-------------------
Corporation and Chase Securities Inc. as their brokers in the sale provided
herein and will pay and discharge the claim thereof for commission or expense
reimbursement in connection therewith. Sellers have not entered into any other
contract, arrangement or understanding with any Person or firm, nor are they
aware of any claim or basis for any claim based upon any act or omission of the
Sellers or any of their affiliates, which may result in the obligation of Buyer
to pay any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
3.13 Miscellaneous Assets. Schedule 3.13 contains a list, true and
--------------------
complete in all material respects, of converters and motor vehicles owned or
leased by the Sellers. Sellers represent that included in the Acquired Assets
are the Sellers' Tandem CLX machine and the teledirect predictive dialers
located in Hendersonville, North Carolina. Sellers shall buy out any leases with
respect to leased motor vehicles of Sellers prior to Closing. Except as set
forth in
-35-
Schedule 3.13, the Equipment and Inventory are and will be at Closing in good
operating condition and repair and fit for the purpose for which they are being
used except where the failure to be in good operating condition or repair or fit
for such purpose, individually or in the aggregate with such other failures, has
not had, does not have or would not reasonably be expected to have, a Regional
Material Adverse Effect.
3.14 Characteristics of the CATV Systems.
-----------------------------------
(a) To the best of Sellers' knowledge, after reasonable inquiry,
Schedule 3.14(a) sets forth accurately and completely in all material respects
the following information as of June 30, 1997 (unless otherwise noted in such
Schedule):
(i) a listing of each head-end and microwave site and the related
channel capacity for each Regional CATV System;
(ii) a statement as to the approximate number of Basic
Subscribers included in each Regional CATV System calculated in accordance with
Schedule 3.14(a)(ii);
(iii) a listing of the services provided by each Regional CATV
System (designating the respective tiers of service) and the rates charged for
each level of service offered. Schedule 3.14(a) also lists the stations and
signals carried by each such CATV System and the channel position of each such
signal and station;
(iv) a listing of the retransmission agreements and must-carry
requests required and currently used in the operation of the CATV Business; and
(v) a listing of all Sellers' FCC licenses.
(b) Schedule 3.14(b) sets forth accurately and completely in all
material respects with respect to each Regional CATV System the following
information as of June 30, 1997 (unless otherwise noted in such Schedule):
(i) the approximate number of homes passed; and
(ii) the approximate number of plant miles (aerial and
underground).
-36-
(c) Schedule 1.01(a) sets forth accurately and completely in all
material respects the cable televison franchises of each Regional CATV System
and their respective expiration dates and community unit identification numbers.
3.15 Insurance. Schedule 3.15 is a list, accurate and complete in all
---------
material respects, of insurance policies and bonds in full force and effect with
respect to the Sellers as of June 30, 1997, and no Seller has received any
notice of non-renewal or cancellation of such insurance policies or bonds.
Except as any Seller may determine, in the exercise of its business judgment,
each Seller will maintain such insurance policies and bonds in full force and
effect up to and including the Closing Date.
3.16 Accounts Receivable. The Accounts Receivable on the Closing Date
-------------------
have not been assigned to or for the benefit of any other Person. The Accounts
Receivable (to the extent not collected prior to the Closing), other than the
Overdue Receivables, arose and will arise from bona fide transactions in the
ordinary course of business.
3.17 Overbuilds. Except as set forth in Schedule 3.17, to the best of
----------
Sellers' knowledge after reasonable inquiry, no construction programs have been
commenced by any municipality or other cable television provider or operator in
any area served by the Sellers' CATV Systems.
3.18 Intangible Property. Except as set forth on Schedule 3.18 and
-------------------
except for such instances where the failure to be true of items (a) and (b)
below, individually or in the aggregate, has not had, does not have or would not
reasonably be expected to have, a Regional Material Adverse Effect, (a) the
Sellers own or possess licenses or other rights to use all Intangible Property
reasonably necessary to the operation of the CATV Business as presently
conducted without any conflict with, or infringement of, the rights of others,
and (b) there is no claim pending or, to the best of Sellers' knowledge,
threatened with respect to any such Intangible Property.
3.19 Retransmission Agreements. Buyer will not have any obligations
-------------------------
under the retransmission agreements applicable to the Sellers' CATV Systems to
make any payments or carry additional programming.
-37-
3.20 Representation of Cablevision. Cablevision represents and warrants
-----------------------------
that each Seller is a direct or indirect wholly-owned subsidiary of Cablevision.
3.21 Tangible Capital Expenditures. The Sellers represent that for the
-----------------------------
period January 1, 1997 through June 30, 1997, they have recorded approximately
$4,884,000 for Tangible Capital Expenditures.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
---------------------------------------
To induce Sellers to enter into this Agreement, Buyer represents and
warrants to the Sellers as follows:
4.01 Organization and Authority of Buyer. Buyer is a limited liability
-----------------------------------
company duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, with all requisite power and authority to
conduct its business and operations as presently conducted.
4.02 Legal Capacity; Approvals and Consents.
---------------------------------------
(a) Authority and Binding Effect. The execution and delivery of this
----------------------------
Agreement and the performance of Buyer's obligations hereunder have been
duly and validly authorized by all requisite limited liability company
action on the part of Buyer. Subject to Section 9.02 hereof and the
receipt of Consents set forth on Schedule 4.05, Buyer has all requisite
power and authority to execute and deliver this Agreement and to perform it
obligations hereunder. This Agreement has been duly executed and delivered
by Buyer and is the valid and binding obligation of Buyer enforceable in
accordance with its terms, except as such enforceability may be affected by
laws of bankruptcy, insolvency, reorganization and creditors' rights
generally and by the availability of equitable remedies.
(b) No Breach or Violation. Subject only to obtaining the Consents
----------------------
set forth in Schedule 4.05, the execution, delivery and performance of this
Agreement do not, and will not, contravene the articles of organization or
the operating agreement of Buyer, and do not and will not: (i) conflict
with or result in a breach or violation by Buyer of, or (ii) constitute a
default by Buyer under, any Law, Judgment, contract, arrangement or
understanding to which Buyer
-38-
is a party or by which Buyer is subject or bound or may be affected except
for any instances under (i) or (ii) which, individually or in the
aggregate, have not, do not and would not reasonably be expected to
materially adversely affect Buyer's ability to perform its obligations
hereunder.
4.03 Legal and Governmental Proceedings and Judgments. Except as may
------------------------------------------------
affect the cable television industry generally, there is no legal action,
proceeding or investigation pending or, to the knowledge of Buyer, threatened
against Buyer, nor is there any Judgment outstanding against Buyer or to or by
which Buyer is subject or bound which materially adversely affects the ability
of Buyer to consummate any of the transactions contemplated hereby.
4.04 Finders and Brokers. Buyer has not entered into any contract,
-------------------
arrangement or understanding with any Person, and is not aware of any claim or
basis for any claim based upon any act or omission of Buyer or any of its
affiliates, which may result in the obligation of Sellers to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
4.05 Buyer Consents. Except for the parties listed in Schedules 3.02 and
--------------
4.05, there are no parties whose approval or Consent, or with whom the filing of
any certificate notice, application, report or other document, is legally or
contractually required or otherwise is necessary in connection with the
execution, delivery or performance of this Agreement by the Buyer, except where
failure to obtain such Consent or approval or failure to make such filing has
not had, does not have and would not reasonably be expected to have a material
adverse effect on Buyer's ability to perform its obligations hereunder.
4.06 Acquisition of Rights. As of the date hereof, Buyer has no actual
---------------------
knowledge of any reason relating to Buyer that any Governmental Authority or
other party whose consent is required or contemplated hereunder, would refuse to
consent to the transfer of CATV Instruments or any rights to Buyer hereunder or
would condition granting of any such consent on the performance by Sellers or
Buyer of any material obligation not expressly set forth herein.
-39-
4.07 Financing Commitment Letter. There has heretofore been delivered to
---------------------------
Cablevision a commitment letter of The Chase Manhattan Bank and Chase Securities
Inc., dated August 18, 1997 (the "Financing Commitment Letter"), relating to the
---------------------------
financing of the transaction contemplated hereby. As of the date hereof, the
Financing Commitment Letter is in full force and effect.
5. COVENANTS.
---------
5.01 Business of Sellers. From the date hereof to the Closing Date, and
-------------------
except as otherwise consented to or approved by Buyer in writing (which consent
shall not be unreasonably withheld), each Seller covenants and agrees as
follows:
(a) Business in Ordinary Course. Except as otherwise provided herein,
---------------------------
Sellers shall conduct the CATV Business in the ordinary course, consistent
with past practices. Sellers shall use reasonable commercial efforts to
preserve the CATV Business intact, to retain the services of their
Employees (including, in the sole discretion of the Sellers, the payment of
bonuses or other incentives to retain such Employees) and agents, and to
preserve their business relationships with, and the goodwill of, their
customers, suppliers and others. Each Seller shall pay before delinquent
all taxes and other charges upon or against such Seller or any of its
properties or income, file when due all tax returns and other reports
required by Governmental Authorities and pay when due all liabilities
except those which it chooses to contest in good faith and by appropriate
proceedings.
(b) Books and Records. Each Seller shall maintain its books, accounts
-----------------
and records in the usual, regular and ordinary manner.
(c) Litigation During Interim Period. Sellers will advise Buyer in
--------------------------------
writing promptly of the assertion, commencement or threat of any material
claim, litigation, labor dispute, proceeding or investigation in which a
Seller is a party or the Acquired Assets or CATV Business may be affected.
(d) Material Contracts and Material CATV Instruments. Sellers shall
------------------------------------------------
deliver to Buyer copies of all Material Contracts and Material CATV
Instruments that
-40-
are entered into after the date hereof and prior to the Closing.
(e) Maintenance of Acquired Assets. Sellers shall (i) maintain the
------------------------------
Acquired Assets, including the plant and Equipment and Inventory related
thereto, in good operating condition, except where the failure to so
maintain would not reasonably be expected to have, individually or in the
aggregate, a Regional Material Adverse Effect and (ii) in the event the
Closing has not taken place prior to January 1, 1998, implement capital
expenditures during 1998 up to and including the Closing Date, designed to
maintain its physical plant and assets in the ordinary course of business
consistent with past practices;
(f) Disconnection. Sellers shall continue in all material respects
-------------
their policies for disconnection and discontinuance of service to Basic
Subscribers whose accounts are delinquent in accordance with those policies
in effect on the date of this Agreement.
(g) Disposal of Acquired Assets. Sellers shall not sell, transfer or
---------------------------
assign any Acquired Assets other than in the ordinary course of business
consistent with past practices.
(h) New Contracts. Sellers, without consent of Buyer, shall not enter
-------------
into any contract or commitment not on an arm's-length basis for the
acquisition of goods or services relating to the CATV System or the CATV
Business, exclusive of contracts or commitments with respect to capital
expenditures, the performance of which will not be completed by the Closing
Date and which involve an annual expenditure in excess of $50,000;
provided, however, that if such contract or commitment is being entered
-------- -------
into in the ordinary course of the CATV Business, then Buyer shall not
unreasonably withhold consent.
(i) Increased Compensation. Subject to Section 5.01(a), Sellers shall
----------------------
not increase in any material respect the compensation or benefits available
to Employees of Sellers who work in the CATV Business except as required
pursuant to existing written agreements or except in the ordinary course of
business consistent with past practice.
-41-
(j) Accounts Receivable Write-Offs. Sellers shall report and write
------------------------------
off accounts receivable in accordance with past practices.
(k) Amendments. Sellers shall not permit the amendment or
----------
cancellation of any Contract or CATV Instrument (other than those
constituting Excluded Assets) which would, individually or in the
aggregate, reasonably be expected to have a Regional Material Adverse
Effect.
(l) Inventories. Sellers shall maintain Invento ries at normal levels
-----------
consistent with past practice.
(m) Marketing Programs. Sellers agree not to implement any new
------------------
marketing program, policy or practice, or implement any rate change,
retiering or repackaging (i) outside the ordinary course of business
consistent with past practices or (ii) designed to temporarily increase the
number of Basic Subscribers.
(n) Employee Bonuses and Commissions. Within thirty (30) days of the
--------------------------------
date of this Agreement, Sellers will provide Buyer with a schedule, true
and accurate in all material respects, listing, for each Employee who
earned annual compensation in excess of $40,000 during 1996, such
Employee's total compensation during 1996 (including salary, bonus and
other compensation).
(o) Material Contracts and Material CATV Instruments. Within thirty
------------------------------------------------
(30) days of the date of this Agreement, Sellers shall provide Buyer with a
list of all Material Contracts and Material CATV Instruments that Buyer is
assuming or acquiring, as the case may be.
5.02 Access to Information.
---------------------
(a) Access by Buyer. Between the date of this Agreement and the
---------------
Closing, Buyer shall have reasonable access upon reasonable notice during
normal business hours to (i) all of the properties, books, reports,
records, CATV Instruments and Contracts of Sellers, and Sellers shall
furnish Buyer with all information it may reasonably request (ii) executive
officers of Cablevision in connection with matters relating to or arising
out of this Agreement and (iii) general managers of each Regional CATV
System, provided that reasonable advance
-42-
notice is given to an executive officer of Cablevision. All information
obtained by Buyer pursuant to this Agreement and in connection with the
negotiation hereof shall be used by Buyer solely for purposes related to
this Agreement and the acquisition of the Acquired Assets and, in the case
of non-public information, shall, except as may be required for the
performance of this Agreement or by Law, or as may be required to secure
the financing contemplated by the Financing Commitment Letter (or any
Replacement Commitment Letter), or any other financing needed to consummate
the transactions contemplated hereby be kept in strict confidence by Buyer.
(b) Access by Sellers. Subsequent to the Closing, Buyer shall
-----------------
preserve and give to Sellers reasonable access upon reasonable notice
during normal business hours to all of the books, reports, records, CATV
Instruments and Contracts from files and records transferred to Buyer at
the time of Closing, for the purposes of the preparation of tax returns,
the defense of any claims asserted or which may be asserted with respect to
which a Seller is the Indemnitor as contemplated by this Agreement, or
other proper purposes.
5.03 Notification of Certain Matters. Each party will promptly notify
-------------------------------
each other party of any fact, event, circumstance or action the existence or
occurrence of which would cause any of such party's representations or
warranties under this Agreement not to be true and correct in any material
respect.
5.04 Forms 394. If required, promptly after the date of this Agreement,
---------
the Sellers and Buyer shall, at their own expense, prepare and file properly
prepared Applications for Franchise Authority Consent to Assignment or Transfer
of Control or Cable Television Franchise FCC 394 with the local Government
Authorities that have issued franchises to the Sellers, and shall file all
additional information required by such franchises or applicable local Laws or
that the Governmental Authorities deem necessary or appropriate in connection
with their consideration of the request of the Sellers or Buyer that such
authority approve of the transfer of the franchises included in the CATV Systems
to Buyer.
5.05 Monthly Financial Statements. Between the date of execution and
----------------------------
delivery of this Agreement and the Closing Date, U.S. Cable shall deliver to
Buyer within thirty-five (35) days
-43-
after the end of each calendar month, unaudited consolidated financial reports
in the form customarily prepared by U.S. Cable (which shall include in the
consolidation ECC and Missouri, L.P.) with respect to the CATV Business and
other reports with respect to the CATV Business (including, without limitation,
capital expenditures to the CATV Business, reports setting forth the revenue and
cash flow of the CATV Business for each month and year-to-date, subscriber
information for basic subscribers and premium service units, disconnect
requests, and such other information as Buyer may reasonably request which is in
the form customarily prepared by U.S. Cable, beginning as soon as practicable
after the date of this Agreement). Such financial statements and monthly
operating statements shall present fairly and accurately in all material
respects the consolidated financial condition and results of operations of U.S.
Cable, ECC and Missouri, L.P., and the CATV Business for the period then ended
and as of such dates and be prepared in accordance with GAAP consistently
applied through the periods specified subject to normal year end adjustments.
5.06 Covenant Not to Compete. The term "Covenantors" as used in this
-----------------------
Section 5.06 shall be defined to mean each Seller and Cablevision Systems
Corporation.
(a) Each Covenantor, covenants and agrees that for a period of three
years after Closing (or such period as allowed by law if less than three
years), no Covenantor nor any corporation, firm or other entity controlled
by such Covenantor (alone or in combination with any other Covenantor) will
acquire, manage, operate or control, any cable television system,
multichannel multipoint distribution system ("MMDS"), satellite master
antenna system ("SMATV") or local multipoint distribution system ("LMDS")
within the System Areas. Notwithstanding anything contained herein, the
ownership of securities of any company which is "publicly held" and which
do not constitute more than five percent (5%) of the voting rights or
equity interests of such entity shall not constitute a violation of this
covenant.
(b) Each Covenantor agrees that in the event that any Covenantor
commits a breach or threatens to commit a breach of any of the provisions
of this Section 5.06 as a result of actions by such Covenantor or any
corporation, firm or other entity controlled by such Covenantor, Buyer
shall have the right and remedy to have the provisions of this Section 5.06
specifically enforced
-44-
by any court having jurisdiction, it being acknowledged and agreed that any
such breach could cause immediate irreparable injury to Buyer and that
money damages would not provide an adequate remedy at law for any such
breach or threatened breach. Such right and remedy shall be in addition to,
and not in lieu of, any other rights and remedies including damages
available to Buyer at law or in equity.
(c) If any of the provisions of, or covenants contained in, this
Section 5.06 are hereafter construed to be wholly or to any extent invalid
or unenforceable in any jurisdiction, the same shall be deemed
automatically modified to the minimum extent necessary to make such
provision or covenant enforceable, and the same shall not affect the
remainder of the provisions to the extent not invalid or unenforceable in
such jurisdiction or the enforceability thereof without limitation in any
other jurisdiction.
5.07 No Solicitation. Between the date of this Agreement and the Closing
---------------
Date, Sellers shall not, and shall cause their partners, officers, directors,
employees, agents and representatives not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of any proposal with respect
to the CATV Business, engage in any negotiations concerning, or provide to any
other Person any information or data relating to the CATV Business, the CATV
Systems, the Acquired Assets, or Sellers for the purposes of, or have any
discussions with any Person relating to, or otherwise cooperate in any way with
or assist or participate in, facilitate or encourage, any inquiries or the
making of any proposal which constitutes, or may reasonably be expected to lead
to, any effort or attempt by any other Person to seek or effect a sale of all or
substantially all of the Sellers, the Acquired Assets, the CATV Systems or the
CATV Business.
5.08 Status of Financing Commitment Letter. Buyer shall give prompt
-------------------------------------
notice to Sellers if the Financing Commitment Letter is withdrawn or materially
modified and if a Replacement Commitment Letter is executed or withdrawn or
materially modified.
-45-
6. DELIVERIES AT CLOSING.
---------------------
6.01 Deliveries by Sellers. At the Closing, Sellers will deliver or
---------------------
cause to be delivered to Buyer:
(a) Such deeds (consisting of special warranty deeds unless Sellers
received a lesser deed in connection with their acquisition of such
property, then a quitclaim deed or such other form of deed as Sellers
determine is appropriate based on advice of their counsel), certificates or
title policies, bills of sale, endorsements, and other good and sufficient
instruments of conveyance, transfer and assignment as are necessary to vest
in Buyer the right, title and interest of Sellers in accordance herewith in
and to the Acquired Assets in a form reasonably satisfactory to Buyer.
(b) For each Seller, a certificate signed by a principal officer,
dated as of the Closing, representing and certifying to Buyer as to the
matters set forth in Sections 7.02, 7.03, 7.04 and 7.05.
(c) A Bill of Sale, General Assignment and Instrument of Assumption of
Liabilities in substantially the form of Exhibit B hereto.
(d) An opinion of Sellers' Counsel, substantially in the form of
Exhibit D hereto.
(e) An opinion of Sellers' FCC Counsel substantially in the form of
Exhibit I hereto.
(f) Evidence that the waiting period under the HSR Act and Rules, if
applicable, has expired.
(g) Evidence in a form and substance reasonably satisfactory to Buyer
of receipt of the Required Consents and approvals listed on Schedule 3.02
as required as conditions to the transactions contemplated hereunder have
been obtained.
(h) The Indemnity Escrow Agreement, in substantially the form attached
hereto as Exhibit H, executed by Sellers.
-46-
(i) If applicable, the Retained Systems Escrow Agreement, in
substantially the form attached hereto as Exhibit F, executed by the
applicable Sellers.
(j) If applicable, the Management Agreement, in substantially the form
attached hereto as Exhibit G, executed by the applicable Sellers.
6.02 Deliveries by Buyer. At the Closing, Buyer will deliver or cause to
-------------------
be delivered to Sellers:
(a) The Purchase Price as provided in Section 2.02 less the Indemnity
Escrow which shall be delivered to the Indemnity Escrow Agent as provided
in Section 2.02.
(b) A Bill of Sale, General Assignment and Instrument of Assumption of
Liabilities in the form of Exhibit B hereto.
(c) A certificate signed by a member or manager of Buyer dated as of
the Closing, representing and certifying to Sellers as to matters set forth
in Sections 8.02, 8.03, 8.04 and 8.05.
(d) An opinion of Buyer's Counsel, substantially in the form of
Exhibit E hereto.
(e) Evidence in a form and substance reasonably satisfactory to
Sellers that the Required Consents listed on Schedule 4.05 have been
obtained.
(f) Evidence that the waiting period under the HSR Act and Rules, if
applicable, has expired.
(g) The Indemnity Escrow Agreement, in substantially the form attached
hereto as Exhibit H, executed by Buyer.
(h) If applicable, the Retained Systems Escrow Agreement, in
substantially the form attached hereto as Exhibit F, executed by Buyer.
(i) If applicable, the Management Agreement, in substantially the form
attached hereto as Exhibit G, executed by Buyer.
-47-
7. CONDITIONS TO THE OBLIGATIONS OF BUYER.
--------------------------------------
The obligations of Buyer to complete the transactions provided for herein
are subject to the fulfillment, of all of the following conditions any of which
may be waived in writing by Buyer:
7.01 Receipt of Consents. The conditions specified in Section 9.02 shall
-------------------
have been satisfied and the Required Consents described in Schedules 3.02 and
4.05, shall have been obtained and be in full force and effect. Notwithstanding
the foregoing, to the extent that approvals and consents of Governmental
Authorities have been obtained such that the number of Retained Basic
Subscribers does not in the aggregate exceed ten percent (10%) of the Basic
Subscribers, this closing condition shall have been fulfilled insofar as the
consents and approvals of franchising authorities are concerned; provided,
however, that upon completion of the Closing, the provisions of Section 9.06
hereof with regard to Retained Basic Subscribers shall apply.
7.02 Sellers' Authority. All actions under the documents governing
------------------
the Sellers that are necessary to authorize (i) the execution and delivery of
this Agreement by Sellers and the performance by each Seller of its obligations
under this Agreement and (ii) the consummation of the transactions contemplated
hereby, shall have been duly and validly taken by Sellers and shall be in full
force and effect on the Closing Date.
7.03 Performance by Sellers. Each Seller shall have performed all of its
----------------------
agreements and covenants hereunder (including, without limitation, its covenants
in Articles 5, 6 and 9) to the extent such are required to be performed at or
prior to the Closing except (and other than with respect to covenants and
agreements set forth in Section 6.01) where the failure to perform, individually
or in the aggregate, as has not had, do not have or would not reasonably be
expected to have, a CATV Business Material Adverse Effect or which does not have
a material adverse affect on the ability of Sellers to consummate the
transactions contemplated hereby.
7.04 Absence of Breach of Warranties and Representa tions. The
----------------------------------------------------
representations and warranties of Sellers con tained in this Agreement shall be
true and correct on and as of the Closing Date with the same force and effect as
if made
-48-
on and as of such date, except (i) to the extent that such representations and
warranties describe a condition on a specified time or date or are affected by
the conclusion of the transactions permitted or contemplated hereby or the
conduct of the CATV Business in accordance with Article 5 hereof between the
date hereof and the Closing Date, or (ii) where the failure of such
representations and warranties to be true and correct, individually or in the
aggregate, does not have, has not had and would not reasonably be expected to
have, a CATV Business Material Adverse Effect.
7.05 Absence of Proceedings. No Judgment shall have been issued
----------------------
enjoining or preventing the consummation of the transactions contemplated
hereby.
7.06 Financing Withdrawal. (a) Since the date of this Agreement, there
--------------------
shall not have occurred a material adverse deterioration in the debt securities
market for corporate issuers generally or in the debt securities market for the
syndication of bank loans to corporate borrowers generally as a result of which
The Chase Manhattan Bank or Chase Securities Inc. has exercised its rights under
clause (iii) of the fourth paragraph of the Financing Commitment Letter not to
provide the financing provided for therein as a result of such material adverse
deterioration; provided, that if a Replacement Commitment Letter is obtained,
then the condition set forth in this Section 7.06(a) shall be deemed satisfied
unless such financing is no longer available to Buyer because the bank or banks
or investment bank or investment banks party thereto, as a result of a material
adverse deterioration in the debt securities market for corporate issuers
generally or in the market for the syndication of bank loans to corporate
borrowers generally occurring, in each case, after such Replacement Commitment
Letter is executed by such bank or banks or investment bank or investment banks,
exercises its or their rights under such Replacement Commitment Letter, not to
provide the financing provided for therein as a result of such material adverse
deterioration.
(b) Since the date of this Agreement, there shall not have occurred a
CATV Business Material Adverse Effect as a result of which The Chase Manhattan
Bank or Chase Securities Inc. has exercised their rights under clause (ii) of
the fourth paragraph of the Financing Commitment Letter not to provide the
financing provided for therein as a result of a CATV Business Material Adverse
Effect; provided, that if a Replacement Commitment Letter is obtained, then the
condition
-49-
set forth in this Section 7.06(b) shall be deemed satisfied unless such
financing is no longer available to Buyer because the bank or banks or
investment bank or investment banks party thereto, as a result of a CATV
Business Material Adverse Effect occurring after such Replacement Commitment
Letter is executed by such bank or banks or investment bank or investment banks,
exercises its or their rights under such Replacement Commitment Letter not to
provide the financing provided for therein as a result of such CATV Business
Material Adverse Effect.
7.07 Limitation on Retained Basic Subscribers. As of the Closing Date,
----------------------------------------
there shall not be in the aggregate in excess of 10% of the Sellers' Basic
Subscribers (i) in franchises with respect to which consent to transfer to the
Buyer has not been obtained, (ii) in franchises that are expired as of the
Closing Date, or which were expired as of the date of this Agreement but were
renewed prior to the Closing Date for less than a period of time as agreed to by
Buyer and Sellers, and (iii) in franchises due to expire prior to the date that
is three (3) years after the Closing and with respect to which Sellers did not
timely make a Section 626 Request with the proper Governmental Authority and
which have not been extended or renewed prior to Closing for at least such
period of time as agreed to by Buyer and Sellers. Each Basic Subscriber
referred to in (i), (ii) or (iii) of this Section 7.07 is referred to as a
"Retained Basic Subscriber".
- --------------------------
8. CONDITIONS TO THE OBLIGATIONS OF SELLERS.
----------------------------------------
The obligations of Sellers to complete the transactions provided for herein
are subject to the fulfillment of all of the following conditions, any of which
may be waived in writing by Sellers.
8.01 Receipt of Consents. The conditions specified in Section 9.02 shall
-------------------
have been satisfied, and the Required Consents described in Schedule 3.02 shall
have been obtained and shall be in full force and effect and the approvals and
consents of Governmental Authorities shall have been obtained such that the
aggregate number of Retained Basic Subscribers does not exceed ten percent (10%)
of the Basic Subscribers.
8.02 Buyer's Authority. All member or manager and other actions
-----------------
necessary to authorize (i) the execution, delivery and performance by Buyer of
this Agreement, and (ii) the consummation of the transactions contemplated
hereby,
-50-
shall have been duly and validly taken by Buyer and shall be in full force and
effect on the Closing Date.
8.03 Performance by Buyer. Buyer shall have performed in all material
--------------------
respects all covenants (including, without limitation, its covenants and
agreements set forth in Article 5, 6, or 9) and agreements to be performed by it
hereunder to the extent such are required to be performed at or prior to the
Closing except (and other than with respect to covenants and agreements set
forth in Section 6.02) where the failure to perform does not have a material
adverse effect on the ability of Buyer and Sellers to consummate the
transactions contemplated hereby.
8.04 Absence of Breach of Representations and Warranties. All
---------------------------------------------------
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date with the
same effect as if then made, except to the extent that such representations and
warranties describe a condition on a specified time or date or are affected by
the conclusion of the transactions permitted or contemplated hereby or the
conduct of the CATV Business in accordance with Article 5 hereof between the
date hereof and the Closing Date.
8.05 Absence of Proceedings. No Judgment shall have been issued
----------------------
enjoining or preventing the consummation of the transactions contemplated
hereby.
9. COVENANTS.
---------
9.01 Compliance with Conditions. Each of the parties hereto covenants
--------------------------
and agrees with the other to exercise reasonable commercial efforts to perform,
comply with and otherwise satisfy each and every one of the conditions to be
satisfied by such party hereunder and each party shall use reasonable commercial
efforts to notify promptly the other if it shall learn that any conditions to
performance of either party will not be fulfilled.
9.02 Compliance with HSR Act and Rules.
---------------------------------
(a) The performance of the obligations of all parties under this
Agreement is subject to the condition that, if the HSR Act and Rules are
applicable to the transactions contemplated hereby, the waiting period
specified therein, as the same may be extended, shall
-51-
have expired without action taken to prevent the consummation of the
transactions contemplated hereby.
(b) Each of the parties hereto will use its reasonable commercial
efforts to comply promptly with any applicable requirements under the HSR
Act and Rules relating to filing and furnishing of information to the FTC
and the Antitrust Division of the DOJ, the parties' actions to include,
without limitation, (i) filing or causing to be filed the HSR Report
required to be filed by them, or by any other Person that is part of the
same "person" (as defined in the HSR Act and Rules) or any of them, and
taking all other action required by the HSR Act or Rules; (ii) coordinating
the filing of such HSR Reports (and exchanging drafts thereof) so as to
present both HSR Reports to the FTC and the DOJ at the time selected by the
mutual agreement of Sellers and Buyer, and to avoid substantial errors or
inconsistencies between the two in the description of the transaction; and
(iii) using their reasonable commercial efforts to comply with any
additional request for documents or information made by the FTC or the DOJ
or by a court and assisting the other parties to so comply.
(c) Notwithstanding anything herein to the contrary, in the event that
the consummation of the transactions contemplated hereby is challenged by
the FTC or the DOJ or any agency or instrumentality of the Federal
Government by an action to stay or enjoin such consummation, then Buyer and
Sellers (each, a "Side") shall cooperate with each other, as reasonably
requested, but not beyond the Outside Date, to contest such action until
such Side does not reasonably believe that there are reasonable grounds to
contest such action, at which time such Side shall have the right to
terminate this Agreement unless the other of such Sides, at its sole cost
and expense, elects to contest such action, in which case the noncontesting
Side shall cooperate with the contesting Side and assist the contesting
Side, as reasonably requested, to contest such action until such time as
any party terminates this Agreement under this Section or Article 12. In
the event that such a stay or injunction is granted (preliminary or
otherwise), then either Buyer or Sellers may terminate this Agreement by
prompt written notice to the other(s). If any other form of equitable
relief affecting any party is granted to the FTC, the DOJ or other such
agency or instrumentality,
-52-
then such party may terminate this Agreement by prompt written notice to
the other parties. Upon any termination pursuant to this Section 9.02(c)
other than as a result of a breach of this Agreement, no party shall have
any further obligation or liability to the other parties under this
Agreement. To effectuate the intent of the foregoing provisions of this
Section 9.02, the parties agree to exchange requested or required
information in making the filings and in complying as above provided, and
the parties agree to take all necessary steps to preserve the
confidentiality of the information set forth in any filings including,
without limitation, limiting disclosure of exchanged information to counsel
for the nondisclosing party or parties.
9.03 Applications for Consent to Transfer the Acquired Assets. (a)
--------------------------------------------------------
Subject to Section 5.04 and Section 9.02, in order to secure requisite Consents
to the transfer to Buyer of the Acquired Assets, Buyer with respect to the
Consents listed on Schedule 4.05 and Sellers with respect to the Consents listed
in Schedule 3.02, shall proceed as promptly as practicable and in good faith and
using reasonable commercial efforts, to prepare, file and prosecute such
application or applications as may be necessary to obtain each such consent or
approval. Buyer and Sellers shall use reasonable commercial efforts to promptly
assist each other and shall take such prompt and affirmative actions as may be
reasonably necessary in obtaining such Consents required to be obtained
hereunder and shall cooperate with each other in the preparation, filing and
prosecution of such applications as may be reasonably necessary, and agree to
furnish all information required by the approving entity, and to be represented
at such meetings or hearings as may be scheduled to consider such applications.
Buyer agrees to negotiate in good faith with any applicable Governmental
Authority with respect to any reasonable request made by such Governmental
Authority in connection with obtaining any Consents, renewals or extensions.
Without limiting in any respect the foregoing, each party agrees to file
applications acceptable to all parties with all appropriate Governmental
Authorities for all consents or approvals required to consummate the
transactions hereunder within forty-five (45) days after the date of this
Agreement.
(b) Buyer agrees that, except as provided in the following sentence,
it will not, without the prior written consent of Sellers, take any action to
amend or that would
-53-
amend or modify any application filed as provided in this Section 9.03 after the
date that such application is accepted as complete. Buyer and Sellers agree that
Buyer may amend or modify one time any such application or applications
previously filed without the consent of Sellers so long as such amendments or
modifications are required by applicable Law; provided, that if, as a result of
--------
such amendments or modifications, the conditions precedent to Closing cannot be
satisfied by the Outside Date, then Buyer and Sellers agree that the Outside
Date shall automatically be extended to the first date on which the approval
period with respect to such amendments or modifications shall have expired, but
in no event beyond twelve months from the date of this Agreement. In the event
that Buyer breaches the provisions of this Section 9.03(b) and as a direct
result thereof the conditions precedent to Closing cannot be satisfied by the
Outside Date, as extended, then Sellers may (if they so elect) (i) extend the
Outside Date in Section 12.01 to a date that will give effect to any resulting
delay; or (ii) terminate this Agreement under Section 12.02 hereof.
9.04 Records, Taxes and Related Matters. Sellers and Buyer shall each
----------------------------------
make their respective books and records (including work papers in the possession
of their respective accountants) available for inspection by the other party, or
by its duly authorized representatives, for reasonable business purposes at all
reasonable times during normal business hours, on reasonable notice, for a seven
(7) year period after the Closing Date with respect to all transactions of the
CATV Business occurring prior to or relating to the Closing, and the historical
financial condition, assets, liabilities, results of operation and cash flows of
the CATV Business for any period prior to the Closing. In the case of records
owned by Sellers, such records shall be made available at Sellers' executive
office, and in the case of records owned by Buyer, such records shall be made
available at the office at which such records are maintained. As used in this
Section 9.04, the right of inspection includes the right to make copies for
reasonable business purposes. In all cases where Buyer, pursuant to the terms
hereof, has assumed Sellers' liability for the payment of taxes (including,
without limitation, deposits), Buyer shall (unless and to the extent otherwise
requested by Sellers) prepare and file all returns, reports, information
statements, forms or other documents required to be filed with respect to such
taxes, all in a timely and proper fashion and as may be reasonably necessary or
appropriate to assure that Sellers shall be in material
-54-
compliance with law, and Buyer shall pay or cause to be paid all such taxes when
due.
9.05 Non-Assignment. Notwithstanding any provision to the contrary
--------------
contained herein (but not in limitation of Sellers' obligations under Section
9.03 or the conditions set forth in Section 7.01), Sellers shall not be
obligated to assign to Buyer any Contract or CATV Instrument which provides that
it may not be assigned without the consent of the other party thereto and for
which such consent is not obtained, but in any such event, Sellers shall, to the
extent reasonably necessary, cooperate with Buyer in any commercially
reasonable arrangement designed to provide the benefits thereof to Buyer.
Without limiting the generality of any provision elsewhere herein contained, the
non-assignment of any of the foregoing shall not, to the extent that it is
otherwise an Assumed Liability hereunder, alter its status as such or relieve
Buyer of its obligations or liabilities with respect thereto so long as and only
to the extent Buyer obtains the benefit of the Acquired Asset relating to such
Assumed Liability.
9.06 Retained Franchises. After satisfaction or waiver of the
-------------------
conditions precedent to Buyer's obligation to close as set forth in Section
7.01, those CATV Licenses (and all assets related thereto) that pertain to
Retained Basic Subscribers (the "Retained Franchises") shall be retained by the
-------------------
Seller which holds the Retained Franchises and subsequently transferred to the
Buyer or otherwise disposed of in accordance with the terms hereof.
(a) Concurrent with the Closing hereunder, the applicable Seller and
the Buyer shall enter into a management agreement with respect to each of
the Retained Franchises in the form of the management agreement attached as
Exhibit G hereto (the "Management Agreement").
(b) Sellers and Buyer shall continue to cooperate in attempting to
secure renewal or extension of, or approval of the transfer of, as the case
may be, each Retained Franchise, in accordance with the provisions of
Section 9.03 hereof and where a renewal application is pending at Closing,
renewals of the Retained Franchise.
(c) The Retained Franchises shall be managed in accordance with the
Management Agreement referred to in
-55-
clause (a) above and the Retained Franchise Price shall be released to
Buyer or Sellers, as the case may be, in accordance with the terms of the
Retained Systems Escrow Agreement.
9.07 Use of Names and Logos. For a period of one hundred and twenty
----------------------
(120) days after the Closing Date, Buyer shall be entitled to use trademarks,
trade names, service marks, service names, logos, and similar proprietary rights
of Sellers to the extent incorporated in the Acquired Assets transferred to it
at Closing; provided that Buyer shall use commercially reasonable efforts to
remove all names, marks, logos and other rights of Seller from the Acquired
Assets as soon as reasonably practicable after Closing.
9.08 Audited Financial Statements. Sellers shall deliver to Buyer
----------------------------
audited consolidated financial statements for U.S. Cable and its consolidated
subsidiaries as of and for the year ended December 31, 1997 within ninety (90)
days of December 31, 1997.
10. SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND OTHER AGREEMENTS;
------------------------------------------------------------------------
INDEMNIFICATION.
---------------
10.01 Survival of Representations, Warranties, Covenants and Other
------------------------------------------------------------
Agreements. All representations, warranties, covenants and other agreements
- ----------
made by the parties to this Agreement (other than representations and warranties
set forth in (i) Section 3.06(d) which shall survive the Closing for a period of
two (2) years and (ii) Section 3.05, Section 3.06(a) or relating to claims by
third parties with respect to Excluded Liabilities which shall each survive the
Closing for the period ending 60 days after the expiration of the relevant
statute of limitations applicable to such claims) shall survive the Closing for
a period of one year, and shall thereafter terminate.
10.02 Indemnification by Sellers.
--------------------------
(a) Indemnity. Subject to Section 10.01 and Section 10.05, Sellers
---------
agree to indemnify, defend and hold harmless Buyer, its affiliates and
their respective shareholders, directors, officers, partners, employees,
agents, successors and assigns (a "Seller Indemnified Party"), from and
------------------------
against all losses, damages, liabilities, deficiencies or obligations,
including, without limitation, all claims, actions, suits,
-56-
proceedings, demands, judgments, assessments, fines, interest, penalties,
costs and expenses (including, without limitation, settlement costs and
reasonable legal fees) (collectively, "Losses") to which they may become
------
subject as a direct result of (x) the Excluded Liabilities and (y) any and
all misrepresentations or breaches of a representation herein or warranty
(other than that contained in Section 3.06(d), which is provided for in
Section 10.05) or the nonperformance or breach of any covenants or
agreements of Sellers contained herein.
(b) Payment. Any obligations of Sellers under the provisions of this
-------
Article (including, for the avoidance of doubt, Section 10.05) shall be
paid promptly to the Seller Indemnified Party by the Sellers and shall
represent a retrospective adjustment to Purchase Price. The amount of such
payment (and adjustment) shall be equal to the amount of the Loss incurred
by the Seller Indemnified Party on account of the matter for which
indemnification is required hereunder less any payments made or to be made
to the Seller Indemnified Party under any insurance, indemnity or similar
policy or arrangement.
(c) Buyer's Basket. Notwithstanding anything contained herein to the
--------------
contrary, the indemnification provided above shall apply only to the extent
that, and not until, the aggregate of all amounts subject to
indemnification under this Section 10.02 exceeds two million five hundred
thousand Dollars ($2,500,000) (the "Buyer's Basket"). In any event, the
--------------
maximum amount that Sellers will be required to pay under this Section
10.02 and Section 10.05 in respect of all claims by all parties is fifteen
million Dollars ($15,000,000); provided, however that the Buyer's Basket
-------- -------
and $15,000,000 maximum shall not apply to claims relating to (i) Excluded
Liabilities and (ii) Rate Refund Adjustments paid by Buyer (in cash or on
credit) and as to which Sellers have been given a complete opportunity to
contest, dispute, defend against and appeal by appropriate proceedings. For
avoidance of doubt, amounts paid by Buyer under Section 10.05 shall not
apply toward Buyer's Basket.
(d) Programming Service. To the extent that any action is brought
-------------------
against Buyer by a programming supplier as a result of Buyer's failure to
carry a programming service pursuant to such supplier's contract with
-57-
Sellers, Sellers shall indemnify Buyer for all Losses incurred by Buyer in
connection therewith.
10.03 Indemnification by Buyer.
------------------------
(a) Indemnity. Subject to Section 10.01, Buyer agrees to indemnify,
---------
defend and hold harmless Sellers and their respective shareholders,
partners, directors, officers, employees, agents, successors and assigns (a
"Buyer Indemnified Party"), from and against all Losses to which they may
-----------------------
become subject as a direct result of: (i) any and all misrepresentations or
breaches of a representation or warranty or the nonperformance or breach of
any covenant or agreement of Buyer contained herein; (ii) the Assumed
Liabilities; or (iii) the ownership and operation of the Acquired Assets
and the CATV Business after the Closing.
(b) Payments. Any obligations of Buyer under the provisions of this
--------
Article shall be paid promptly to the Buyer Indemnified Party by Buyer.
The amount of such payment shall be equal to the amount of the Loss
incurred by the Buyer Indemnified Party on account of the matter for which
indemnification is required hereunder less any payments made or to be made
to the Buyer Indemnified Party under any insurance, indemnity or similar
policy or arrangement.
(c) Sellers' Basket. Notwithstanding anything contained herein to the
---------------
contrary, the indemnification provided above shall apply only to the extent
that, and not until, the aggregate of all amounts subject to
indemnification under this Section 10.03 exceeds two million five hundred
thousand Dollars ($2,500,000)(the "Sellers' Basket"). In any event, the
---------------
maximum amount that Buyer will be required to pay under this Section 10.03
in respect of all claims by all parties is fifteen million Dollars
($15,000,000); provided, however, that the Sellers' Basket and $15,000,000
-------- -------
maximum shall not apply to claims relating to Assumed Liabilities.
10.04 Third Party Claims. If any claim ("Asserted Claim") covered by the
------------------ --------------
foregoing indemnities is asserted against any indemnified party ("Indemnitee"),
----------
it shall be a condition to the obligations under this Article that the
Indemnitee shall promptly give the indemnifying party ("Indemnitor") notice
----------
thereof in accordance with Section
-58-
13.05. The Indemnitee shall give Indemnitor an opportunity to control
negotiations toward resolution of such claim without the necessity of
litigation, and, if litigation ensues, to defend the same with counsel
reasonably acceptable to Indemnitee, at Indemnitor's expense, and Indemnitee
shall extend reasonable cooperation in connection with such defense. If the
Indemnitor fails to assume control of the negotiations prior to litigation or to
defend such action within a reasonable time, Indemnitee shall be entitled, but
not obligated, to assume control of such negotiations or defense of such action,
and Indemnitor shall be liable to the Indemnitee for its expenses reasonably
incurred in connection therewith which Indemnitor shall promptly pay. Neither
Indemnitor nor Indemnitee shall settle, compromise, or make any other
disposition of any Asserted Claims, which would or might result in any liability
to Indemnitee or Indemnitor, respectively, under this Article 10 without the
written consent of Indemnitee or Indemnitor, respectively, which shall not be
unreasonably withheld; provided, that the Indemnitor may settle, compromise or
--------
make any other disposition of Asserted Claims if the same includes a complete
discharge of the Indemnitees.
10.05 Environmental Matters. Buyer may perform, at its option and at its
---------------------
own expense, Phase I environmental site assessments and asbestos studies (the
"Environmental Reports") of the Real Property performed by one or more reputable
- ----------------------
environmental firms designated by Buyer and reasonably acceptable to Sellers.
Buyer covenants to notify Sellers of any adverse environmental conditions
affecting the Real Property of which it has knowledge prior to Closing. If
environmental conditions are uncovered as a result of obtaining such
Environmental Reports or as a result of subsequent investigations conducted by
Buyer after Closing pursuant to such Environmental Reports and (i) remediation
of such conditions is required by Environmental Law or such conditions, if not
remediated, would in their then existing state reasonably be expected to subject
Buyer to fines or penalties as a result of such conditions violating
Environmental Law or (ii) Sellers' representations and warranties in Section
3.06(d) are breached, then (a) Buyer will pay the first five hundred thousand
Dollars ($500,000) of actual out-of-pocket remediation expense associated with
such environmental conditions, (b) Buyer, on the one hand, and Sellers, on the
other hand, will share equally the next five million Dollars ($5,000,000) of
actual out-of-pocket remediation expense associated with such environmental
-59-
conditions, and (c) Sellers will pay all of the remainder of such actual out-of-
pocket remediation expense associated with the environmental conditions;
provided, however, in no event will Sellers pay in excess of fifteen million
- -------- -------
Dollars ($15,000,000) in the aggregate as a result of payments made under this
Section 10.05 and Section 10.02 and, provided further, that Buyer shall have no
obligation to pay or incur any remediation expense unless and until the Closing
shall have occurred. Any environmental conditions uncovered as a result of
performing the Environmental Reports will not affect the Closing, unless as a
result thereof, a condition precedent to Closing cannot be satisfied. Sellers
and Buyer agree that Buyer shall not be entitled to make any claims against
Seller pursuant to this Section 10.05 subsequent to the date that is two (2)
years after the Closing.
10.06 Sole Remedy Upon Closing. Sellers and Buyer agree (a) that the
------------------------
indemnification under Sections 10.02 and 10.05 of this Agreement is the sole
remedy of the Buyer for a breach of this Agreement by Sellers in the event the
transactions contemplated by this Agreement are consummated and (b) that the
indemnification under Section 10.03 of this Agreement is the sole remedy of the
Sellers for a breach of this Agreement by Buyer in the event the transactions
contemplated by this Agreement are consummated.
11. FURTHER ASSURANCES.
------------------
From time to time after the Closing, each party will execute and deliver
such other instruments of conveyance and transfer, fully cooperate with the
other parties and take such other actions as the other parties reasonably may
request to effect the purposes and intent of this Agreement; provided, however,
that nothing in this Agreement shall be deemed to require or permit the Sellers
or Buyer to take any action that would otherwise require approval of any CATV
Licenses by any Governmental Authority prior to the time such approval is
obtained.
12. CLOSING.
-------
12.01 Closing. The Closing shall take place at the offices of Buyer's
-------
counsel at 10:00 A.M., local time, on the fifth (5th) business day after all
consents required as conditions to the sale as provided in Section 7.01 have
been received (the "Closing Date"); provided, however, that unless Buyer so
------------
agrees, the Closing shall not occur prior to
-60-
December 1, 1997; and provided further that if the Closing shall not have
occurred prior to the expiration of nine months from the date of this Agreement
or as extended pursuant to Section 9.03 (the "Outside Date"), this Agreement
------------
shall terminate unless otherwise provided by the mutual written agreement of
Buyer and Sellers. If, as of the Outside Date, the Closing cannot be effected,
all parties hereto shall be released from all obligations hereunder other than
obligations arising from a breach or default hereunder, and each party hereto
will bear expenses as provided in Section 13.06 hereof. At the Closing, the
parties hereto shall execute and deliver all instruments and documents as shall
be necessary in the reasonable opinion of counsel for the respective parties to
consummate the transactions contemplated herein.
12.02 Termination. In addition to the termination provided for in
-----------
Section 12.01, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned:
(a) At any time, by the mutual written agreement of Buyer and Sellers;
(b) By Buyer, upon and effective as of the date of written notice to
Sellers, if any of the conditions to the obligations of Buyer set forth in
Article 7 shall not have been waived or satisfied at the time of the
Closing;
(c) By Buyer, if there has been a breach by Sellers of any of their
representations, warranties, covenants or agreements contained in this
Agreement, and such breach shall not have been cured within a reasonable
time after notice thereof to Sellers, or cannot reasonably be cured, in
either case, such that the provisions of Sections 7.01, 7.02, 7.03, 7.04 or
7.07 of this Agreement are incapable of being satisfied by the Outside
Date;
(d) By Sellers, upon and effective as of the date of written notice to
Buyer, if any of the conditions to the obligations of Sellers set forth in
Article 8 shall not have been waived or satisfied at the time of the
Closing;
(e) By Sellers, if there has been a breach by Buyer of any of its
representations, warranties, covenants or agreements contained in this
Agreement, and such breach shall not have been cured within a reasonable
time after
-61-
notice thereof to Buyer or cannot reasonably be cured, in either case, such
that the provisions of Sections 8.01, 8.02, 8.03, 8.04 or 7.07 of this
Agreement are incapable of being satisfied by the Outside Date;
(f) By Sellers or Buyer, upon and effective as of the date of written
notice to the other parties, pursuant to the termination provisions of
Section 9.02(c);
(g) By Sellers, upon and effective as of the date of written notice to
Buyer, pursuant to the termination provisions of Section 9.03(b);
(h) By Sellers, (i) if the Financing Commitment Letter has been
withdrawn or modified in any material respect and Buyer has not obtained a
Replacement Commitment Letter(s) within 90 days of such withdrawal or
material modification, or (ii) if Buyer has obtained a Replacement
Commitment Letter(s), and such Replacement Commitment Letter(s) has been
withdrawn or modified in a material respect and such Replacement Commitment
Letter(s) has not been replaced with another Replacement Commitment Letter
within 90 days of such withdrawal or modification;
(i) By Buyer if Sellers refuse to proceed or tender performance at
Closing; or
(j) By Sellers if Buyer refuses to proceed or tender performance at
Closing.
12.03 Remedies Upon Default.
---------------------
(a) Buyer's Default. Subject to the last sentence of this Section
---------------
12.03(a), if (i) Sellers terminate this Agreement pursuant to Section
12.02(d) as a result of any of the conditions set forth in Sections 8.01,
8.02, 8.03 or 8.04 not having been satisfied at the time the Closing should
have otherwise occurred and such failure to have any such condition
satisfied is due to Buyer's breach of any material term, condition,
covenant or agreement of this Agreement or, (ii) if this Agreement shall
terminate pursuant to Section 12.01 or Section 12.02(g) and such failure of
the Closing to occur on or prior to the Outside Date is due to Buyer's
breach of any material term, condition, covenant or agreement of this
Agreement, or (iii) Sellers terminate this Agreement pursuant to
-62-
Section 12.02(j) because Buyer refuses to proceed or tender performance at
the Closing, or (iv) Sellers terminate this Agreement pursuant to Section
12.02(e) or Section 12.02(h), then, unless, in the case of clause (iii), at
the Closing there is a nonfulfillment of any of the conditions precedent
specified in Article 7 hereof (other than as a result of Buyer's breach of
its obligations hereunder) or unless in the case of clause (i), (ii), (iii)
or (iv) Sellers are in material breach under this Agreement, Sellers shall
be entitled to receive the deposit in the Earnest Money Escrow, pursuant to
the Earnest Money Escrow Agreement. The parties agree that such payment to
Sellers shall constitute liquidated damages and not a penalty and that the
amount of such liquidated damages are reasonable in light of the nature of
the harm to Sellers and the difficulty in assessing actual damages.
(b) Seller's Default. If (i) Buyer terminates this Agreement
----------------
pursuant to Section 12.02(b) as a result of any of the conditions set forth
in Section 7.01, 7.02, 7.03 or 7.04 not having been satisfied at the time
the Closing should have otherwise occurred and such failure to have any
such condition satisfied is due to Sellers' breach of any material term
condition, covenant or agreement of this Agreement or, (ii) if this
Agreement shall terminate pursuant to Section 12.01 and such failure of the
Closing to occur on or prior to the Outside Date is due to Sellers' breach
of any material term, condition, covenant or agreement of this Agreement,
or (iii) Buyer terminates this Agreement pursuant to Section 12.02(i)
because Sellers refuse to proceed or tender performance at the Closing, or
(iv) Buyer terminates this Agreement pursuant to Section 12.02(c) then,
unless in the case of clause (iii), at the Closing there is a
nonfulfillment of any of the conditions precedent specified in Article 8
hereof (other than as a result of Sellers' breach of its obligations
hereunder) or unless in the case of clause (i), (ii), (iii) or (iv) Buyer
is in material breach under this Agreement, Buyer shall be entitled to
recover Damages from Sellers suffered by Buyer as a result of such breach
but in no event shall Buyer be entitled to recover in excess of $15,000,000
as a result of damages suffered hereunder. Alternatively, if at any time
on or prior to the Closing Date, Sellers shall be in material breach or be
in material default of their obligations under this Agreement, including if
the Closing does not
-63-
occur due to the refusal by Sellers to proceed or tender performance at
Closing in violation of their obligations under this Agreement, and, with
respect to any such breach or default by Sellers occurring prior to the
time the conditions set forth in Section 7 and 8 hereof have been waived or
satisfied, provided that Buyer is not then in material breach or in
--------
material default of its obligations under this Agreement, Buyer shall be
entitled to require Sellers to specifically perform and consummate the
transactions in accordance with this Agreement, if necessary, through
injunction, court order or other process, and to recover from Sellers any
costs and expenses incurred by Buyers in connection therewith. The remedy
of specific performance is in addition to, and Buyer shall be entitled to,
any and all other rights and remedies at law, including damages, available
to Buyer in accordance with the terms of this Agreement, provided that in
no event shall Buyer be entitled to recover in excess of $15,000,000 as a
result of damages suffered hereunder, and provided further that the remedy
of specific performance is only available if Buyer does not terminate this
Agreement and does not proceed at law for damages from Sellers.
12.04 Return of Earnest Money Escrow. Subject to Section 12.03(a) of
------------------------------
this Agreement and the terms of the Earnest Money Escrow Agreement, upon the
termination of this Agreement, the Earnest Money Escrow, together with any
income thereon, shall be returned, paid or delivered to Buyer, as the case may
be.
13. MISCELLANEOUS.
-------------
13.01 Amendments; Waivers. This Agreement cannot be changed or
-------------------
terminated orally and no waiver of compliance with any provision or condition
hereof and no consent provided for herein shall be effective unless evidenced by
an instrument in writing duly executed by the party hereto sought to be charged
with such waiver or consent. No waiver of any term or provision hereof shall be
construed as a further or continuing waiver of such term or provision or any
other term or provision. Any condition to the performance of any party hereto
which may legally be waived at or prior to the Closing may be waived in writing
at any time by the party or parties entitled to the benefit thereof. Each of
ECC and Missouri, L.P. agree that with respect to any amendment, modification,
waiver, change or discharge of any term or provision hereof,
-64-
U.S. Cable may act for and on behalf of ECC and Missouri, L.P., respectively,
and that any notice given by or to U.S. Cable in accordance with the terms
hereof shall be deemed given by or to each of them and that all notices given
hereunder by Sellers shall be given by U.S. Cable.
13.02 Entire Agreement. This Agreement sets forth the entire
----------------
understanding and agreement of the parties and supersedes any and all prior
agreements, memoranda, arrangements and understandings relating to the subject
matter hereof other than any letter or agreement that specifically refers to
this Section 13.02. No representation, warranty, promise, inducement or
statement of intention has been made by any party which is not contained in this
Agreement, and no party shall be bound by, or be liable for, any alleged
representation, promise, inducement or statement of intention not contained
herein or therein.
13.03 Binding Effect; Assignment. This Agreement shall be binding upon
--------------------------
and inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement may not be assigned by any party without the
prior written consent of the other parties hereto; provided, however, that Buyer
-------- -------
may assign its rights under this Agreement to one or more entities that are
subsidiaries of the Buyer so long as such entity or entities assume the
obligations of Buyer under this Agreement, including the obligation to assume
the Assumed Liabilities at Closing.
13.04 Construction; Counterparts. The Article and Section headings of
--------------------------
this Agreement are for convenience of reference only and do not form a part
hereof and do not in any way modify, interpret or construe the intentions of the
parties. This Agreement may be executed in one or more counterparts, and all
such counterparts shall constitute one and the same instrument.
13.05 Notices. All notices and communications hereunder shall be in
-------
writing and shall be deemed to have been duly given to a party when delivered in
person or by facsimile, or three business days after such notice is enclosed in
a properly sealed envelope, certified or registered, and deposited (postage and
certification or registration prepaid) in a post office or collection facility
regularly maintained by the United States Postal Service, or one business day
after delivery to a nationally recognized overnight courier service, and
addressed as follows:
-65-
If to Sellers: U.S. Cable Television Group, L.P.
ECC Holding Corporation
Missouri Cable Partners, L.P.
c/o U.S. Cable Television Group, L.P.
One Media Crossways
Woodbury, New York 11797
Telephone: (516) 364-8450
Facsimile: (516)
Attention: General Counsel
copies to: Cablevision Systems Corporation
One Media Crossways
Woodbury, New York 11797
Telephone: (516) 364-8450
Facsimile: (516)
Attention: General Counsel
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telephone: (212) 558-4000
Facsimile: (212) 558-3588
Attention: John P. Mead
If to Buyer: Mediacom LLC
90 Crystal Run Road Suite 406-A
Middletown, New York 10940
Telephone: (914) 695-2600
Facsimile: (914) 695-2699
Attention: Rocco B. Commisso
copies to: Cooperman Levitt Winikoff Lester &
Newman, P.C.
800 Third Avenue
New York, New York 10022
Telephone: (212) 688-7000
Facsimile: (212) 755-2839
Attention: Robert L. Winikoff, Esq.
-66-
Any party may change its address for the purpose of notice by giving notice in
accordance with the provisions of this Section 13.05.
13.06 Expenses of the Parties. Except as otherwise provided herein, all
-----------------------
expenses incurred by or on behalf of the parties hereto in connection with the
authorization, preparation and consummation of this Agreement, including,
without limitation, all fees and expenses of agents, representatives, counsel
and accountants employed by the parties hereto in connection with the
authorization, preparation, execution and consummation of this Agreement shall
be borne solely by the party who shall have incurred the same.
13.07 Non-Recourse. No partner, officer, director, shareholder or other
------------
holder of an ownership interest of or in any party to this Agreement shall have
any personal liability in respect of any such party's obligations under this
Agreement by reason of his or its status as such partner, officer, director,
shareholder or other holder.
13.08 Third Party Beneficiary. This Agreement is entered into only for
-----------------------
the benefit of the parties and their respective successors and assigns, and
nothing hereunder shall be deemed to constitute any person a third party
beneficiary to this Agreement.
13.09 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE INTERNAL LAWS, AND NOT THE LAW OF CONFLICTS, OF THE STATE
OF NEW YORK.
13.10 Press Releases. No press release or other public information
--------------
relating to the purchase and sale contemplated in this Agreement shall be made
or disclosed by any party hereto without the consent of the other parties;
provided however, that any party may disclose such information if reasonably
deemed to be required by law by the legal counsel for such party.
13.11 Severability. If any provision of this Agreement is finally
------------
determined to be illegal, void or unenforceable, such determination shall not,
of itself, nullify this Agreement which shall continue in full force and effect
subject to the conditions and provisions hereof.
-67-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
SELLERS:
U.S. CABLE TELEVISION GROUP, L.P.
By: V Cable G.P., Inc., a general
partner
By /s/ Barry J. O'Leary
----------------------------
Name:Barry J. O'Leary
Title:Senior Vice President,
Finance and Treasurer
ECC HOLDING CORPORATION
By /s/ Barry J. O'Leary
----------------------------
Name:Barry J. O'Leary
Title:Senior Vice President,
Finance and Treasurer
MISSOURI CABLE PARTNERS, L.P.
By: V-C Mo. G.P., Inc., a general partner
By /s/ Barry J. O'Leary
----------------------------
Name:Barry J. O'Leary
Title:Senior Vice President,
Finance and Treasurer
BUYER: MEDIACOM LLC
By /s/ Rocco B. Commisso
----------------------------
Name: Rocco B. Commisso
Title: Manager
CABLEVISION SYSTEMS CORPORATION
By /s/ Barry J. O'Leary
----------------------------
Name:Barry J. O'Leary
Title:Senior Vice President,
Finance and Treasurer
(only as to Sections 3.20 and 5.06)
-68-
EXHIBIT 5.1
-----------
[LETTERHEAD OF COOPERMAN LEVITT WINIKOFF LESTER & NEWMAN, P.C.]
August 7, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
We have been requested by Mediacom LLC ("Mediacom"), a New York limited
liability company, and Mediacom Capital Corporation ("Mediacom Capital" and
together with Mediacom, the "Issuers"), a New York corporation, to furnish our
opinion in connection with the registration statement (the "Registration
Statement") on Form S-4, filed concurrently herewith, with respect to the
registration of $200,000,000 principal amount of Series B 8 1/2 % Senior Notes
due 2008 of the Issuers (the "Series B Notes") to be offered in exchange for
outstanding 8 1/2 % Senior Notes due 2008 (the "Series A Notes"). The Series B
Notes will be issued under an indenture relating to the Series A and Series B
Notes (the "Indenture") among the Issuers and Bank of Montreal Trust Company, as
Trustee.
We have made such examination as we have deemed necessary for the purpose
of this opinion. Based upon such examination, it is our opinion that when the
Registration Statement has become effective under the Securities Act of 1933, as
amended, the Series B Notes have been duly executed and authenticated in
accordance with the Indenture, the Indenture has been qualified under the Trust
Indenture Act of 1939, as amended, the Series A Notes have been validly tendered
to the Issuers and the Series B Notes have been delivered in exchange therefor,
the Series B Notes will be validly issued and binding obligations of the Issuers
subject in each case to the effect of (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally and (ii) the application of general principles of
equity (regardless of whether enforcement is considered in proceedings at law or
in equity).
We express no opinion as to the applicability (and, if applicable, the
effect) of Section 548 of the United States Bankruptcy Code or any comparable
provision of state law to the conclusions expressed above.
Securities and Exchange Commission
August 7, 1998
Page 2
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York and the Federal laws of
the United States of America.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus included in the Registration Statement.
Very truly yours,
COOPERMAN LEVITT WINIKOFF
LESTER & NEWMAN, P.C.
By /s/ Elliot Brecher
-----------------------------
EXHIBIT 8.1
-----------
[LETTERHEAD OF COOPERMAN LEVITT WINIKOFF LESTER & NEWMAN, P.C.]
August 3, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
We have been requested by Mediacom LLC ("Mediacom"), a New York limited
liability company, and Mediacom Capital Corporation ("Mediacom Capital" and
together with Mediacom, the "Issuers"), a New York corporation, to furnish our
opinion in connection with the registration statement (the "Registration
Statement") on Form S-4, filed concurrently herewith, with respect to the
registration of $200,000,000 principal amount of Series B 8 1/2 % Senior Notes
due 2008 of the Issuers (the "Series B Notes") to be offered (the "Exchange
Offer") in exchange for outstanding 8 1/2 % Senior Notes due 2008 (the "Series A
Notes").
We have made such examination as we have deemed necessary for the purpose
of this opinion. Based upon the terms of the Exchange Offer, of the Series A
Notes and of the Series B Notes, which are set forth in the Registration
Statement, it is our opinion that the summary set forth in "Federal Tax
Considerations--Exchange of Series A Notes for Series B Notes" in the
Registration Statement accurately describes, in all material respects, the
material federal income tax consequences of the Exchange Offer to the holders of
the Series A Notes.
The foregoing opinion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service, and case
law, any of which may be changed at any time with retroactive effect. We
undertake no obligation to update this opinion in respect of any such changes.
Securities and Exchange Commission
August 3, 1998
Page 2
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus included in the Registration Statement.
Very truly yours,
COOPERMAN LEVITT WINIKOFF
LESTER & NEWMAN, P.C.
BY /s/ Mark L. Lubin
----------------------
[Execution Copy]
EXHIBIT 10.5(a)
************************************************************
MEDIACOM CALIFORNIA LLC
MEDIACOM DELAWARE LLC
MEDIACOM ARIZONA LLC
_____________________________
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 24, 1997
______________________________
THE CHASE MANHATTAN BANK,
as Administrative Agent
and
FIRST UNION NATIONAL BANK,
as Documentation Agent
************************************************************
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience of reference only.
Page
----
Section 1. Definitions and Accounting Matters.................... 2
1.01 Certain Defined Terms.................................. 2
1.02 Accounting Terms and Determinations.................... 34
1.03 Classes and Types of Loans............................. 36
1.04 Subsidiaries........................................... 36
1.05 Nature of Obligations of Borrowers..................... 36
Section 2. Commitments, Loans, Notes and Prepayments............. 36
2.01 Loans.................................................. 36
2.02 Borrowings............................................. 38
2.03 Changes of Commitments................................. 39
2.04 Commitment Fee......................................... 41
2.05 Lending Offices........................................ 41
2.06 Several Obligations; Remedies Independent.............. 41
2.07 Notes.................................................. 42
2.08 Optional Prepayments and Conversions or Continuations
of Loans............................................... 43
2.09 Mandatory Prepayments and Reductions of Commitments.... 45
Section 3. Payments of Principal and Interest.................... 46
3.01 Repayment of Loans..................................... 46
3.02 Interest............................................... 49
3.03 Determination of Applicable Margin..................... 50
Section 4. Payments; Pro Rata Treatment; Computations; Etc....... 51
4.01 Payments............................................... 51
4.02 Pro Rata Treatment..................................... 52
4.03 Computations........................................... 53
4.04 Minimum Amounts........................................ 53
4.05 Certain Notices........................................ 54
4.06 Non-Receipt of Funds by the Administrative Agent....... 55
4.07 Sharing of Payments, Etc............................... 56
Section 5. Yield Protection, Etc................................. 57
5.01 Additional Costs....................................... 57
(i)
Page
----
5.02 Limitation on Types of Loans........................... 60
5.03 Illegality............................................. 61
5.04 Treatment of Affected Loans............................ 61
5.05 Compensation........................................... 62
5.06 U.S. Taxes............................................. 63
5.07 Replacement of Lenders................................. 64
Section 6. Conditions Precedent.................................. 65
6.01 Initial Loan........................................... 65
6.02 Initial and Subsequent Loans........................... 70
Section 7. Representations and Warranties........................ 71
7.01 Corporate Existence.................................... 71
7.02 Financial Condition.................................... 71
7.03 Litigation............................................. 72
7.04 No Breach.............................................. 72
7.05 Action................................................. 73
7.06 Approvals.............................................. 73
7.07 ERISA.................................................. 73
7.08 Taxes.................................................. 74
7.09 Investment Company Act................................. 74
7.10 Public Utility Holding Company Act..................... 74
7.11 Material Agreements and Liens.......................... 75
7.12 Environmental Matters.................................. 75
7.13 Capitalization......................................... 76
7.14 Subsidiaries, Etc...................................... 77
7.15 True and Complete Disclosure........................... 77
7.16 Franchises............................................. 78
7.17 The CATV Systems....................................... 78
7.18 Rate Regulation........................................ 80
7.19 Real Property.......................................... 81
7.20 Acquisition Agreements................................. 81
Section 8. Covenants of the Borrowers............................ 81
8.01 Financial Statements Etc............................... 82
8.02 Litigation............................................. 85
8.03 Existence, Etc......................................... 86
8.04 Insurance.............................................. 87
8.05 Prohibition of Fundamental Changes..................... 87
8.06 Limitation on Liens.................................... 93
8.07 Indebtedness........................................... 95
8.08 Investments............................................ 95
8.09 Restricted Payments.................................... 96
8.11 Management Fees........................................ 100
8.12 Capital Expenditures................................... 101
8.13 Interest Rate Protection Agreements.................... 102
8.14 Affiliate Subordinated Indebtedness.................... 102
(ii)
Page
----
8.15 Lines of Business...................................... 103
8.16 Transactions with Affiliates........................... 103
8.17 Use of Proceeds........................................ 104
8.18 Certain Obligations Respecting Subsidiaries............ 104
8.19 Modifications of Certain Documents..................... 106
Section 9. Events of Default..................................... 106
9.01 Events of Default...................................... 106
9.02 Certain Cure Rights.................................... 111
Section 10. The Administrative Agent............................. 113
10.01 Appointment, Powers and Immunities.................... 113
10.02 Reliance by Administrative Agent...................... 114
10.03 Defaults.............................................. 114
10.04 Rights as a Lender.................................... 115
10.05 Indemnification....................................... 115
10.06 Non-Reliance on Administrative Agent and Other
Lenders.............................................. 116
10.07 Failure to Act........................................ 117
10.08 Resignation or Removal of Administrative Agent........ 117
10.09 Consents under Other Loan Documents................... 117
10.10 Documentation Agent................................... 118
Section 11. Miscellaneous........................................ 118
11.01 Waiver................................................ 118
11.02 Notices............................................... 119
11.03 Expenses, Etc......................................... 119
11.04 Amendments, Etc....................................... 121
11.05 Successors and Assigns................................ 122
11.06 Assignments and Participations........................ 122
11.07 Survival.............................................. 126
11.08 Captions.............................................. 126
11.09 Counterparts.......................................... 126
11.10 Governing Law; Submission to Jurisdiction............. 126
11.11 Waiver of Jury Trial.................................. 127
11.12 Treatment of Certain Information; Confidentiality..... 127
(iii)
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Investments
SCHEDULE III - Franchises
SCHEDULE IV - Certain Matters Related to CATV Systems
SCHEDULE V - Real Property
SCHEDULE VI - Certain Adjustments to Operating Cash Flow and System Cash Flow
EXHIBIT A-1 - Form of Revolving Credit Note
EXHIBIT A-2 - Form of Term A Note
EXHIBIT A-3 - Form of Term B Note
EXHIBIT B - Form of Quarterly Officer's Report
EXHIBIT C - Form of Security Agreement
EXHIBIT D - Form of Guarantee and Pledge Agreement
EXHIBIT E - Form of Subsidiary Guarantee Agreement
EXHIBIT F - Form of Management Fee Subordination Agreement
EXHIBIT G - Form of Opinion of Counsel to
the Obligors
EXHIBIT H - Form of Opinion of Special New York
Counsel to Chase
EXHIBIT I - Form of Confidentiality Agreement
EXHIBIT J - Form of Assignment and Acceptance
(iv)
SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 24, 1997,
between: MEDIACOM CALIFORNIA LLC, a limited liability company duly organized
and validly existing under the laws of the State of Delaware ("Mediacom
--------
California"); MEDIACOM DELAWARE LLC, a limited liability company duly organized
- ----------
and validly existing under the laws of the State of Delaware ("Mediacom
--------
Delaware"); MEDIACOM ARIZONA LLC, a limited liability company duly organized and
validly existing under the laws of the State of Delaware ("Mediacom Arizona"
----------------
and, together with Mediacom California and Mediacom Delaware, the "Borrowers");
---------
each of the lenders that is a signatory hereto identified under the caption
"Lenders" on the signature pages hereto and each lender that becomes a "Lender"
after the date hereof pursuant to Section 11.06(b) hereof (individually, a
"Lender" and, collectively, the "Lenders"); THE CHASE MANHATTAN BANK, a New York
- ------- -------
banking corporation, as administrative agent for the Lenders (in such capacity,
together with its successors in such capacity, the "Administrative Agent") and
--------------------
FIRST UNION NATIONAL BANK, as documentation agent (in such capacity, the
"Documentation Agent").
- --------------------
Mediacom California, Mediacom Arizona, the Existing Lenders (as hereinafter
defined) and the Administrative Agent are parties to an Amended and Restated
Credit Agreement dated as of December 27, 1996 (such Credit Agreement, as
heretofore modified and supplemented and in effect on the date hereof, being
herein called the "Existing Credit Agreement") providing subject to the terms
-------------------------
and conditions thereof, for loans in an aggregate principal amount not exceeding
$40,000,000 at any one time outstanding. The parties hereto wish to amend the
Existing Credit Agreement by among other things, increasing the amount of loans
available thereunder to an aggregate principal amount up to but not exceeding
$100,000,000, by adding the New Lenders (as hereinafter defined), by adding
Mediacom Delaware as an additional borrower thereunder and by amending certain
of the other provisions thereof, and, in that connection, wish to amend and
restate the Existing Credit Agreement in its entirety, it being the intention of
the parties hereto that the loans outstanding on the Effective Date (as
hereinafter defined) shall continue and remain outstanding and not be repaid on
the Effective Date, but shall be assigned and reallocated among the Lenders as
provided in Section 2.01 hereof.
Accordingly the parties hereto hereby agree that the Existing Credit Agreement
shall, as of the Effective Date (but subject to the satisfaction of the
conditions precedent specified
Credit Agreement
----------------
- 2 -
in Section 6.01 hereof), be amended and restated
in its entirety as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall have
---------------------
the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when
used in the plural and vice versa):
---- -----
"Acquisition Agreements" shall mean, collectively, the December 1996
----------------------
Acquisition Agreements, the Benchmark Acquisition Agreement, the Booth
Acquisition Agreement, the Spring 1997 Acquisition Agreements and the Subsequent
Acquisition Agreements.
"Acquisitions" shall mean, collectively, the December 1996 Acquisitions
------------
the Benchmark Acquisition, the Booth Acquisition, the Spring 1997 Acquisitions
and the Subsequent Acquisitions.
"Adjusted Operating Cash Flow" shall mean, for any period during which
----------------------------
the Borrowers shall have consummated either of the Spring 1997 Acquisitions, the
sum, for the Borrowers and their Subsidiaries (determined on a combined basis
without duplication in accordance with GAAP), of the following, in each case
determined under the assumption that such Spring 1997 Acquisition had been
consummated on the first day of such period: (i) Operating Cash Flow for such
period plus (ii) the sum of (x) non-recurring expenses incurred by the
----
applicable Spring 1997 Seller prior to the actual closing of such Spring 1997
Acquisition (to the extent such items were included as operating expenses in the
determination of Operating Cash Flow for such period) and (y) the amounts set
forth in Schedule VI hereto for such period (representing certain cost savings
and programming cost increases in respect of the CATV Systems being acquired in
such Spring 1997 Acquisition), minus (iii) without duplication of the Management
-----
Fees actually paid during such period, the additional Management Fees that would
have been paid during such period at a rate equal to 5% of the gross operating
revenue of the Borrowers and their Subsidiaries for such period (determined, as
specified above, under the assumption that such Spring 1997 Acquisition had been
consummated on the first day of such period).
Credit Agreement
----------------
- 3 -
"Adjusted System Cash Flow" shall mean, for any period during which the
-------------------------
Borrowers shall have consummated either of the Spring 1997 Acquisitions, the
sum, for the Borrowers and their Subsidiaries (determined on a combined basis
without duplication in accordance with GAAP), of the following, in each case
determined under the assumption that such Spring 1997 Acquisition had been
consummated on the first day of such period: (i) System Cash Flow for such
period plus (ii) the sum of (x) non-recurring expenses incurred by the
----
applicable Spring 1997 Seller prior to the actual closing of such Spring 1997
Acquisition (to the extent such items were included as operating expenses in the
determination of System Cash Flow for such period) and (y) the amounts set forth
in Schedule VI hereto (representing certain cost savings and programming cost
increases in respect of the CATV Systems being acquired in such Spring 1997
Acquisition).
"Administrative Questionnaire" shall mean an Administrative Questionnaire in a
----------------------------
form supplied by the Administrative Agent.
"Affiliate" shall mean any Person that directly or indirectly controls, or is
---------
under common control with, or is controlled by, a Borrower and, if such Person
is an individual, any member of the immediate family (including parents, spouse,
children and siblings) of such individual and any trust whose principal
beneficiary is such individual or one or more members of such immediate family
and any Person who is controlled by any such member or trust. As used in this
definition, "control" (including, with its correlative meanings, "controlled by"
------- -------------
and "under common control with") shall mean possession, directly or indirectly,
-------------------------
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise), provided that, in any event, any Person that owns
--------
directly or indirectly securities having 5% or more of the voting power for the
election of directors or other governing body of a corporation or 5% or more of
the partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person. Notwithstanding the foregoing, (a) no individual
shall be an Affiliate solely by reason of his or her being a director, officer
or employee of any Borrower or any of its Subsidiaries and (b) none of the
Wholly Owned Subsidiaries of any Borrower shall be Affiliates.
Credit Agreement
----------------
- 4 -
"Affiliate Subordinated Indebtedness" shall mean Indebtedness to an Affiliate
-----------------------------------
(i) for which a Borrower is directly and primarily liable, (ii) in respect of
which none of its Subsidiaries is contingently or otherwise obligated, (iii)
that is subordinated to the obligations of the Borrowers to pay principal of and
interest on the Loans and Notes hereunder on terms in form and substance
satisfactory to the Majority Lenders, (iv) that does not mature prior to June
30, 2006, and that is issued pursuant to documentation containing terms
(including interest, covenants and events of default) in form and substance
satisfactory to the Majority Lenders and (v) that states by its terms that
principal and interest in respect thereof shall only be payable to the extent
permitted under Section 8.09 hereof. Notwithstanding the foregoing, Affiliate
Subordinated Indebtedness shall not include the Booth Subordinated Indebtedness.
"Applicable Lending Office" shall mean, for each Lender and for each Type of
-------------------------
Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender)
designated for such Type of Loan in the Administrative Questionnaire submitted
by such Lender or such other office of such Lender (or of an affiliate of such
Lender) as such Lender may from time to time specify to the Administrative Agent
and the Borrowers as the office by which its Loans of such Type are to be made
and maintained.
"Applicable Margin" shall mean (a) with respect to Revolving Credit Loans and
-----------------
Term A Loans of any Type, the respective rates indicated below for Revolving
Credit Loans and Term A Loans of such Type opposite the then-current Rate Ratio
(determined pursuant to Section 3.03 hereof) indicated below (except that
anything in this Agreement to the contrary notwithstanding, the Applicable
Margin with respect to Revolving Credit Loans and Term A Loans shall be the
highest rates provided for below (i.e., 1.625% with respect to Base Rate Loans
and 2.625% with respect to Eurodollar Loans) during any period when an Event of
Default shall have occurred and be continuing):
Credit Agreement
----------------
- 5 -
Applicable Margin (% p.a.)
Range --------------------------
of
Rate Ratio Base Rate Loans Eurodollar Loans
---------- --------------- ----------------
Greater than or equal
to 5.50 to 1 1.625% 2.625%
Greater than or equal to
5.00 to 1 but less than
5.50 to 1 1.375% 2.375%
Greater than or equal to
4.50 to 1 but less than
5.00 to 1 1.125% 2.125%
Greater than or equal to
4.00 to 1 but less than
4.50 to 1 0.875% 1.875%
Greater than or equal to
3.00 but less than
4.00 0.625% 1.625%
Less than 3.00 to 1 0.375% 1.375%
and (b) with respect to Term B Loans of any Type, the respective rates indicated
below for Term B Loans of such Type opposite the then-current Rate Ratio
(determined pursuant to Section 3.03 hereof) indicated below (except that
anything in this Agreement to the contrary notwithstanding, the Applicable
Margin with respect to Term B Loans shall be the highest rates provided for
below (i.e., 1.75% with respect to Base Rate Loans and 2.75% with respect to
Eurodollar Loans) during any period when an Event of Default shall have occurred
and be continuing):
Credit Agreement
----------------
- 6 -
Applicable Margin (% p.a.)
Range --------------------------
of
Rate Ratio Base Rate Loans Eurodollar Loans
---------- --------------- ----------------
Greater than or equal
to 5.50 to 1 1.75% 2.75%
Greater than or equal to
5.00 to 1 but less than
5.50 to 1 1.50% 2.50%
Less than 5.00 to 1 1.25% 2.25%
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as amended
---------------
from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the higher of
---------
(a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the Prime Rate
for such day. Each change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based upon the
---------------
Base Rate.
"Basic Documents" shall mean, collectively, this Agreement, the other Loan
---------------
Documents and the Acquisition Agreements.
"Basic Subscribers" shall mean, as at any date, (a) Subscribers who subscribe
-----------------
to a CATV System at the regular basic monthly subscription rate for such CATV
System to a single household Subscriber (exclusive of "secondary outlets", as
such term is commonly understood in the cable television industry), plus (b) the
----
number of Subscribers determined by dividing the aggregate dollar monthly amount
billed to bulk Subscribers (hotels, motels, apartment buildings, hospitals and
the like), by the regular basic monthly subscription rate for basic service
charged by the CATV System in which such bulk Subscriber is located.
"Basle Accord" shall mean the proposals for risk-based capital framework
------------
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital
Credit Agreement
----------------
- 7 -
Standards" dated July 1988, as amended, modified and supplemented and in effect
from time to time or any replacement thereof.
"Benchmark" shall mean Benchmark Acquisition Fund II Limited Partnership, a
---------
Maryland limited partnership.
"Benchmark Acquisition" shall mean the acquisition by Mediacom California
---------------------
pursuant to the Benchmark Acquisition Agreement of substantially all of the
assets comprising the cable television systems of Benchmark in the communities
of Ridgecrest, and China Lake Naval Station, California, and in San Bernadino
County and Kern County, California.
"Benchmark Acquisition Agreement" shall mean the Asset Purchase Agreement made
-------------------------------
as of November 6, 1995, by and between Benchmark and Mediacom California, as
assignee of Mediacom, as amended by an Amendment No. 1 thereto dated as of March
12, 1996, and as the same shall, subject to Section 8.19 hereof, be further
modified and supplemented and in effect from time to time.
"Booth" shall mean Booth American Company, a Michigan corporation.
-----
"Booth Acquisition" shall mean the acquisition by Mediacom California pursuant
-----------------
to the Booth Acquisition Agreement of substantially all of the assets comprising
the cable television systems of Booth in the communities of Kernville, Wofford
Heights, Lake Isabella, Bodfish, Onyx, Weldon-Kelso Valley, Belle Vista, Mt.
Mesa-Squirrel Valley and South Lake of Kern County, California.
"Booth Acquisition Agreement" shall mean the Asset Purchase and Sale Agreement
---------------------------
made as of May 23, 1996 by and between Booth and Mediacom California, as the
same shall, subject to Section 8.19 hereof, be modified and supplemented and in
effect from time to time.
"Booth Subordinated Indebtedness" shall mean the obligations of the Borrowers
-------------------------------
to Booth (or any transferee thereof) under the Amended and Restated Senior
Subordinated Loan Agreement executed and delivered on December 27, 1996 pursuant
to the Booth Acquisition Agreement, as amended by Amendment No. 1 dated as of
June 24, 1997.
"Business Day" shall mean any day (a) on which commercial banks are not
------------
authorized or required to close in New
Credit Agreement
----------------
- 8 -
York City and (b) if such day relates to a borrowing of, a payment or prepayment
of principal of or interest on, a Conversion of or into, or an Interest Period
for, a Eurodollar Loan or a notice by a Borrower with respect to any such
borrowing, payment, prepayment, Conversion or Interest Period, that is also a
day on which dealings in Dollar deposits are carried out in the London interbank
market.
"Capital Expenditures" shall mean, for any period, expenditures made by the
--------------------
Borrowers or any of their Subsidiaries to acquire or construct fixed assets,
plant and equipment (including renewals, improvements and replacements, but
excluding repairs and the Acquisitions) during such period computed in
accordance with GAAP.
"Capital Lease Obligations" shall mean, for any Person, all obligations of
-------------------------
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"CATV System" shall mean any cable distribution system that receives broadcast
-----------
signals by antennae, microwave transmission, satellite transmission or any other
form of transmission and that amplifies such signals and distributes them to
Persons who pay to receive such signals, but shall exclude wireless cable.
"Chase" shall mean The Chase Manhattan Bank.
-----
"Class" shall have the meaning assigned to such term in Section 1.03 hereof.
-----
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
----
time.
"Commisso Entity" shall mean, collectively, (i) Rocco Commisso, (ii) any
---------------
entity controlled by Rocco Commisso and owned by Rocco Commisso, (iii) members
of the immediate family of Rocco Commisso or (iv) trusts established for the
benefit of Rocco Commisso or members of the immediate family of Rocco Commisso.
Credit Agreement
----------------
- 9 -
"Commitments" shall mean, collectively, the Revolving Credit Commitments and
-----------
the Term Loan Commitments.
"Continue", "Continuation" and "Continued" shall refer to the continuation
-------- ------------ ---------
pursuant to Section 2.08 hereof of a Eurodollar Loan from one Interest Period to
the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a conversion pursuant
------- ---------- ---------
to Section 2.08 hereof of one Type of Loans into another Type of Loans, which
may be accompanied by the transfer by a Lender (at its sole discretion) of a
Loan from one Applicable Lending Office to another.
"Cure Monies" shall mean proceeds of Affiliate Subordinated Indebtedness
-----------
and/or equity contributions received by the Borrowers after the date hereof
that, at the time the same are received by the Borrowers are identified by the
Borrowers, in a certificate of a Senior Officer delivered by the Borrowers to
the Administrative Agent within one Business Day of such receipt, as
constituting "Cure Monies" for purposes of Section 9.02 hereof.
"Debt Issuance" shall mean any issuance or sale by a Borrower or any of its
-------------
Subsidiaries after the Effective Date of any debt securities, excluding,
however, any Indebtedness incurred pursuant to Section 8.07(c) or 8.07(e)
hereof.
"Debt Service" shall mean, for any period, the sum, for the Borrowers and
------------
their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following: (a) in the case of Revolving Credit
Loans under this Agreement, the aggregate amount of payments of principal of
such Loans that, giving effect to Commitment reductions or terminations
scheduled to be made during such period pursuant to Section 2.03(a) hereof, were
required to be made pursuant to Section 3.01(a) hereof during such period plus
----
(b) in the case of Term Loans under this Agreement and all other Indebtedness
(other than Revolving Credit Loans), all regularly scheduled payments or
regularly scheduled prepayments of principal of such Indebtedness (including,
without limitation, the principal component of any payments in respect of
Capital Lease Obligations) made or payable during such period (other than the
principal component of any payments in respect of Affiliate Subordinated
Indebtedness) plus (c) all Interest Expense for such period.
----
Credit Agreement
----------------
- 10 -
"December 1996 Acquisitions" shall mean, collectively, the Saguaro Cable
--------------------------
Acquisition and the Valley Center Acquisition.
"December 1996 Acquisition Agreements" shall mean, collectively, the Saguaro
------------------------------------
Cable Acquisition Agreement and the Valley Center Acquisition Agreement.
"Deeds of Trust" shall mean, collectively, one or more deeds of trust,
--------------
mortgages, or collateral assignments of leasehold interest, in form and
substance satisfactory to the Administrative Agent, creating a Lien on real
property or leasehold interests in the state where the respective Property to be
covered by such instrument is located, executed by the respective Obligor that
is the owner or lessee of such Property in favor of the Administrative Agent
(or, in the case of a deed of trust, in favor of a trustee for the benefit of
the Administrative Agent and the Lenders) pursuant to the Existing Credit
Agreement (or any predecessor agreement), Section 6.01(h) hereof or Section 8.18
hereof, as the case may be, covering the respective fee or leasehold interests
owned by such Obligor, as said deeds of trust, mortgages and collateral
assignments of leasehold interests shall be modified and supplemented and in
effect from time to time.
"Default" shall mean an Event of Default or an event that with notice or lapse
-------
of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other disposition
-----------
of any Property (whether now owned or hereafter acquired) by the Borrowers or
any of their Subsidiaries to any other Person excluding any sale, assignment,
transfer or other disposition of any Property sold or disposed of in the
ordinary course of business and on ordinary business terms.
"Dollars" and "$" shall mean lawful money of the United States of America.
------- -
"Effective Date" shall mean the date on which the conditions to effectiveness
--------------
set forth in Section 6.01 hereof shall have been satisfied or waived.
"Environmental Claim" shall mean, with respect to any Person, any written or
-------------------
oral notice, claim, demand or other communication (collectively, a "claim") by
-----
any other Person alleging or asserting such Person's liability for investigatory
Credit Agreement
----------------
- 11 -
costs, cleanup costs, governmental response costs, damages to natural resources
or other Property, personal injuries, fines or penalties arising out of, based
on or resulting from (i) the presence, or Release into the environment, of any
Hazardous Material at any location, whether or not owned by such Person, or (ii)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law. The term "Environmental Claim" shall include, without
limitation, any claim by any governmental authority for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence of Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Laws" shall mean any and all present and future Federal, state,
------------------
local and foreign laws, rules or regulations, and any orders or decrees, in each
case as now or hereafter in effect, relating to the regulation or protection of
human health, safety or the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or toxic or hazardous
substances or wastes into the indoor or outdoor environment, including, without
limitation, ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or toxic or hazardous substances or wastes.
"Equity Issuance" shall mean, collectively, (a) any issuance or sale by a
---------------
Borrower after the Effective Date of (i) any of its ownership interests or of
its capital stock, (ii) any warrants or options exercisable in respect of its
capital stock or its ownership interests (other than any warrants or options
issued to directors, officers or employees of the Borrowers pursuant to employee
benefit plans established in the ordinary course of business and any ownership
interests of the Borrowers issued upon the exercise of such warrants or options)
or (iii) any other security or instrument representing an equity interest (or
the right to obtain any equity interest) in the Borrowers or (b) the receipt by
a Borrower after the Effective Date of any equity capital contribution (whether
or not evidenced by any equity security issued by the recipient of such
contribution), provided that the term "Equity Issuance" shall not include any
--------
capital contribution by Mediacom to any Borrower from
Credit Agreement
----------------
- 12 -
the proceeds of the proposed equity issuance by Mediacom described in the
Confidential Private Placement Memorandum dated September, 1996 relating to the
offering of $75,000,000 limited liability company membership interests in
Mediacom.
"Equity Rights" shall mean, with respect to any Person, any subscriptions,
-------------
options, warrants, commitments, preemptive rights or agreements of any kind
(including, without limitation, any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or securities convertible
into, any additional shares of capital stock of any class or other ownership
interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that is a
---------------
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which a Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which a Borrower
is a member.
"Eurodollar Base Rate" shall mean, with respect to any Eurodollar Loan for any
--------------------
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%), quoted by Chase at approximately 11:00 a.m. London
time (or as soon thereafter as practicable) on the date two Business Days prior
to the first day of such Interest Period for the offering by Chase to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
the Eurodollar Loan to be made by Chase for such Interest Period. If Chase is
not participating in any Eurodollar Loans during any Interest Period therefor,
the Eurodollar Base Rate for such Loans for such Interest Period shall be
determined by reference to the amount of such Loans that Chase would have made
or had outstanding had it been participating in such Loan during such Interest
Period.
"Eurodollar Loans" shall mean Loans that bear interest at rates based on rates
----------------
referred to in the definition of "Eurodollar Base Rate" in this Section 1.01.
Credit Agreement
----------------
- 13 -
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest Period
---------------
therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) determined by the Administrative Agent to be equal to the Eurodollar Base
Rate for such Loan for such Interest Period divided by 1 minus the Reserve
Requirement (if any) for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in Section 9
----------------
hereof.
"Excess Cash Flow" shall mean, for any period, the excess of (a) Operating
----------------
Cash Flow for such period over (b) the sum of (i) Capital Expenditures made
during such period plus (ii) the aggregate amount of Debt Service for such
----
period plus (iii) the Tax Payment Amount for such period plus (iv) any decreases
---- ----
(or minus any increases) in Working Capital from the first day to the last day
-----
of such period.
"Executive Compensation" shall mean, for any period, the aggregate amount of
----------------------
compensation (including, without limitation, salaries, withholding taxes,
unemployment insurance contributions, pension, health and other benefits) of the
Manager's executive management personnel during such period. For purposes
hereof, "executive management personnel" shall not include any individual (such
as a system manager) who is employed solely in connection with the day-to-day
operations of a CATV System.
"Existing Lenders" shall mean Chase and First Union National Bank.
----------------
"FCC" shall mean the Federal Communications Commission or any governmental
---
authority substituted therefor.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
------------------
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
--------
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published
Credit Agreement
----------------
- 14 -
on the next succeeding Business Day and (b) if such rate is not so published for
any Business Day, the Federal Funds Rate for such Business Day shall be the
average rate charged to Chase on such Business Day on such transactions as
determined by the Administrative Agent.
"Fixed Charge Coverage Ratio" shall mean, as at any date, the ratio of (a) the
---------------------------
product of (x) Operating Cash Flow for the fiscal quarter ending on, or most
recently ended prior to, such date times (y) four to (b) the sum of (i) Debt
-----
Service for the period of four consecutive fiscal quarters ending on, or most
recently ended prior to, such date plus (ii) Capital Expenditures for the period
----
of four consecutive fiscal quarters ending on, or most recently ended prior to,
such date plus (iii) the Tax Payment Amount for the period of four consecutive
----
fiscal quarters ending on, or most recently ended prior to, such date. For
purposes of determining the Fixed Charge Coverage Ratio, Capital Expenditures
incurred for any period prior to January 1, 2000 with respect to the cable
television systems acquired or to be acquired in connection with the December
1996 Acquisitions and the Spring 1997 Acquisitions shall be the lesser of (i)
actual Capital Expenditures incurred for such period with respect to such cable
television systems and (ii) the product of $40 times the average number of
-----
Subscribers to such cable television systems during such period.
"Franchise" shall mean a franchise, license, authorization or right by
---------
contract or otherwise to construct, own, operate, promote, extend and/or
otherwise exploit any CATV System operated or to be operated by a Borrower or
any of its Subsidiaries granted by any state, county, city, town, village or
other local or state government authority or by the FCC. The term "Franchise"
shall include each of the Franchises set forth on Schedule III hereto.
"GAAP" shall mean generally accepted accounting principles applied on a basis
----
consistent with those that, in accordance with the last sentence of Section
1.02(a) hereof, are to be used in making the calculations for purposes of
determining compliance with this Agreement.
"Guarantee" shall mean a guarantee, an endorsement, a contingent agreement to
---------
purchase or to furnish funds for the payment or maintenance of, or otherwise to
be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any
Credit Agreement
----------------
- 15 -
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall
--------- ----------
have a correlative meaning.
"Guarantee and Pledge Agreement" shall mean a Second Amended and Restated
------------------------------
Guarantee and Pledge Agreement substantially in the form of Exhibit D hereto
between the Parent Guarantors and the Administrative Agent, as the same shall be
modified and supplemented and in effect from time to time.
"Hazardous Material" shall mean, collectively, (a) any petroleum or petroleum
------------------
products, flammable materials, explosives, radioactive materials, asbestos, urea
formaldehyde foam insulation, and transformers or other equipment that contain
polychlorinated biphenyls ("PCB's"), (b) any chemicals or other materials or
-----
substances that are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Law and (c) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"Indebtedness" shall mean, for any Person: (a) obligations created, issued or
------------
incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person), including, without limitation, Affiliate Subordinated Debt
and Booth Subordinated Indebtedness; (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business so long as such trade accounts
payable are payable within 90 days
Credit Agreement
----------------
- 16 -
of the date the respective goods are delivered or the respective services are
rendered; (c) Indebtedness of others secured by a Lien on the Property of such
Person, whether or not the respective indebtedness so secured has been assumed
by such Person; (d) obligations of such Person in respect of letters of credit
or similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Lease Obligations of such
Person; and (f) Indebtedness of others Guaranteed by such Person; provided that
--------
Indebtedness shall exclude (i) obligations in respect of surety and performance
bonds backing pole rental or conduit attachments and the like, or backing
obligations under Franchises, arising in the ordinary course of business of the
CATV Systems of the Borrowers and their Subsidiaries and (ii) all obligations in
respect of Interest Rate Protection Agreements.
"Interest Coverage Ratio" shall mean, as at any date, the ratio of (a)
-----------------------
Operating Cash Flow for the fiscal quarter ending on, or most recently ended
prior to, such date to (b) Interest Expense for such fiscal quarter.
Notwithstanding the foregoing, if during any fiscal quarter for which the
Interest Coverage Ratio is being determined the Borrowers shall have consummated
either of the Spring 1997 Acquisitions, the Interest Coverage Ratio shall be
deemed to be equal to the ratio of Adjusted Operating Cash Flow for such fiscal
quarter to Interest Expense for such fiscal quarter, Interest Expense to be
determined under the assumption that such Spring 1997 Acquisition had been
consummated (and all Indebtedness incurred in connection therewith) on the first
day of such fiscal quarter.
"Interest Expense" shall mean, for any period, the sum, for the Borrowers and
----------------
their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following: (a) all interest in respect of
Indebtedness (including, without limitation, the interest component of any
payments in respect of Capital Lease Obligations) accrued or capitalized during
such period (whether or not actually paid during such period) and all commitment
fees payable hereunder, but excluding all interest in respect of Affiliate
Subordinated Indebtedness and all Booth Subordinated Indebtedness (in each case,
to the extent not paid in cash during such period), plus (b) the net amount
----
payable (or minus the net amount receivable) under Interest Rate Protection
-----
Agreements during such period (whether or not actually paid or received during
such period)
Credit Agreement
----------------
- 17 -
plus (c) the aggregate amount of upfront or one-time fees or
- ----
expenses payable in respect of Interest Rate Protection Agreements to the extent
such fees or expenses are amortized during such period.
"Interest Period" shall mean, with respect to any Eurodollar Loan, each period
---------------
commencing on the date such Eurodollar Loan is made or Converted from a Base
Rate Loan or (in the event of a Continuation) the last day of the next preceding
Interest Period for such Loan and (subject to the provisions of Section
2.01(c) hereof) ending on the numerically corresponding day in the first,
second, third or sixth calendar month thereafter, as the Borrowers may select as
provided in Section 4.05 hereof, except that each Interest Period that commences
on the last Business Day of a calendar month (or on any day for which there is
no numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) if any Interest Period for any Revolving
Credit Loan would otherwise end after the Revolving Credit Commitment
Termination Date, such Interest Period shall end on the Revolving Credit
Commitment Termination Date; (ii) no Interest Period for any Revolving Credit
Loan may commence before and end after any Revolving Credit Commitment Reduction
Date unless, after giving effect thereto, the aggregate principal amount of
Revolving Credit Loans having Interest Periods that end after such Revolving
Credit Commitment Reduction Date shall be equal to or less than the aggregate
principal amount of Revolving Credit Loans scheduled to be outstanding after
giving effect to the payments of principal required to be made on such Revolving
Credit Commitment Reduction Date; (iii) no Interest Period for any Term A Loan
may commence before and end after any Principal Payment Date unless, after
giving effect thereto, the aggregate principal amount of the Term A Loans having
Interest Periods that end after such Principal Payment Date shall be equal to or
less than the aggregate principal amount of the Term A Loans scheduled to be
outstanding after giving effect to the payments of principal required to be made
on such Principal Payment Date; (iv) no Interest Period for any Term B Loan may
commence before and end after any Principal Payment Date unless, after giving
effect thereto, the aggregate principal amount of the Term B Loans having
Interest Periods that end after such Principal Payment Date shall be equal to or
less than the aggregate principal amount of the Term B Loans scheduled to be
outstanding after giving effect to the payments of principal
Credit Agreement
----------------
- 18 -
required to be made on such Principal Payment Date; (v) each Interest Period
that would otherwise end on a day that is not a Business Day shall end on the
next succeeding Business Day (or, if such next succeeding Business Day falls in
the next succeeding calendar month, on the next preceding Business Day); and
(vi) notwithstanding clauses (i), (ii), (iii) and (iv) above, no Interest Period
shall have a duration of less than one month and, if the Interest Period for any
Eurodollar Loan would otherwise be a shorter period, such Loan shall not be
available hereunder for such period.
"Interest Rate Protection Agreement" shall mean, for any Person, an interest
----------------------------------
rate swap, cap or collar agreement or similar arrangement between such Person
and one or more financial institutions providing for the transfer or mitigation
of interest risks either generally or under specific contingencies. For
purposes hereof, the "credit exposure" at any time of any Person under an
---------------
Interest Rate Protection Agreement to which such Person is a party shall be
determined at such time in accordance with the standard methods of calculating
credit exposure under similar arrangements as prescribed from time to time by
the Administrative Agent, taking into account potential interest rate movements
and the respective termination provisions and notional principal amount and term
of such Interest Rate Protection Agreement.
"Investment" shall mean, for any Person: (a) the acquisition (whether for
----------
cash, Property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of any other Person or any agreement to make any such acquisition (including,
without limitation, any "short sale" or any sale of any securities at a time
when such securities are not owned by the Person entering into such sale); (b)
the making of any deposit with, or advance, loan or other extension of credit
to, any other Person (including the purchase of Property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such Property to such Person), but excluding any such advance, loan or extension
of credit having a term not exceeding 90 days arising in connection with the
sale of programming or advertising time by such Person in the ordinary course of
business; (c) the entering into of any Guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person
and (without duplication) any amount committed to be advanced, lent or extended
to such Person;
Credit Agreement
----------------
- 19 -
or (d) the entering into of any Interest Rate Protection Agreement.
"Lien" shall mean, with respect to any Property, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Loan Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"Loan Documents" shall mean, collectively, this Agreement, the Notes, the
--------------
Security Documents and each Management Fee Subordination Agreement.
"Loans" shall mean, collectively, the Revolving Credit Loans and the Term
-----
Loans.
"Lower Delaware Acquisition" shall mean the acquisition by Mediacom Delaware
--------------------------
pursuant to the Lower Delaware Acquisition Agreement of substantially all of the
assets comprising the cable television systems of American Cable TV Investors 5,
Ltd. in (i) the following areas in Delaware: the residential and recreational
areas known as Angola-by-the Bay, unincorporated Sussex County, Long Neck, the
private residential community of Sea Colony and the towns of Bethany Beach,
Dagsboro, Frankford, Millsboro, Millville, Oceanview, Selbyville and South
Bethany and (ii) the following areas in Maryland: the towns of Willards and
Pittsville, Unincorporated Wicomico County, Worcester County and the private
residential community of Ocean Pines.
"Lower Delaware Acquisition Agreement" shall mean the Asset Purchase Agreement
------------------------------------
made as of December 24, 1996 by and between American Cable TV Investors 5, Ltd.
and Mediacom, as the same shall, subject to Section 8.19 hereof, be modified and
supplemented and in effect from time to time.
"Majority Lenders" shall mean, subject to the last paragraph of Section 11.04
----------------
hereof, Lenders having at least 66-2/3% of the sum of (a) the aggregate
outstanding principal amount of the Term Loans or, if the Term Loans shall not
have been made (or designated as provided in Section 2.01 hereof), the aggregate
outstanding principal amount of the Term Loan Commitments plus (b) the sum of
----
(i) the aggregate unused amount, if any, of the
Credit Agreement
----------------
- 20 -
Revolving Credit Commitments at such time plus (ii) the aggregate outstanding
----
principal amount of the Revolving Credit Loans at such time.
"Majority Revolving Credit Lenders" shall mean Revolving Credit Lenders having
---------------------------------
at least 66-2/3% of the aggregate amount of the Revolving Credit Commitments or,
if the Revolving Credit Commitments shall have terminated, Revolving Credit
Lenders holding at least 66-2/3% of the aggregate unpaid principal amount of the
Revolving Credit Loans.
"Majority Term A Lenders" shall mean Term A Lenders holding at least 66-2/3%
-----------------------
of the aggregate outstanding principal amount of the Term A Loans or, if the
Term A Loans shall not have been made (or designated as provided in Section 2.01
hereof), at least 66-2/3% of the Term A Commitments.
"Majority Term B Lenders" shall mean Term B Lenders holding at least 66-2/3%
-----------------------
of the aggregate outstanding principal amount of the Term B Loans or, if the
Term B Loans shall not have been made, at least 66-2/3% of the Term B
Commitments.
"Management Agreements" shall mean, collectively, (a) the Management Agreement
---------------------
dated March 12, 1996 among Mediacom California and Mediacom Management
Corporation, (b) the Management Agreement dated December 27, 1996 among Mediacom
Arizona and Mediacom Management Corporation and (c) the Management Agreement
dated June 24, 1997 among Mediacom Delaware and Mediacom Management Corporation,
in each case as the same shall, subject to Section 8.19 hereof, be modified and
supplemented and in effect from time to time.
"Management Fee Subordination Agreement" shall mean a Second Amended
--------------------------------------
Management Fee Subordination Agreement substantially in the form of Exhibit F
hereto between the Manager (or, as contemplated by Section 8.11 hereof, any
other Person to whom a Borrower or any of its Subsidiaries may be obligated to
pay Management Fees), the Borrowers and the Administrative Agent, as the same
shall be modified and supplemented and in effect from time to time.
"Management Fees" shall mean, for any period, the sum of all fees, salaries
---------------
and other compensation (including, without limitation, all Executive
Compensation) paid or incurred by the Borrowers to Affiliates (other than
Affiliates that are employees of the Borrowers and their Subsidiaries) in
respect of services
Credit Agreement
----------------
- 21 -
rendered in connection with the management or supervision of
the Borrowers and their Subsidiaries, provided that Management Fees shall
--------
exclude (a) the first $100,000 of Manager Expenses (if any) during any fiscal
year and (b) the aggregate amount of intercompany shared expenses payable to
Mediacom that are allocated by Mediacom to the Borrowers and their Subsidiaries
in accordance with Section 5.05 of the Guarantee and Pledge Agreement (other
than the allocated amount of Executive Compensation, which Executive
Compensation shall in any event constitute management fees hereunder).
"Manager" shall mean Mediacom Management Corporation, or any successor in such
-------
capacity as manager of the Borrowers.
"Manager Expenses" shall mean out-of-pocket expenses incurred by the Manager
----------------
on behalf of the Borrowers and their Subsidiaries in connection with the
operation of the business of the Borrowers and their Subsidiaries.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
-----------------------
Property, business, operations, financial condition, prospects, liabilities or
capitalization of the Borrowers and their Subsidiaries taken as a whole, (b) the
ability of any Obligor to perform its obligations under any of the Loan
Documents to which it is a party, (c) the validity or enforceability of any of
the Loan Documents, (d) the rights and remedies of the Lenders and the
Administrative Agent under any of the Loan Documents or (e) the timely payment
of the principal of or interest on the Loans or other amounts payable in
connection therewith.
"Mediacom" shall mean Mediacom LLC, a New York limited liability company.
--------
"Mediacom Arizona Operating Agreement" shall mean the Operating Agreement of
------------------------------------
Mediacom Arizona dated December 27, 1996 between Mediacom and Mediacom
California, as the same shall, subject to Section 8.19 hereof, be modified and
supplemented and in effect from time to time.
"Mediacom California Operating Agreement" shall mean the Operating Agreement
---------------------------------------
of Mediacom California dated March 12, 1996 between Mediacom and Mediacom
Management Corporation, as the same shall, subject to Section 8.19 hereof, be
modified and supplemented and in effect from time to time.
Credit Agreement
----------------
- 22 -
"Mediacom Delaware Operating Agreement" shall mean the Operating Agreement of
-------------------------------------
Mediacom Delaware dated January 1, 1997, as the same shall, subject to Section
8.19 hereof, be modified and supplemented and in effect from time to time.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
------------------
Section 3(37) of ERISA to which contributions have been made by a Borrower or
any ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Available Proceeds" shall mean:
----------------------
(i) in the case of any Disposition, the amount of Net Cash
Payments received in connection with such Disposition and
(ii) in the case of any Equity Issuance or Debt Issuance, the
aggregate amount of all cash received by any Borrower or any of its
Subsidiaries in respect of such Equity Issuance or Debt Issuance, net of
reasonable expenses incurred by the Borrowers and their Subsidiaries in
connection therewith.
"Net Cash Payments" shall mean, with respect to any Disposition, the aggregate
-----------------
amount of all cash payments, and the fair market value of any non-cash
consideration, received by the Borrowers and their Subsidiaries directly or
indirectly in connection with such Disposition; provided that (a) Net Cash
--------
Payments shall be net of the amount of any legal, accounting, broker, title and
recording tax expenses, commissions, finders' fees and other fees and expenses
paid by the Borrowers and their Subsidiaries in connection with such Disposition
and (b) Net Cash Payments shall be net of any repayments by the Borrowers and
their Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is
secured by a Lien on the Property that is the subject of such Disposition and
(ii) the transferee of (or holder of a Lien on) such Property requires that such
Indebtedness be repaid as a condition to the purchase of such Property.
"New Lenders" shall mean each Lender party hereto on the Effective Date other
-----------
than the Existing Lenders.
"Notes" shall mean, collectively, the Revolving Credit Notes and the Term Loan
-----
Notes.
Credit Agreement
----------------
- 23 -
"Obligors" shall mean, collectively, the Borrowers, the Parent Guarantors and,
--------
effective upon execution and delivery of any Subsidiary Guarantee Agreement,
each Subsidiary of a Borrower so executing and delivering such Subsidiary
Guarantee Agreement.
"Operating Agreements" shall mean, collectively, the Mediacom California
--------------------
Operating Agreement, the Mediacom Delaware Operating Agreement and the Mediacom
Arizona Operating Agreement.
"Operating Cash Flow" shall mean, for any period, the sum, for the Borrowers
-------------------
and their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following: (a) System Cash Flow minus (b)
-----
Management Fees paid during such period to the extent not exceeding 5% of the
gross operating revenue of the Borrowers and their Subsidiaries for such period.
"Parent Guarantors" shall mean, collectively, Mediacom and Mediacom Management
-----------------
Corporation.
"Pay TV Units" shall mean the aggregate number of premium or pay television
------------
services to which Subscribers subscribe.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall mean: (a) direct obligations of the United
---------------------
States of America, or of any agency thereof, or obligations guaranteed as to
principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than 90 days from the date of
acquisition thereof; (b) certificates of deposit issued by any bank or trust
company organized under the laws of the United States of America or any state
thereof and having capital, surplus and undivided profits of at least
$500,000,000, maturing not more than 90 days from the date of acquisition
thereof; and (c) commercial paper rated A-1 or better or P-1 by Standard &
Poor's Ratings Group, a division of McGraw-Hill Companies, Inc., or Moody's
Investors Services, Inc., respectively, maturing not more than 90 days from the
date of acquisition thereof; in each case so long as the same (x) provide for
the payment of principal and interest (and not principal alone or interest
alone) and (y) are not subject to any contingency regarding the payment of
principal or interest.
Credit Agreement
----------------
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"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or maintained
----
by a Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA,
other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum equal to 2% plus the Base Rate
----------------- ----
as in effect from time to time plus the Applicable Margin for Base Rate Loans,
----
provided that, with respect to principal of a Eurodollar Loan that shall become
- --------
due (whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise) on a day other than the last day of the Interest Period
therefor, the "Post-Default Rate" shall be, for the period from and including
such due date to but excluding the last day of such Interest Period, 2% plus the
----
interest rate for such Loan as provided in Section 3.02(b) hereof and,
thereafter, the rate provided for above in this definition.
"Prime Rate" shall mean the rate of interest from time to time announced by
----------
Chase at the its principal office in New York City as its prime commercial
lending rate.
"Principal Payment Dates" shall mean the last Business Day of March, June,
-----------------------
September and December of each year, commencing with September 30, 1997, through
and including September 30, 2005.
"Property" shall mean any right or interest in or to property of any kind
--------
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Quarterly Dates" shall mean the twentieth day of January, April, July and
---------------
October in each year, the first of which shall be the first such day after the
date of this Agreement; provided that if any such day is not a Business Day,
then such Quarterly Date shall be the next succeeding Business Day.
"Quarterly Officer's Report" shall mean a quarterly report of a Senior Officer
--------------------------
with respect to Basic Subscribers,
Credit Agreement
----------------
- 25 -
homes passed, revenues per Subscriber and Pay TV Units, substantially in the
form of Exhibit B hereto.
"Quarterly Payment Period" shall mean each successive three-month period from
------------------------
and including a Quarterly Date (or, in the case of the initial Quarterly Payment
Period, from and including the Effective Date) to but not including the next
following Quarterly Date.
"Rate Ratio" shall mean, for any Quarterly Payment Period, the daily average
----------
of the Senior Leverage Ratio during the fiscal quarter ending on, or most
recently ended prior to, the first day of such Quarterly Payment Period,
provided that until such time as one complete fiscal quarter shall have elapsed
- --------
subsequent to the Effective Date, such daily average of the Senior Leverage
Ratio shall be determined only for the portion of such fiscal quarter commencing
on the Effective Date.
"Rate Ratio Certificate" shall mean, for any Quarterly Payment Period, a
----------------------
certificate of a Senior Officer setting forth, in reasonable detail, the
calculation (and the basis for such calculation) of the Rate Ratio for use in
determining the Applicable Margin hereunder during such Quarterly Payment
Period.
"Registered Holder" shall have the meaning assigned to such term in Section
-----------------
5.06(a)(ii) hereof.
"Registered Loan" shall have the meaning assigned to such term in Section
---------------
2.07(f) hereof.
"Registered Note" shall have the meaning assigned to such term in Section
---------------
2.07(f) hereof.
"Regulations A, D, G, T, U and X" shall mean, respectively, Regulations A, D,
-------------------------------
G, T, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"Regulatory Change" shall mean, with respect to any Lender, any change after
-----------------
the date hereof in Federal, state or foreign law or regulations (including,
without limitation, Regulation D) or the adoption or making after such date of
any interpretation, directive or request applying to a class of banks including
such Lender of or under any Federal, state or foreign law or regulations
(whether or not having the force of law and
Credit Agreement
----------------
- 26 -
whether or not failure to comply therewith would be unlawful) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Reserve Requirement" shall mean, for any Interest Period for any Eurodollar
-------------------
Loan, the average maximum rate at which reserves (including, without limitation,
any marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion Dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loans.
"Restricted Payment" shall mean, collectively, (a) all distributions of the
------------------
Borrowers (in cash, Property or obligations) on, or other payments or
distributions on account of, or the setting apart of money for a sinking or
other analogous fund for, or the purchase, redemption, retirement or other
acquisition of, any portion of any ownership interest in the Borrowers or of any
warrants, options or other rights to acquire any such ownership interest (or to
make any payments to any Person, such as "phantom stock" payments, where the
amount thereof is calculated with reference to fair market or equity value of
the Borrowers or any Subsidiary), (b) any payments made by a Borrower to any
holders of any equity interests in the Borrowers that are designed to reimburse
such holders for the payment of any taxes attributable to the operations of the
Borrowers and their Subsidiaries, (c) any payments of principal of or interest
on Affiliate Subordinated Indebtedness or Booth Subordinated Indebtedness and
(d) any payments in respect of Management Fees.
Credit Agreement
----------------
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"Revolving Credit Commitment" shall mean, as to each Revolving Credit Lender,
---------------------------
the obligation of such Lender to make Revolving Credit Loans in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
set forth opposite the name of such Lender on the signature pages hereof under
the caption "Revolving Credit Commitment" or, in the case of a Person that
becomes a Revolving Credit Lender pursuant to an assignment permitted under
Section 11.06(b) hereof, as specified in the respective instrument of assignment
pursuant to which such assignment is effected (as the same may be reduced from
time to time pursuant to Section 2.03 or 2.09 hereof, or increased or reduced in
connection with any assignment pursuant to Section 11.06(b) hereof). The
original aggregate principal amount of the Revolving Credit Commitments is
$40,000,000.
"Revolving Credit Lenders" shall mean (a) on the date hereof, the Lenders
------------------------
having Revolving Credit Commitments on the signature pages hereof and (b)
thereafter, the Lenders from time to time holding Revolving Credit Loans and
Revolving Credit Commitments after giving effect to any assignments thereof
permitted by Section 11.06(b) hereof.
"Revolving Credit Commitment Reduction Dates" shall mean the last Business Day
-------------------------------------------
of March, June, September and December in each year, commencing with September
30, 1998, through and including September 30, 2005.
"Revolving Credit Commitment Termination Date" shall mean the Revolving Credit
--------------------------------------------
Commitment Reduction Date falling on or nearest to September 30, 2005.
"Revolving Credit Loans" shall mean the loans provided for in Section 2.01(a)
----------------------
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Revolving Credit Notes" shall mean the promissory notes provided for by
----------------------
Section 2.07(a) hereof and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time. The term "Revolving Credit Notes" shall
include any Registered Notes evidencing Revolving Credit Loans executed and
delivered pursuant to Section 2.07(f) hereof.
"RidgeNet" shall mean the Internet communications node serving the cities of
--------
Ridgecrest and Indian Wells Valley, California.
Credit Agreement
----------------
- 28 -
"RidgeNet Indebtedness" shall mean obligations of Mediacom California to pay
---------------------
the deferred purchase price of RidgeNet.
"Saguaro Cable Acquisition" shall mean the acquisition by Mediacom Arizona
-------------------------
pursuant to the Saguaro Cable Acquisition Agreement of substantially all of the
assets comprising the cable television systems of Saguaro Cable TV Investors,
L.P. in the communities of Nogales, Rio Rico, Amado and Ajo, Arizona, and
located in the Counties of Pima and Santa Cruz, Arizona.
"Saguaro Cable Acquisition Agreement" shall mean the Asset Purchase Agreement
-----------------------------------
made as of August 29, 1996, by and between Saguaro Cable TV Investors, L.P. and
Mediacom Arizona, as assignee of Mediacom, as the same shall, subject to Section
8.19 hereof, be modified and supplemented and in effect from time to time.
"Security Agreement" shall mean a Second Amended and Restated Security
------------------
Agreement substantially in the form of Exhibit C hereto between the Borrowers,
each of the additional parties, if any, that becomes a "Securing Party"
thereunder, and the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Security Documents" shall mean, collectively, the Security Agreement, the
------------------
Deeds of Trust, the Guarantee and Pledge Agreement and the Subsidiary Guarantee
Agreements, and all Uniform Commercial Code financing statements required by the
Security Agreement, the Deeds of Trust, the Guarantee and Pledge Agreement and
the Subsidiary Guarantee Agreements, to be filed with respect to the security
interests created pursuant to the Security Agreement, the Deeds of Trust, the
Guarantee and Pledge Agreement and the Subsidiary Guarantee Agreements.
"Senior Indebtedness" shall mean, as of any date, all Indebtedness of the
-------------------
Borrowers and their Subsidiaries (determined on a combined basis without
duplication in accordance with GAAP), including, without limitation, all
Indebtedness hereunder, but excluding all Affiliate Subordinated Debt and Booth
Subordinated Debt.
"Senior Leverage Ratio" shall mean, as at any date, the ratio of (a) the
---------------------
aggregate amount of all Senior Indebtedness (other than RidgeNet Indebtedness)
of the Borrowers and their
Credit Agreement
----------------
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Subsidiaries (including, without limitation, Capital Lease Obligations) as at
such date to (b) the product of (x) System Cash Flow for the fiscal quarter
ending on, or most recently ended prior to, such date times (y) four.
-----
Notwithstanding the foregoing, if during any fiscal quarter for which the
Senior Leverage Ratio is being determined the Borrowers shall have consummated
either of the Spring 1997 Acquisitions, the Senior Leverage Ratio shall be
deemed to be equal to the ratio of (a) the aggregate amount of all Senior
Indebtedness (other than RidgeNet Indebtedness) of the Borrowers and their
Subsidiaries (including, without limitation, Capital Lease Obligations) as at
the relevant date to (b) the product of Adjusted System Cash Flow for such
fiscal quarter, times four.
-----
"Senior Officer" shall mean the chairman, chief executive officer or chief
--------------
financial officer of the Manager, acting for and on behalf of the Borrowers.
"Spring 1997 Acquisition Agreements" shall mean, collectively, the Lower
----------------------------------
Delaware Acquisition Agreement and the Sun City Acquisition Agreement.
"Spring 1997 Acquisitions" shall mean, collectively, the Lower Delaware
------------------------
Acquisition and the Sun City Acquisition.
"Spring 1997 Sellers" shall mean American Cable TV Investors 5, Ltd. and
-------------------
CoxCom, Inc.
"Subscriber" shall mean a Person who subscribes to one or more of the cable
----------
television services of the Borrowers and their Subsidiaries and includes both
Basic Subscribers and Persons who subscribe to Pay TV Units, but excluding each
such Person who is pending disconnection for any reason or is delinquent in
payment for such services for more than 60 days or who has not paid in full
without discount at least one monthly bill generated in the ordinary course of
business.
"Subsequent Acquisition Agreements" shall mean each agreement pursuant to
---------------------------------
which a Subsequent Acquisition shall be consummated, as the same shall, subject
to Section 8.19 hereof, be modified and supplemented and in effect from time to
time.
"Subsequent Acquisitions" shall mean any acquisition permitted under
-----------------------
8.05(d)(iv) hereof.
Credit Agreement
----------------
- 30 -
"Subsidiary" shall mean, with respect to any Person, any corporation,
----------
partnership, limited liability company or other entity of which at least a
majority of the securities or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions of such corporation, partnership,
limited liability company or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership, limited liability company or other entity shall
have or might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly owned or controlled by such Person or one
or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person.
"Subsidiary Guarantee Agreement" shall mean a Subsidiary Guarantee Agreement
------------------------------
substantially in the form of Exhibit E hereto by a Subsidiary of a Borrower in
favor of the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Subsidiary Guarantor" shall mean any Subsidiary of a Borrower that executes
--------------------
and delivers a Subsidiary Guarantee Agreement.
"Sun City Acquisition" shall mean the acquisition by Mediacom California
--------------------
pursuant to the Sun City Acquisition Agreement of substantially all of the
assets comprising the cable television systems of CoxCom, Inc. in Sun City,
California.
"Sun City Acquisition Agreement" shall mean the Asset Purchase Agreement made
------------------------------
as of May 22, 1997, by and between CoxCom, Inc. and Mediacom California, as the
same shall, subject to Section 8.19 hereof, be modified and supplemented and in
effect from time to time.
"Supplemental Capital" shall mean advances made by an Affiliate to a Borrower
--------------------
constituting Affiliate Subordinated Indebtedness (excluding any Cure Monies).
"System Cash Flow" shall mean, for any period, the sum, for the Borrowers and
----------------
their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following: (a) gross operating revenues for such
period minus (b) all operating expenses for such period, including, without
-----
Credit Agreement
----------------
- 31 -
limitation, technical, programming and selling, general and administrative
expenses, but excluding (to the extent included in operating expenses) income
taxes, Management Fees, the first $100,000 of Manager Expenses during any fiscal
year, depreciation, amortization and interest expense (including, without
limitation, all items included in Interest Expense), provided that gross
--------
operating revenues and operating expenses for any period shall exclude all
extraordinary and unusual items and all non-cash items.
Notwithstanding the foregoing, (i) if during any period for which System Cash
Flow is being determined the Borrowers shall have consummated any acquisition of
any CATV System or other business (excluding, however, any of the Spring 1997
Acquisitions), or consummated any Disposition, then, for all purposes of this
Agreement (other than for purposes of the definition of Excess Cash Flow),
System Cash Flow shall be determined on a pro forma basis as if such acquisition
or Disposition had been made or consummated on the first day of such period.
"Tax Payment Amount" shall mean, for any period, an amount not exceeding in
------------------
the aggregate the amount of Federal, state and local income taxes the Borrowers
would otherwise have paid in the event it were a corporation (other than an "S
corporation" within the meaning of Section 1361 of the Code) for such period and
all prior periods.
"Term A Commitment" shall mean, as to each Term A Lender, the obligation of
-----------------
such Lender to make one or more Term A Loans (or to acquire Term A Loans
pursuant to Section 2.01 hereof) in an aggregate principal amount up to but not
exceeding the amount set opposite the name of such Lender on the signature pages
hereof under the caption "Term A Commitment" or, in the case of a Person that
becomes a Term A Lender pursuant to an assignment permitted under Section
11.06(b) hereof, as specified in the respective instrument of assignment
pursuant to which such assignment is effected (as the same may be reduced from
time to time pursuant to Section 2.03 or 2.09 hereof, or increased or reduced in
connection with any assignment pursuant to Section 11.06(b) hereof). The
original aggregate principal amount of the Term A Commitments is $50,000,000.
"Term A Lenders" shall mean (a) on the date hereof, the Lenders having Term A
--------------
Commitments on the signature pages hereof and (b) thereafter, the Lenders from
time to time holding Term A
Credit Agreement
----------------
- 32 -
Loans and Term A Commitments after giving effect to any assignments thereof
permitted by Section 11.06(b) hereof.
"Term A Loans" shall mean the loans provided for by Section 2.01(b) hereof,
------------
which may be Base Rate Loans and/or Eurodollar Loans.
"Term A Notes" shall mean the promissory notes provided for by Section 2.07(b)
------------
hereof and all promissory notes delivered in substitution or exchange therefor,
in each case as the same shall be modified and supplemented and in effect from
time to time. The term "Term A Notes" shall include any Registered Notes
evidencing Term A Loans executed and delivered pursuant to Section 2.07(f)
hereof.
"Term B Commitment" shall mean, as to each Term B Lender, the obligation of
-----------------
such Lender to make one or more Term B Loans in an aggregate principal amount up
to but not exceeding the amount set opposite the name of such Lender on the
signature pages hereof under the caption "Term B Commitment" or, in the case of
a Person that becomes a Term B Lender pursuant to an assignment permitted under
Section 11.06(b) hereof, as specified in the respective instrument of assignment
pursuant to which such assignment is effected (as the same may be reduced from
time to time pursuant to Section 2.03 or 2.09 hereof, or increased or reduced in
connection with any assignment pursuant to Section 11.06(b) hereof). The
original aggregate principal amount of the Term B Commitments is $10,000,000.
"Term B Lenders" shall mean (a) on the date hereof, the Lenders having Term B
--------------
Commitments on the signature pages hereof and (b) thereafter, the Lenders from
time to time holding Term B Loans and Term B Commitments after giving effect to
any assignments thereof permitted by Section 11.06(b) hereof.
"Term B Loans" shall mean the loans provided for by Section 2.01(c) hereof,
------------
which may be Base Rate Loans and/or Eurodollar Loans.
"Term B Notes" shall mean the promissory notes provided for by Section 2.07(c)
------------
hereof and all promissory notes delivered in substitution or exchange therefor,
in each case as the same shall be modified and supplemented and in effect from
time to time. The term "Term B Notes" shall include any Registered Notes
evidencing Term B Loans executed and delivered pursuant to Section 2.07(f)
hereof.
Credit Agreement
----------------
- 33 -
"Term Loan Commitments" shall mean, collectively, the Term A Commitments and
---------------------
the Term B Loan Commitments.
"Term Loan Commitment Termination Date" shall mean June 30, 1997.
-------------------------------------
"Term Loan Lenders" shall mean, collectively, the Term A Lenders and the Term
-----------------
B Lenders.
"Term Loan Notes" shall mean, collectively, the Term A Notes and the Term B
---------------
Notes.
"Term Loans" shall mean, collectively, the Term A Loans and the Term B Loans.
----------
"Total Leverage Ratio" shall mean, as at any date, the ratio of (a) the
--------------------
aggregate amount of all Indebtedness (other than RidgeNet Indebtedness) of the
Borrowers and their Subsidiaries (including, without limitation, Capital Lease
Obligations, but excluding Affiliate Subordinated Debt) as at such date to (b)
the product of (x) System Cash Flow for the fiscal quarter ending on, or most
recently ended prior to, such date times (y) four.
-----
Notwithstanding the foregoing, if during any fiscal quarter for which the
Total Leverage Ratio is being determined the Borrowers shall have consummated
either of the Spring 1997 Acquisitions, the Total Leverage Ratio shall be deemed
to be equal to the ratio of (a) the aggregate amount of all Indebtedness (other
than RidgeNet Indebtedness) of the Borrowers and their Subsidiaries (including,
without limitation, Capital Lease Obligations) as at the relevant date to (b)
the product of Adjusted System Cash Flow for such fiscal quarter, times four.
-----
"Type" shall have the meaning assigned to such term in Section 1.03 hereof.
----
"U.S. Person" shall mean a citizen or resident of the United States of
-----------
America, a corporation, partnership, limited liability company or other entity
created or organized in or under any laws of the United States of America or any
State thereof, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income.
Credit Agreement
-----------------
- 34 -
"U.S. Taxes" shall mean any present or future tax, assessment or other charge
----------
or levy imposed by or on behalf of the United States of America or any taxing
authority thereof.
"Valley Center Acquisition" shall mean the acquisition by Mediacom California
-------------------------
pursuant to the Valley Center Acquisition Agreement of substantially all of the
assets comprising the cable television systems of Valley Center Cablesystems,
L.P. in the communities of Valley Center and Pauma, California and located in
the County of San Diego, California.
"Valley Center Acquisition Agreement" shall mean the Asset Purchase Agreement
-----------------------------------
made as of August 29, 1996, by and between Valley Center Cablesystems, L.P. and
Mediacom California, as the same shall, subject to Section 8.19 hereof, be
modified and supplemented and in effect from time to time.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any
-----------------------
corporation, partnership, limited liability company or other entity of which all
of the equity securities or other ownership interests (other than, in the case
of a corporation, directors' qualifying shares) are directly or indirectly owned
or controlled by such Person or one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
"Working Capital" shall mean, as at such date, for the Borrowers and their
---------------
Subsidiaries (determined on a combined basis without duplication in accordance
with GAAP) (a) current assets (excluding cash and cash equivalents) minus (b)
-----
current liabilities (excluding the current portion of long term debt and of any
installments of principal payable hereunder).
1.02 Accounting Terms and Determinations.
-----------------------------------
(a) Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall (unless otherwise disclosed to the Lenders in writing at the
time of delivery thereof in the manner described in paragraph (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Lenders hereunder (which, prior to the delivery of
the first financial statements under Section 8.01 hereof,
Credit Agreement
----------------
- 35 -
shall mean the audited financial statements as at December 31, 1996 referred to
in Section 7.02 hereof). All calculations made for the purposes of determining
compliance with this Agreement shall (except as otherwise expressly provided
herein) be made by application of generally accepted accounting principles
applied on a basis consistent with those used in the preparation of the latest
annual or quarterly financial statements furnished to the Lenders pursuant to
Section 8.01 hereof (or, prior to the delivery of the first financial statements
under Section 8.01 hereof, used in the preparation of the audited financial
statements as at December 31, 1996 referred to in Section 7.02 hereof) unless
(i) the Borrowers shall have objected to determining such
compliance on such basis at the time of delivery of such financial
statements or
(ii) the Majority Lenders shall so object in writing within 30
days after delivery of such financial statements, in either of which events such
calculations shall be made on a basis consistent with those used in the
preparation of the latest financial statements as to which such objection shall
not have been made (which, if objection is made in respect of the first
financial statements delivered under Section 8.01 hereof, shall mean the
unaudited financial statements referred to in Section 7.02(i) hereof).
(b) The Borrowers shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
paragraph (a) above and (ii) reasonable estimates of the difference between such
statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance with the
covenants set forth in Section 8 hereof, the Borrowers will not change the last
day of its fiscal year from December 31, or the last days of the first three
fiscal quarters in each of its fiscal years from March 31, June 30 and September
30 of each year, respectively.
Credit Agreement
----------------
- 36 -
1.03 Classes and Types of Loans.
--------------------------
Loans hereunder are distinguished by "Class" and by "Type". The "Class" of a
Loan (or of a Commitment to make a Loan) refers to whether such Loan is a
Revolving Credit Loan, a Term A Loan or a Term B Loan, each of which constitutes
a Class. The "Type" of a Loan refers to whether such Loan is a Base Rate Loan
or a Eurodollar Loan, each of which constitutes a Type. Loans may be identified
by both Class and Type.
1.04 Subsidiaries.
------------
None of the Borrowers has any Subsidiaries on the date hereof; reference in
this Agreement to Subsidiaries of the Borrowers shall be deemed inapplicable
until such time as the Majority Lenders shall consent to the creation of such
Subsidiaries or such Subsidiaries shall in fact come into existence in
accordance with the terms hereof.
1.05 Nature of Obligations of Borrowers.
----------------------------------
It is the intent of the parties hereto that the Borrowers shall be jointly and
severally obligated hereunder and under the Notes, as co-borrowers under this
Agreement and as co-makers on the Notes, in respect of the principal of and
interest on, and all other amounts owing in respect of, the Loans and the Notes.
Section 2. Commitments, Loans, Notes and Prepayments.
2.01 Loans.
-----
(a) Revolving Credit Loans. Each Revolving Credit Lender severally agrees,
----------------------
on the terms and conditions of this Agreement, to make loans to the Borrowers in
Dollars during the period from and including the Effective Date to but not
including the Revolving Credit Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Revolving Credit Commitment of such Lender as in effect from time to time
(such Loans being herein called "Revolving Credit Loans"), provided that in no
---------------------- --------
event shall the aggregate principal amount of all Revolving Credit Loans exceed
the aggregate amount of the Revolving Credit Commitments as in effect from time
to time. Subject to the terms and conditions of this Agreement, during such
period the Borrowers may borrow, repay and reborrow the amount of the Revolving
Credit Commitments by means of Base Rate Loans and Eurodollar Loans and may
Convert Revolving Credit Loans of one Type into Revolving Credit Loans of
another Type (as provided in Section 2.08 hereof)
Credit Agreement
----------------
- 37 -
or Continue Revolving Credit Loans of one Type as Revolving Credit Loans of the
same Type (as provided in Section 2.08 hereof).
(b) Term A Loans. On the Effective Date, all outstanding "Loans" under the
------------
Existing Credit Agreement held by the Existing Lenders, shall automatically and
without any action on the part of any Person, be designated as Term A Loans
hereunder and each of the New Lenders that is a Term A Lender (and each Existing
Lender, if any, whose relative proportion of Term A Commitments hereunder is
increasing over the proportion of Existing Loans held by it under the Existing
Credit Agreement) shall, by assignments from the Existing Lenders (which shall
be deemed to occur automatically on the Effective Date), acquire a portion of
the Term A Loans of the Existing Lenders so designated in such amounts (and the
Term A Lenders shall, through the Administrative Agent, make such additional
adjustments among themselves as shall be necessary) so that after giving effect
to such assignments and adjustments, the Term A Lenders shall hold the Term A
Loans hereunder ratably in accordance with their respective Term A Commitments.
On the Effective Date all "Interest Periods" in respect of the "Loans" under the
Existing Credit Agreement that are designated as Term A Loans hereunder shall
automatically be terminated and, subject to the terms and conditions of this
Agreement (including, without limitation, paragraph (d) below), the Borrowers
shall be permitted to Continue such "Loans" as Eurodollar Loans or to Convert
such "Loans" into Base Rate Loans hereunder, in each case as provided in Section
2.08 hereof.
In addition to the foregoing, each Term A Lender severally agrees, on the
terms and conditions of this Agreement, to make additional term loans to the
Borrowers in Dollars on the Effective Date (provided that the same shall occur
no later than the Term Loan Commitment Termination Date) in an aggregate
principal amount up to but not exceeding the amount of the Term A Commitment of
such Lender (such Loans, together with the "Loans" under the Existing Credit
Agreement designated as Term Loans hereunder pursuant to the preceding
paragraph, being herein called "Term A Loans"), provided that in no event shall
------------ --------
the aggregate principal amount of all Term A Loans exceed the aggregate amount
of the Term A Commitments as in effect on the Effective Date. Subject to the
terms and conditions of this Agreement, on the Effective Date the Borrowers may
borrow the amount of the unutilized Term A Commitments by means of Base Rate
Loans and Eurodollar Loans, and thereafter the Borrowers may
Credit Agreement
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Convert Term A Loans of one Type into Term A Loans of another Type (as provided
in Section 2.08 hereof) or Continue Term A Loans of one Type as Term A Loans of
the same Type (as provided in Section 2.08 hereof).
(c) Term B Loans. Each Term B Lender severally agrees, on the terms and
------------
conditions of this Agreement, to make one or more term loans to the Borrowers in
Dollars on the Effective Date (provided that the same shall occur no later than
the Term Loan Commitment Termination Date) in an aggregate principal amount up
to but not exceeding the amount of the Term B Commitment of such Lender (such
Loans, together with the "Loans" under the Existing Credit Agreement designated
as Term B Loans hereunder pursuant to the preceding paragraph, being herein
called "Term B Loans"), provided that in no event shall the aggregate principal
------------ --------
amount of all Term B Loans exceed the aggregate amount of the Term B Commitments
as in effect on the Effective Date. Subject to the terms and conditions of this
Agreement, on the Effective Date the Borrowers may borrow the amount of the
unutilized Term B Commitments by means of Base Rate Loans and Eurodollar Loans,
and thereafter the Borrowers may Convert Term B Loans of one Type into Term B
Loans of another Type (as provided in Section 2.08 hereof) or Continue Term B
Loans of one Type as Term B Loans of the same Type (as provided in Section 2.08
hereof).
(d) Limit on Eurodollar Loans. No more than ten separate Interest Periods in
-------------------------
respect of Eurodollar Loans of a Class from each Lender may be outstanding at
any one time.
Credit Agreement
----------------
- 39 -
2.02 Borrowings.
----------
The Borrowers shall give the Administrative Agent notice of each borrowing
hereunder as provided in Section 4.05 hereof. Not later than 1:00 p.m. New York
time on the date specified for each borrowing hereunder, each Lender shall make
available the amount of the Loan or Loans to be made by it on such date to the
Administrative Agent, at an account designated by the Administrative Agent to
the Lenders, in immediately available funds, for account of the Borrowers. The
amount so received by the Administrative Agent shall, subject to the terms and
conditions of this Agreement, be made available to the Borrowers by depositing
the same, in immediately available funds, in an account of the Borrower
designated by the Borrowers and maintained with Chase at its principal office.
2.03 Changes of Commitments.
----------------------
(a) The aggregate amount of the Revolving Credit Commitments shall be
automatically reduced to zero on the Revolving Credit Commitment Termination
Date. In addition, the aggregate amount of the Revolving Credit Commitments
shall be automatically reduced on each Revolving Credit Commitment Reduction
Date set forth in column (A) below, (x) by an amount (subject to reduction
pursuant to paragraph (c) below) equal to the amount set forth in column (B)
below opposite such Revolving Credit Commitment Reduction Date, (y) to an amount
(subject to reduction pursuant to paragraph (c) below) equal to the amount set
forth in column (C) below opposite such Revolving Credit Commitment Reduction
Date:
(A) (B) (C)
Revolving Credit Revolving Credit Revolving Credit
Commitment Reduction Commitments Reduced Commitments Reduced
Date Falling on or by the Following to the Following
Nearest to: Amounts: Amounts:
---------- ------- -------
September 30, 1998 $ 100,000 $39,900,000
December 31, 1998 $ 100,000 $39,800,000
March 31, 1999 $ 700,000 $39,100,000
June 30, 1999 $ 700,000
$38,400,000
September 30, 1999 $ 700,000 $37,700,000
December 31, 1999 $ 700,000 $37,000,000
March 31, 2000 $1,000,000 $36,000,000
June 30, 2000 $ 1,000,000
$35,000,000
Credit Agreement
----------------
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September 30, 2000 $1,000,000 $34,000,000
December 31, 2000 $1,000,000 $33,000,000
March 31, 2001 $1,300,000 $31,700,000
June 30, 2001 $ 1,300,000
$30,400,000
September 30, 2001 $1,300,000 $29,100,000
December 31, 2001 $1,300,000 $27,800,000
March 31, 2002 $1,500,000 $26,300,000
June 30, 2002 $ 1,500,000
$24,800,000
September 30, 2002 $1,500,000 $23,300,000
December 31, 2002 $1,500,000 $21,800,000
March 31, 2003 $1,700,000 $20,100,000
June 30, 2003 $ 1,700,000
$18,400,000
September 30, 2003 $1,700,000 $16,700,000
December 31, 2003 $1,700,000 $15,000,000
March 31, 2004 $2,000,000 $13,000,000
June 30, 2004 $2,000,000 $11,000,000
September 30, 2004 $2,000,000 $ 9,000,000
December 31, 2004 $2,000,000 $ 7,000,000
March 31, 2005 $2,333,333 $ 4,666,667
June 30, 2005 $2,333,333 $ 2,333,334
September 30, 2005 $2,333,334 $ 0
(b) The Borrowers shall have the right at any time or from time to time (i)
so long as no Revolving Credit Loans are outstanding, to terminate the Revolving
Credit Commitments, (ii) so long as no Term A Loans are outstanding, to
terminate the Term A Commitments, (iii) so long as no Term B Loans are
outstanding, to terminate the Term B Commitments and (iv) to reduce the
aggregate unused amount of the Commitments of any Class; provided that (x) the
--------
Borrowers shall give notice of each such termination or reduction as provided in
Section 4.05 hereof, (y) each partial reduction shall be in an aggregate amount
at least equal to $500,000 (or a larger multiple of $100,000) and (z) prior to
the making of the initial Loans hereunder, each such reduction of Commitments
shall be applied ratably to the Commitments of each Class.
Credit Agreement
----------------
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(c) Each reduction in the aggregate amount of the Revolving Credit
Commitments pursuant to paragraph (b) above, or pursuant to Section 2.09(a)
hereof, on any date shall be applied to the reductions set forth in the schedule
in paragraph (a) above ratably as follows: each such reduction shall result in
an automatic and simultaneous reduction (but not below zero) of the respective
amounts set forth in column (B) at the end of paragraph (a) above (ratably in
accordance with the respective remaining amounts thereof, after giving effect to
any prior reductions pursuant to this paragraph (c)), with appropriate
reductions (but not below zero) being made to the respective amounts set forth
in column (C) of said paragraph (a) after giving effect to such reduction of the
amounts in said column (B).
Each reduction in the aggregate amount of the Revolving Credit Commitments
pursuant to Section 2.09(b) or 2.09(c) hereof on any date shall be applied to
the reductions set forth in the schedule in paragraph (a) above in inverse order
as follows: each such reduction shall result in the automatic and simultaneous
reduction (but not below zero) in the aggregate amount of the Revolving Credit
Commitments for each Revolving Credit Commitment Reduction Date (as reflected in
column (C) at the end of paragraph (a) above) after such date in an amount equal
to the amount of such reduction.
(d) The aggregate amount of the Term A and Term B Commitments shall be
automatically reduced to zero on the Term Loan Commitment Termination Date.
(e) The Commitments once terminated or reduced may not be reinstated.
2.04 Commitment Fee.
--------------
The Borrowers shall pay to the Administrative Agent for account of each Lender
a commitment fee on the daily average unused amount of such Lender's Revolving
Credit Commitment, for the period from and including the date hereof to but not
including the earlier of the date such Revolving Credit Commitment is terminated
and the Revolving Credit Commitment Termination Date, at a rate per annum equal
to 1/2 of 1%. Accrued commitment fee shall be payable on each Quarterly Date
and on the earlier of the date the relevant Commitments are terminated and the
Revolving Credit Commitment Termination Date.
Credit Agreement
----------------
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2.05 Lending Offices.
---------------
The Loans of each Type made by each Lender shall be made and maintained at
such Lender's Applicable Lending Office for Loans of such Type.
2.06 Several Obligations; Remedies Independent.
-----------------------------------------
The failure of any Lender to make any Loan to be made by it on the date
specified therefor shall not relieve any other Lender of its obligation to make
its Loan on such date, but neither any Lender nor the Administrative Agent shall
be responsible for the failure of any other Lender to make a Loan to be made by
such other Lender, and (except as otherwise provided in Section 4.06 hereof) no
Lender shall have any obligation to the Administrative Agent or any other Lender
for the failure by such Lender to make any Loan required to be made by such
Lender. Anything in this Agreement to the contrary notwithstanding, each Lender
hereby agrees with each other Lender that no Lender shall take any action to
protect or enforce its rights arising out of this Agreement or the Notes
(including, without limitation, exercising any rights of off-set) without first
obtaining the prior written consent of the Administrative Agent or the Majority
Lenders, it being the intent of the Lenders that any such action to protect or
enforce rights under this Agreement and the Notes shall be taken in concert and
at the direction or with the consent of the Administrative Agent or the Majority
Lenders and not individually by a single Lender.
2.07 Notes.
-----
(a) The Revolving Credit Loans (other than Registered Loans) made by each
Lender shall be evidenced by a single promissory note of the Borrowers
substantially in the form of Exhibit A-1 hereto, dated the date hereof, payable
to such Lender in a principal amount equal to the amount of its Revolving Credit
Commitment as originally in effect and otherwise duly completed.
(b) The Term A Loans (other than Registered Loans) made by each Lender shall
be evidenced by a single promissory note of the Borrowers substantially in the
form of Exhibit A-2 hereto, dated the date hereof, payable to such Lender in a
principal amount equal to the amount of its Term A Commitment as originally in
effect and otherwise duly completed.
(c) The Term B Loans (other than Registered Loans) made by each Lender shall
be evidenced by a single promissory note of the Borrowers substantially in the
form of Exhibit A-3 hereto, dated the date hereof, payable to such Lender in a
Credit Agreement
----------------
- 43 -
principal amount equal to the amount of its Term B Commitment as originally in
effect and otherwise duly completed.
(d) The date, amount, Type, interest rate and duration of Interest Period (if
applicable) of each Loan of each Class made by each Lender to the Borrowers, and
each payment made on account of the principal thereof, shall be recorded by such
Lender on its books and, prior to any transfer of any Note evidencing the Loans
of such Class held by it, endorsed by such Lender on the schedule attached to
such Note or any continuation thereof; provided that the failure of such Lender
--------
to make any such recordation or endorsement shall not affect the obligations of
the Borrowers to make a payment when due of any amount owing hereunder or under
such Note in respect of such Loans.
(e) No Lender shall be entitled to have its Notes substituted or exchanged
for any reason, or subdivided for promissory notes of lesser denominations,
except in connection with a permitted assignment of all or any portion of such
Lender's relevant Commitment, Loans and Notes pursuant to Section 11.06 hereof
and except as provided in clause (e) below (and, if requested by any Lender, the
Borrowers agree to so exchange any Note).
(f) Notwithstanding the foregoing, any Lender that is not a U.S. Person and
is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code may
request the Borrowers (through the Administrative Agent), and the Borrowers
agree thereupon, to record (or cause to be recorded by the Administrative Agent
in accordance with Section 11.06(g) hereof) on the Register referred to in said
Section 11.06(g) any Loans of any Class held by such Lender under this
Agreement. Loans recorded on the Register ("Registered Loans") may not be
----------------
evidenced by promissory notes other than Registered Notes as defined below and,
upon the registration of any Loan, any promissory note (other than a Registered
Note) evidencing the same shall be null and void and shall be returned to the
Borrowers. The Borrowers agree, at the request of any Lender that is the holder
of Registered Loans, to execute and deliver to such Lender a promissory note in
registered form to evidence such Registered Loans (i.e. containing the optional
registered note language as indicated in Exhibits A-1, A-2 or A-3 hereto, as the
case may be) and registered as provided in Section 11.06(g) hereof (herein, a
"Registered Note"), dated the date hereof, payable to such Lender and otherwise
- ----------------
duly completed. A Loan once recorded on the Register may not be removed from
the Register so
Credit Agreement
----------------
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long as it remains outstanding and a Registered Note may not be
exchanged for a promissory note that is not a Registered Note.
2.08 Optional Prepayments and Conversions or Continuations of Loans.
--------------------------------------------------------------
Subject to Section 4.04 hereof, the Borrowers shall have the right to prepay
Loans, or to Convert Loans of one Type into Loans of another Type or Continue
Loans of one Type as Loans of the same Type, at any time or from time to time,
provided that:
- --------
(a) the Borrowers shall give the Administrative Agent notice of each such
prepayment, Conversion or Continuation as provided in Section 4.05 hereof
(and, upon the date specified in any such notice of prepayment, the amount
to be prepaid shall become due and payable hereunder);
(b) Eurodollar Loans may be prepaid or Converted at any time from time to time,
provided that the Borrowers shall pay any amounts owing under Section 5.05
--------
hereof in the event of any such prepayment or Conversion on any date other
than the last day of an Interest Period for such Loans;
(c) prepayments of any Term Loan shall be effected in such manner so that the
Term Loans of both Classes are concurrently prepaid ratably in accordance
with the respective outstanding principal amounts thereof and the aggregate
principal amount of all such concurrent prepayments is at least equal to
$1,000,000 or a greater multiple of $100,000;
(d) prepayments of the Term Loans shall be applied to the remaining
installments of such Loans ratably in accordance with the respective
principal amounts thereof; and
(e) any Conversion or Continuation of Eurodollar Loans shall be subject to the
provisions of Section 2.01(d) hereof.
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 9 hereof, in the event that any Event of Default shall
have occurred and be continuing, the Administrative Agent may (and at the
request of the Majority Lenders shall) suspend the right of the Borrowers to
Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar
Loan, in which event all Loans shall be Converted (on
Credit Agreement
----------------
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the last day(s) of the respective Interest Periods therefor) or Continued, as
the case may be, as Base Rate Loans.
2.09 Mandatory Prepayments and Reductions of Commitments.
---------------------------------------------------
(a) Excess Cash Flow. Not later than the date 150 days after the end of the
----------------
each fiscal year of the Borrowers (or, if earlier, 30 days after the delivery of
the audited financial statements for such fiscal year pursuant to Section
8.01(b) hereof), commencing with the fiscal year ending on December 31, 1999,
the Borrowers shall prepay the Loans, and the Commitments shall be subject to
automatic reduction, in an aggregate amount equal to 50% of Excess Cash Flow for
such fiscal year, such prepayment and reduction to be effected in each case in
the manner and to the extent specified in paragraph (d) of this Section 2.09.
(b) Equity and Debt Issuances. Upon any Equity Issuance or Debt Issuance,
-------------------------
the Borrowers shall prepay the Loans, and the Commitments shall be subject to
automatic reduction, in an aggregate amount equal to 100% of the Net Available
Proceeds thereof, such prepayment and reduction to be effected in each case in
the manner and to the extent specified in paragraph (d) of this Section 2.09.
(c) Sale of Assets. Without limiting the obligation of the Borrowers to
--------------
obtain the consent of the Majority Lenders pursuant to Section 8.05 hereof to
any Disposition not otherwise permitted hereunder, in the event that the Net
Available Proceeds of any Disposition (herein, the "Current Disposition"), and
-------------------
of all prior Dispositions after the date hereof as to which a prepayment has not
yet been made under this Section 2.09(c), shall exceed $2,000,000 then, no later
than five Business Days prior to the occurrence of the Current Disposition, the
Borrowers will deliver to the Lenders a statement, certified by a Senior
Officer, in form and detail satisfactory to the Administrative Agent, of the
amount of the Net Available Proceeds of the Current Disposition and of all such
prior Dispositions and will prepay the Loans, and the Commitments shall be
subject to automatic reduction, in an aggregate amount equal to 100% of the Net
Available Proceeds of the Current Disposition and such prior Dispositions, such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in paragraph (d) of this Section 2.09.
Credit Agreement
----------------
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(d) Application. Upon the occurrence of any of the events described in
-----------
paragraphs (a), (b) or (c) of this Section 2.09, the amount of the required
prepayment shall be applied to the reduction of the Revolving Credit Commitments
and the prepayment of the Term Loans of each Class then outstanding ratably in
accordance with the respective then-outstanding aggregate amounts of such
Commitments and Loans (and to the simultaneous prepayment of the Revolving
Credit Loans in an amount equal to such required reduction of Revolving Credit
Commitments), provided that to the extent any such required reduction of
--------
Revolving Credit Commitments shall exceed the then-outstanding aggregate
principal amount of Revolving Credit Loans, such excess shall be applied to the
prepayment of Term Loans. Each such prepayment of Term Loans under paragraph
(a) of this Section 2.09 shall be applied to the installments thereof ratably in
accordance with the respective principal amounts of such installments and each
prepayment of Term Loans under paragraph (b) or (c) of this Section 2.09 shall
be applied to the installments thereof in inverse order of maturity.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans.
------------------
(a) The Borrowers hereby jointly and severally promise to pay to the
Administrative Agent for account of each Lender the entire outstanding principal
amount of such Lender's Revolving Credit Loans, and each Revolving Credit Loan
shall mature, on the Revolving Credit Commitment Termination Date. In addition,
if following any Revolving Credit Commitment Reduction Date the aggregate
principal amount of the Revolving Credit Loans shall exceed the Revolving Credit
Commitments, the Borrowers shall pay Revolving Credit Loans in an aggregate
amount equal to such excess.
(b) The Borrowers hereby jointly and severally promise to pay to the
Administrative Agent for account of each Lender the principal of such Lender's
Term A Loans in twenty-nine consecutive quarterly installments payable on the
Principal Payment Dates as follows:
Principal Payment Date Amount of Installment ($)
---------------------- -------------------------
June 30, 1998 $ 83,333
September 30, 1998 $ 83,334
Credit Agreement
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December 31, 1998 $ 83,333
March 31, 1999 $ 875,000
June 30, 1999 $ 875,000
September 30, 1999 $ 875,000
December 31, 1999 $ 875,000
March 31, 2000 $1,250,000
June 30, 2000 $1,250,000
September 30, 2000 $1,250,000
December 31, 2000 $1,250,000
March 31, 2001 $1,625,000
June 30, 2001 $1,625,000
September 30, 2001 $1,625,000
December 31, 2001 $1,625,000
March 31, 2002 $1,875,000
June 30, 2002 $1,875,000
September 30, 2002 $1,875,000
December 31, 2002 $1,875,000
March 31, 2003 $2,125,000
June 30, 2003 $2,125,000
September 30, 2003 $2,125,000
December 31, 2003 $2,125,000
March 31, 2004 $2,500,000
June 30, 2004 $2,500,000
September 30, 2004 $2,500,000
December 31, 2004 $2,500,000
March 31, 2005 $4,375,000
June 30, 2005 $4,375,000
If the full amount of the aggregate Term A Commitments are not borrowed (or
designated as Term A Loans as provided in Section 2.01 hereof) on or before the
Term Loan Commitment Termination Date, the shortfall shall be applied to reduce
the foregoing installments ratably.
(c) The Borrowers hereby jointly and severally promise to pay to the
Administrative Agent for account of each Lender the principal of such Lender's
Term B Loans in thirty-three consecutive quarterly installments payable on the
Principal Payment Dates as follows:
Credit Agreement
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Principal Payment Date Amount of Installment ($)
---------------------- -------------------------
September 30, 1997 $ 25,000
December 31, 1997 $ 25,000
March 31, 1998 $ 25,000
June 30, 1998 $ 25,000
September 30, 1998 $ 25,000
December 31, 1998 $ 25,000
March 31, 1999 $ 25,000
June 30, 1999 $ 25,000
September 30, 1999 $ 25,000
December 31, 1999 $ 25,000
March 31, 2000 $ 25,000
June 30, 2000 $ 25,000
September 30, 2000 $ 25,000
December 31, 2000 $ 25,000
March 31, 2001 $ 25,000
June 30, 2001 $ 25,000
September 30, 2001 $ 25,000
December 31, 2001 $ 25,000
March 31, 2002 $ 25,000
June 30, 2002 $ 25,000
September 30, 2002 $ 25,000
December 31, 2002 $ 25,000
March 31, 2003 $ 25,000
June 30, 2003 $ 25,000
September 30, 2003 $ 25,000
December 31, 2003 $ 25,000
March 31, 2004 $ 25,000
June 30, 2004 $ 25,000
September 30, 2004 $ 25,000
December 31, 2004 $ 25,000
March 31, 2005 $ 25,000
June 30, 2005 $ 25,000
September 30, 2005 $9,200,000
Credit Agreement
-----------------
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If the full amount of the aggregate Term B Commitments are not borrowed on or
before the Term Loan Commitment Termination Date, the shortfall shall be
applied to reduce the foregoing installments ratably.
3.02 Interest.
--------
The Borrowers hereby jointly and severally promise to pay to the
Administrative Agent for account of each Lender interest on the unpaid
principal amount of each Loan made by such Lender for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base Rate (as
in effect from time to time) plus the Applicable Margin and
----
(b) during such periods as such Loan is a Eurodollar Loan, for each Interest
Period relating thereto, the Eurodollar Rate for such Loan for such
Interest Period plus the Applicable Margin.
----
Notwithstanding the foregoing, the Borrowers jointly and severally promise to
pay to the Administrative Agent for account of each Lender interest at the
applicable Post-Default Rate on any principal of any Loan made by such Lender
and on any other amount payable by the Borrowers hereunder or under the Notes
held by such Lender to or for account of such Lender, that shall not be paid
in full when due (whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise), for the period from and including the due date
thereof to but excluding the date the same is paid in full. Accrued interest
on each Loan shall be payable (i) in the case of a Base Rate Loan, quarterly
on the Quarterly Dates, (ii) in the case of a Eurodollar Loan, on the last day
of each Interest Period therefor and, if such Interest Period is longer than
three months, at three-month intervals following the first day of such
Interest Period, (iii) in the case of any Eurodollar Loan, upon the payment,
prepayment or Conversion thereof (but only on the principal amount so paid,
prepaid or Converted) and (iv) in the case of all Loans, upon the payment or
prepayment in full of the principal of the Loans, and the termination of the
Commitments, hereunder, except that interest payable at the Post-Default Rate
shall be payable from time to time on demand. Promptly after the determination
of any interest rate provided for herein or any change therein, the
Administrative Agent shall give notice thereof to the Lenders to which such
interest is payable and to the Borrowers.
Credit Agreement
----------------
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3.03 Determination of Applicable Margin.
----------------------------------
(a) The Applicable Margin for all Quarterly Payment Periods through and
including the Quarterly Payment Period ending July 21, 1997, shall be determined
under the assumption that the Rate Ratio is 5.50 to 1. Thereafter, the
Applicable Margin for each Quarterly Payment Period shall be determined based
upon a Rate Ratio Certificate for such Quarterly Payment Period delivered by the
Borrowers to the Lenders and the Administrative Agent under this Section 3.03.
If the Rate Ratio Certificate for any Quarterly Payment Period is delivered to
the Administrative Agent three or more days prior to the first day of such
Quarterly Payment Period, any adjustment in the Applicable Margin required to be
made, as shown in such Rate Ratio Certificate, shall be effective on the first
day of such Quarterly Payment Period.
(b) If the Rate Ratio Certificate for any Quarterly Payment Period is
delivered by the Borrowers to the Administrative Agent later than three days
prior to the commencement of such Quarterly Payment Period, then (i) any
decrease in the Applicable Margin for such Quarterly Payment Period shall not
become effective on the first day of such Quarterly Payment Period but shall
instead become effective on the third day following receipt by the
Administrative Agent of such Rate Ratio Certificate and (ii) any increase in the
Applicable Margin for such Quarterly Payment Period shall become effective
retroactively from the first day of such Quarterly Payment Period.
(c) If it shall be determined at any time, on the basis of a certificate of a
Senior Officer delivered pursuant to the last sentence of Section 8.01 hereof,
that the Applicable Margin then in effect for the current Quarterly Payment
Period, or any previous Quarterly Payment Period, is or was incorrect, and that
a correction would have the effect of increasing the Applicable Margin, then the
Applicable Margin shall be so increased effective retroactively from the first
day of such Quarterly Payment Period, provided that in the event such
certificate for any fiscal quarter is not delivered to the Lenders pursuant to
said Section 8.01 within 60 days of the end of such fiscal quarter, then, unless
the Borrowers shall deliver such certificate within 10 days after notice of such
non-delivery shall be given by any Lender or the Administrative Agent to the
Borrowers, the Applicable Margin for such Quarterly Payment Period shall be
deemed to be the highest Applicable Margin
Credit Agreement
----------------
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provided for in the definition of such term in Section 1.01 hereof.
(d) In the event of any retroactive increase in the Applicable Margin for any
Quarterly Payment Period pursuant to clause (a), (b) or (c) above, the amount of
interest in respect of any Loan outstanding during all or any portion of such
Quarterly Payment Period shall be recalculated using the Applicable Margin as so
increased. On the Business Day immediately following receipt by the Borrowers
of notice from the Administrative Agent of such increase, the Borrowers shall
pay to the Administrative Agent, for account of the Lenders, an amount equal to
the difference between (i) the amount of interest previously paid or payable by
the Borrowers in respect of such Loan for such Quarterly Payment Period and (ii)
the amount of interest in respect of such Loan as so recalculated for such
Quarterly Payment Period.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments.
--------
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrowers under this
Agreement and the Notes, and except to the extent otherwise provided therein,
all payments to be made by the Borrowers under any other Loan Document shall be
made in Dollars, in immediately available funds, without deduction, set-off or
counterclaim, to the Administrative Agent at an account designated by the
Administrative Agent to the Borrowers, not later than 1:00 p.m. New York time on
the date on which such payment shall become due (each such payment made after
such time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) Any Lender for whose account any such payment is to be made may (but
shall not be obligated to) debit the amount of any such payment that is not made
by such time to any ordinary deposit account of a Borrower with such Lender
(with notice to the Borrowers and the Administrative Agent), provided that such
--------
Lender's failure to give such notice shall not affect the validity thereof.
Credit Agreement
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(c) The Borrowers shall, at the time of making each payment under this
Agreement or any Note for account of any Lender, specify to the Administrative
Agent (which shall so notify the intended recipient(s) thereof) the Loans or
other amounts payable by the Borrowers hereunder to which such payment is to be
applied (and in the event that the Borrowers fail to so specify, or if an Event
of Default has occurred and is continuing, the Administrative Agent may
distribute such payment to the Lenders for application in such manner as it or
the Majority Lenders, subject to Section 4.02 hereof, may determine to be
appropriate).
(d) Each payment received by the Administrative Agent under this Agreement or
any Note for account of any Lender shall be paid by the Administrative Agent
promptly to such Lender, in immediately available funds, for account of such
Lender's Applicable Lending Office for the Loan or other obligation in respect
of which such payment is made.
(e) If the due date of any payment under this Agreement or any Note would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
4.02 Pro Rata Treatment.
------------------
Except to the extent otherwise provided herein: (a) each borrowing of Loans
of a particular Class from the Lenders under Section 2.01 hereof shall be made
from the relevant Lenders, each payment of commitment fee under Section 2.04
hereof in respect of Commitments of a particular Class shall be made for account
of the relevant Lenders, and each termination or reduction of the amount of the
Commitments of a particular Class under Section 2.03 hereof shall be applied to
the respective Commitments of such Class of the relevant Lenders, pro rata
according to the amounts of their respective Commitments of such Class; (b)
except as otherwise provided in Section 5.04 hereof, Eurodollar Loans of any
Class having the same Interest Period shall be allocated pro rata among the
relevant Lenders according to the amounts of their respective Revolving Credit,
Term A and Term B Commitments (in the case of the making of Loans) or their
respective Revolving Credit, Term A and Term B Loans (in the case of Conversions
and Continuations of Loans); (c) each payment or prepayment of principal of
Revolving Credit Loans, Term A Loans or Term B Loans by the Borrowers shall be
made for account of the relevant Lenders pro rata in accordance with the
respective unpaid principal amounts of the
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Loans of such Class held by them; and (d) each payment of interest on Revolving
Credit Loans, Term A Loans and Term B Loans by the Borrowers shall be made for
account of the relevant Lenders pro rata in accordance with the amounts of
interest on such Loans then due and payable to the respective Lenders.
4.03 Computations.
------------
Interest on Eurodollar Loans shall be computed on the basis of a year of 360
days and actual days elapsed (including the first day but excluding the last
day) occurring in the period for which payable and interest on Base Rate Loans
and commitment fee shall be computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
Notwithstanding the foregoing, for each day that the Base Rate is calculated by
reference to the Federal Funds Rate, interest on Base Rate Loans shall be
computed on the basis of a year of 360 days and actual days elapsed.
4.04 Minimum Amounts.
---------------
Except for mandatory prepayments made pursuant to Section 2.09 hereof and
Conversions or prepayments made pursuant to Section 5.04 hereof, each borrowing,
Conversion and partial prepayment of principal of Base Rate Loans (other than
prepayments of Term Loans, as to which the provisions of Section 2.08(c) hereof
shall apply) shall be in an aggregate amount at least equal to $100,000 or a
larger multiple of $100,000 and each borrowing, Conversion and partial
prepayment of Eurodollar Loans (other than prepayments of Term Loans, as to
which the provisions of Section 2.08(c) hereof shall apply) shall be in an
aggregate amount at least equal to $1,000,000 or a larger multiple of $100,000
(borrowings, Conversions or prepayments of or into Loans of different Types or,
in the case of Eurodollar Loans, having different Interest Periods at the same
time hereunder to be deemed separate borrowings, Conversions and prepayments for
purposes of the foregoing, one for each Type or Interest Period). If any
Eurodollar Loans would otherwise be in a lesser principal amount for any period,
such Loans shall be Base Rate Loans during such period.
4.05 Certain Notices.
---------------
Notices by the Borrowers to the Administrative Agent of terminations or
reductions of the Commitments, of borrowings, Conversions, Continuations and
optional prepayments of Loans and of Classes of Loans, of Types of Loans and of
the duration of Interest Periods shall be irrevocable and shall be effective
only if received by the Administrative Agent not later than 1:00 p.m. New York
time on
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the number of Business Days prior to the date of the relevant termination,
reduction, borrowing, Conversion, Continuation or prepayment or the first day of
such Interest Period specified below:
Number of
Business
Notice Days Prior
------ ----------
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate. The Administrative Agent shall promptly
notify the Lenders of the contents of each such notice. In the event that the
Borrowers fail to select the Type of Loan, or the duration of any Interest
Period for any Eurodollar Loan, within the time period and otherwise as provided
in this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent.
------------------------------------------------
Unless the Administrative Agent shall have been notified by a Lender or the
Borrowers (the "Payor") prior to the date on which the Payor is to make payment
-----
to the Administrative Agent of (in
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the case of a Lender) the proceeds of a Loan to be made by such Lender hereunder
or (in the case of the Borrowers) a payment to the Administrative Agent for
account of one or more of the Lenders hereunder (such payment being herein
called the "Required Payment"), which notice shall be effective upon receipt,
----------------
that the Payor does not intend to make the Required Payment to the
Administrative Agent, the Administrative Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
------------
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, provided that if neither the recipient(s)
--------
nor the Payor shall return the Required Payment to the Administrative Agent
within three Business Days of the Advance Date, then, retroactively to the
Advance Date, the Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made
by the Borrowers to the Lenders, the Borrowers and the recipient(s) shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment at the Post-Default Rate (without
duplication of the obligation of the Borrowers under Section 3.02 hereof to
pay interest on the Required Payment at the Post-Default Rate), it being
understood that the return by the recipient(s) of the Required Payment to
the Administrative Agent shall not limit such obligation of the Borrowers
under said Section 3.02 to pay interest at the Post-Default Rate in respect
of the Required Payment and
(ii) if the Required Payment shall represent proceeds of a Loan
to be made by the Lenders to the Borrowers, the Payor and the Borrowers
shall each be obligated retroactively to the Advance Date to pay interest
in respect of the Required Payment pursuant to whichever of the rates
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----------------
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specified in Section 3.02 hereof is applicable to the Type of such Loan, it
being understood that the return by the Borrowers of the Required Payment
to the Administrative Agent shall not limit any claim the Borrowers may
have against the Payor in respect of such Required Payment.
4.07 Sharing of Payments, Etc.
-------------------------
(a) Each Borrower agrees that, in addition to (and without limitation of) any
right of set-off, banker's lien or counterclaim a Lender may otherwise have,
each Lender shall be entitled, at its option (to the fullest extent permitted by
law), to set off and apply any deposit (general or special, time or demand,
provisional or final), or other indebtedness, held by it for the credit or
account of such Borrower at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans or
any other amount payable to such Lender hereunder, that is not paid when due
(regardless of whether such deposit or other indebtedness are then due to such
Borrower), in which case it shall promptly notify such Borrower and the
Administrative Agent thereof, provided that such Lender's failure to give such
--------
notice shall not affect the validity thereof.
(b) If any Lender shall obtain from any Borrower payment of any principal of
or interest on any Loan of any Class owing to it or payment of any other amount
under this Agreement or any other Loan Document through the exercise of any
right of set-off, banker's lien or counterclaim or similar right or otherwise
(other than from the Administrative Agent as provided herein), and, as a result
of such payment, such Lender shall have received a greater percentage of the
principal of or interest on the Loans of such Class or such other amounts then
due hereunder or thereunder by such Borrower to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans of such Class or such other amounts, respectively, owing
to such other Lenders (or in interest due thereon, as the case may be) in such
amounts, and make such other adjustments from time to time as shall be
equitable, to the end that all the Lenders shall share the benefit of such
excess payment (net of any expenses that may be incurred by such Lender in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans of such Class or such other
amounts, respectively, owing to each of the Lenders. To such end all the
Credit Agreement
----------------
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Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored.
(c) Each Borrower agrees that any Lender so purchasing such a participation
(or direct interest) may exercise all rights of set-off, banker's lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any such
right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrowers. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
5.01 Additional Costs.
----------------
(a) The Borrowers shall pay directly to each Lender from time to time such
amounts as such Lender may determine to be necessary to compensate such Lender
for any costs that such Lender determines are attributable to its making or
maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
----------
Costs"), resulting from any Regulatory Change that:
(i) shall subject any Lender (or its Applicable Lending Office
for any of such Loans) to any tax, duty or other charge in respect of such
Loans or its Notes or changes the basis of taxation of any amounts payable
to such Lender under this Agreement or its Notes in respect of any of such
Loans (excluding changes in the rate of tax on the overall net income of
such Lender or of such Applicable
Credit Agreement
----------------
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Lending Office by the jurisdiction in which such Lender has its principal
office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Loans or any deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 hereof), or any commitment of such Lender (including,
without limitation, the Commitments of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or
its Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from the Borrowers under this Section
5.01(a), the Borrowers may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender thereafter to make
or Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar
Loans, until the Regulatory Change giving rise to such request ceases to be in
effect (in which case the provisions of Section 5.04 hereof shall be
applicable), provided that such suspension shall not affect the right of such
--------
Lender to receive the compensation so requested.
(b) Without limiting the effect of the foregoing provisions of this Section
5.01 (but without duplication), the Borrowers shall pay directly to each Lender
from time to time on request such amounts as such Lender may determine to be
necessary to compensate such Lender (or, without duplication, the bank holding
company of which such Lender is a subsidiary) for any costs that it determines
are attributable to the maintenance by such Lender (or any Applicable Lending
Office or such bank holding company), pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) of any court or
governmental or monetary authority (i) following any Regulatory Change or (ii)
implementing any risk-based capital guideline or other requirement (whether or
not having the force of law and whether or not the failure to comply therewith
would be unlawful) hereafter issued by any government or governmental or
supervisory authority implementing at the
Credit Agreement
----------------
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national level the Basle Accord, of capital in respect of its Commitments or
Loans (such compensation to include, without limitation, an amount equal to any
reduction of the rate of return on assets or equity of such Lender (or any
Applicable Lending Office or such bank holding company) to a level below that
which such Lender (or any Applicable Lending Office or such bank holding
company) could have achieved but for such law, regulation, interpretation,
directive or request).
(c) Each Lender shall notify the Borrowers of any event occurring after the
date hereof entitling such Lender to compensation under paragraph (a) or (b) of
this Section 5.01 as promptly as practicable, but in any event within 45 days,
after such Lender obtains actual knowledge thereof; provided that (i) if any
--------
Lender fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Lender shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 45 days prior to the date that such Lender does
give such notice and (ii) each Lender will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, except that such Lender shall have no obligation to designate an
Applicable Lending Office located in the United States of America. Each Lender
will furnish to the Borrowers a certificate setting forth the basis and amount
of each request by such Lender for compensation under paragraph (a) or (b) of
this Section 5.01. Determinations and allocations by any Lender for purposes of
this Section 5.01 of the effect of any Regulatory Change pursuant to paragraph
(a) of this Section 5.01, or of the effect of capital maintained pursuant to
paragraph (b) of this Section 5.01, on its costs or rate of return of
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Lender
under this Section 5.01, shall be conclusive, provided that such determinations
--------
and allocations are made on a reasonable basis.
5.02 Limitation on Types of Loans.
----------------------------
Anything herein to the contrary notwithstanding, if, on or prior to the
determination of any Eurodollar Base Rate for any Interest Period:
Credit Agreement
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(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(b) if the related Loans are Revolving Credit Loans, the Majority Revolving
Credit Lenders, if the related Loans are Term A Loans, the Majority Term A
Lenders determine or if the related Loans are Term B Loans the Majority
Term B Lenders, which determination shall be conclusive, and notify the
Administrative Agent that the relevant rates of interest referred to in the
definition of "Eurodollar Base Rate" in Section 1.01 hereof upon the basis
of which the rate of interest for Eurodollar Loans for such Interest Period
is to be determined are not likely adequately to cover the cost to such
Lenders of making or maintaining Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Borrowers and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the
Borrowers shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans
into Base Rate Loans in accordance with Section 2.08 hereof.
5.03 Illegality.
----------
Notwithstanding any other provision of this Agreement, in the event that it
becomes unlawful for any Lender or its Applicable Lending Office to honor its
obligation to make or maintain Eurodollar Loans hereunder (and, in the sole
opinion of such Lender, the designation of a different Applicable Lending Office
would either not avoid such unlawfulness or would be disadvantageous to such
Lender), then such Lender shall promptly notify the Borrowers thereof (with a
copy to the Administrative Agent) and such Lender's obligation to make or
Continue, or to Convert Loans of any other Type into, Eurodollar Loans shall be
suspended until such time as such Lender may again make and maintain Eurodollar
Loans (in which case the provisions of Section 5.04 hereof shall be applicable).
Credit Agreement
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5.04 Treatment of Affected Loans.
---------------------------
If the obligation of any Lender to make Eurodollar Loans or to Continue, or to
Convert Base Rate Loans into, Eurodollar Loans shall be suspended pursuant to
Section 5.01 or 5.03 hereof, such Lender's Eurodollar Loans shall be
automatically Converted into Base Rate Loans on the last day(s) of the then
current Interest Period(s) for Eurodollar Loans (or, in the case of a Conversion
resulting from a circumstance described in Section 5.03 hereof, on such earlier
date as such Lender may specify to the Borrowers with a copy to the
Administrative Agent) and, unless and until such Lender gives notice as provided
below that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so Converted,
all payments and prepayments of principal that would otherwise be applied
to such Lender's Eurodollar Loans shall be applied instead to its Base Rate
Loans; and
(b) all Loans that would otherwise be made or Continued by such Lender as
Eurodollar Loans shall be made or Continued instead as Base Rate Loans, and
all Base Rate Loans of such Lender that would otherwise be Converted into
Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Borrowers with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans of the same
Class made by other Lenders are outstanding, such Lender's Base Rate Loans of
such Class shall be automatically Converted, on the first day(s) of the next
succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the
extent necessary so that, after giving effect thereto, all Base Rate and
Eurodollar Loans of such Class are allocated among the Lenders ratably (as to
principal amounts, Types and Interest Periods) in accordance with their
respective Commitments of such Class.
5.05 Compensation.
------------
The Borrowers shall pay to the Administrative Agent for account of each
Lender, upon the request of such Lender through the Administrative Agent, such
amount or amounts as shall be sufficient (in the reasonable opinion of such
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Lender) to compensate it for any loss, cost or expense that such Lender
determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a Eurodollar
Loan made by such Lender for any reason (including, without limitation, the
acceleration of the Loans pursuant to Section 9 hereof) on a date other
than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrowers for any reason (including, without limitation,
the failure of any of the conditions precedent specified in Section 6
hereof to be satisfied) to borrow a Eurodollar Loan from such Lender on the
date for such borrowing specified in the relevant notice of borrowing given
pursuant to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Lender).
5.06 U.S. Taxes.
----------
(a) The Borrowers jointly and severally agree to pay to each Lender that is
not a U.S. Person such additional amounts as are necessary in order that the net
payment of any amount due to such non-U.S. Person hereunder after deduction for
or withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will
not be less than the amount stated herein to be then due and payable, provided
--------
that the foregoing obligation to pay such additional amounts shall not apply:
Credit Agreement
----------------
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(i) to any payment to any Lender hereunder (other than in
respect of any Registered Loan) unless such Lender is, on the date hereof
(or on the date it becomes a Lender hereunder as provided in Section
11.06(b) hereof) and on the date of any change in the Applicable Lending
Office of such Lender, either entitled to submit a Form 1001 (relating to
such Lender and entitling it to a complete exemption from withholding on
all interest to be received by it hereunder in respect of the Loans) or
Form 4224 (relating to all interest to be received by such Lender hereunder
in respect of the Loans),
(ii) to any payment to any Lender hereunder in respect of a
Registered Loan (a "Registered Holder"), unless such Registered Holder (or,
-----------------
if such Registered Holder is not the beneficial owner of such Registered
Loan, the beneficial owner thereof) is, on the date hereof (or on the date
such Registered Holder becomes a Lender as provided in Section 11.06(b)
hereof) and on the date of any change in the Applicable Lending Office of
such Lender, entitled to submit a Form W-8, together with an annual
certificate stating that (x) such Registered Holder (or beneficial owner,
as the case may be) is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code, and (y) such Registered Holder (or beneficial
owner, as the case may be) shall promptly notify the Borrowers if at any
time, such Registered Holder (or beneficial owner, as the case may be)
determines that it is no longer in a position to provide such certificate
to the Borrowers (or any other form of certification adopted by the
relevant taxing authorities of the United States of America for such
purposes), or
(iii) to any U.S. Taxes imposed solely by reason of the failure
by such non-U.S. Person (or, if such non-U.S. Person is not the beneficial
owner of the relevant Loan, such beneficial owner) to comply with
applicable certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity or connections
with the United States of America of such non-U.S. Person (or beneficial
owner, as the case may be) if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 5.06(a), (A) "Form 1001" shall mean Form 1001
---------
(Ownership, Exemption, or Reduced Rate
Credit Agreement
----------------
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Certificate) of the Department of the Treasury of the United States of America,
(B) "Form 4224" shall mean Form 4224 (Exemption from Withholding of Tax
---------
on Income Effectively Connected with the Conduct of a Trade or Business in the
United States) of the Department of the Treasury of the United States of America
(or in relation to either such Form such successor and related forms as may from
time to time be adopted by the relevant taxing authorities of the United States
of America to document a claim to which such Form relates) and (C) "Form W-8"
--------
shall mean Form W-8 (Certificate of Foreign Status of the Department of Treasury
of the United States of America). Each of the Forms referred to in the foregoing
clauses (A), (B) and (C) shall include such successor and related forms as may
from time to time be adopted by the relevant taxing authorities of the United
States of America to document a claim to which such Form relates.
(b) Within 30 days after paying any amount to the Administrative Agent or any
Lender from which it is required by law to make any deduction or withholding,
and within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, the Borrowers shall
deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
5.07 Replacement of Lenders.
----------------------
If any Lender requests compensation pursuant to Section 5.01 or 5.06 hereof,
or any Lender's obligation to make or Continue, or to Convert Loans of any Type
into, the other Type of Loan shall be suspended pursuant to Section 5.01 or 5.03
hereof (any such Lender requesting such compensation being herein called a
"Requesting Lender"), the Borrowers, upon three Business Days notice, may
- ------------------
require that such Requesting Lender transfer all of its right, title and
interest under this Agreement and such Requesting Lender's Notes to any bank or
other financial institution (a "Proposed Lender") identified by the Borrowers
---------------
that is reasonably satisfactory to the Administrative Agent (i) if such Proposed
Lender agrees to assume all of the obligations of such Requesting Lender
hereunder, and to purchase all of such Requesting Lender's Loans hereunder for
consideration equal to the aggregate outstanding principal amount of such
Requesting Lender's Loans, together with interest thereon to the date of such
purchase, and satisfactory arrangements are made for payment to such Requesting
Lender of all other amounts payable hereunder to such Requesting Lender on or
prior to the date of such transfer (including any fees accrued hereunder and any
amounts that would be payable under Section
Credit Agreement
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5.05 hereof, as if all of such Requesting Lender's Loans were being prepaid in
full on such date) and (ii) if such Requesting Lender has requested compensation
pursuant to said Section 5.01 or 5.06, hereof, such Proposed Lender's aggregate
requested compensation, if any, pursuant to said Section 5.01 or 5.06 with
respect to such Requesting Lender's Loans is lower than that of the Requesting
Lender. Subject to the provisions of Section 11.06(b) hereof, such Proposed
Lender shall be a "Lender" for all purposes hereunder. Without prejudice to the
survival of any other agreement of the Borrowers hereunder the agreements of the
Borrowers contained in Sections 5.01, 5.06 and 11.03 hereof (without duplication
of any payments made to such Requesting Lender by the Borrowers or the Proposed
Lender) shall survive for the benefit of such Requesting Lender under this
Section
Section 6. Conditions Precedent.
6.01 Initial Loan.
------------
The effectiveness of this Agreement (and the amendment and restatement of the
Existing Credit Agreement to be effected hereby), and the obligation of any
Lender to make its initial Loan hereunder is subject to the conditions precedent
that (i) such effectiveness shall occur on or before June 30, 1997 and (ii) the
Administrative Agent shall have received the following documents (with, in the
case of clauses (a), (b), (c) and (d) below, sufficient copies for each Lender),
each of which shall be satisfactory to the Administrative Agent (and to the
extent specified below, to each Lender) in form and substance:
(a) Corporate Documents. Certified copies of each of the Operating
-------------------
Agreements and of the charter and by-laws (or equivalent documents) of each
Obligor and of all limited liability company and corporate authority for
each Obligor (including, without limitation, board of director resolutions,
member approvals and evidence of incumbency, including specimen signatures,
of officers of each Obligor) with respect to the execution, delivery and
performance of the Basic Documents to which such Obligor is to be a party
and each other document to be delivered by such Obligor from time to time
in connection herewith and the Loans hereunder (and the Administrative
Agent and each Lender may conclusively rely on such certificate until it
receives notice in writing from such Obligor to the contrary).
Credit Agreement
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(b) Officer's Certificate. A certificate of a Senior Officer, dated
---------------------
the Effective Date, to the effect set forth in the first sentence of Section
6.02 hereof.
(c) Opinions of Counsel to the Obligors. An opinion, dated the
-----------------------------------
Effective Date, of Cooperman Levitt Winikoff Lester & Newman, P.C., counsel to
the Obligors, substantially in the form of Exhibit G hereto and covering such
other matters as the Administrative Agent or any Lender may reasonably request
(and the Borrowers hereby instruct such counsel to deliver such opinion to the
Lenders and the Administrative Agent).
(d) Opinion of Special New York Counsel to Chase. An opinion, dated the
--------------------------------------------
Effective Date, of Milbank, Tweed, Hadley & McCloy, special New York
counsel to Chase, substantially in the form of Exhibit H hereto (and Chase
hereby instructs such counsel to deliver such opinion to the Lenders).
(e) Notes. The Notes, duly completed and executed for each Lender (except
-----
that, in the case of a Registered Holder, Notes shall be required only to
the extent that such Registered Holder shall have requested the execution
and delivery of a Note pursuant to Section 2.07(f) hereof).
(f) Security Agreement. The Security Agreement, duly executed and
------------------
delivered by the Borrowers, each of the Subsidiaries of the Borrowers in
existence on the Effective Date and the Administrative Agent. In addition, each
such Obligor shall have taken such other action as the Administrative Agent
shall have requested in order to perfect the security interests created pursuant
to the Security Agreement, including, without limitation, delivering to the
Administrative Agent, for filing, appropriately completed and duly executed
copies of Uniform Commercial Code financing statements.
(g) Guarantee and Pledge Agreement. The Guarantee and Pledge Agreement,
------------------------------
duly executed and delivered by the Parent Guarantors and the Administrative
Agent and the certificates (if any) evidencing the ownership interests in each
Borrower held by the Parent Guarantors, accompanied by undated stock powers
executed in blank. In addition, the Parent Guarantors shall have taken such
other action as the Administrative Agent shall have requested in order to
perfect the security interests created pursuant to the
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Guarantee and Pledge Agreement, including, without limitation, (i) delivering to
the Administrative Agent, for filing, appropriately completed and duly executed
copies of Uniform Commercial Code financing statements, (ii) with respect to the
ownership interests in each Borrower held by the Parent Guarantors, executing
and delivering written instructions to such Borrower to register the Lien
created hereunder in such ownership interests in the registration books
maintained by such Borrower for such registrations and (iii) delivering to the
Administrative Agent a written confirmation from such Borrower to the effect
that the Lien created by the Guarantee and Pledge Agreement in the ownership
interests in such Borrower has been duly registered in the registration books of
such Borrower.
(h) Deeds of Trust. One or more Deeds of Trust (or modifications and
--------------
confirmations to Deeds of Trust executed and delivered pursuant to the Existing
Credit Agreement), covering any material fee or leasehold property of the
Borrowers or any of their Subsidiaries, in each case, duly executed and
delivered by the respective Obligor and to the extent necessary under applicable
law, for filing in the appropriate county land office(s), Uniform Commercial
Code financing statements covering fixtures relating to the Property covered by
such Deeds of Trust, in each case appropriately completed and duly executed. In
addition, the Borrowers shall have paid an amount equal to any recording and
stamp taxes payable in connection with recording any such Deeds of Trust (or
modifications and confirmations).
(i) Management Fee Subordination Agreement. A Management Fee
--------------------------------------
Subordination Agreement, duly executed and delivered by the Borrowers, the
Manager and the Administrative Agent.
(j) Lower Delaware Acquisition. Evidence that the Lower Delaware
--------------------------
Acquisition shall have been duly consummated by Mediacom Delaware in accordance
with the terms of the Lower Delaware Acquisition Agreement, including the
schedules and exhibits thereto (except for any modifications, supplements or
waivers thereof, or written consents or determinations made by any of the
parties thereto, each of which shall be satisfactory to the Majority Lenders),
and the Administrative Agent shall have received a certificate of a Senior
Officer to such effect and to the effect that attached thereto are true and
complete copies of
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the documents delivered in connection with the closing thereunder, together with
(in the case of each legal opinion delivered to the Borrowers pursuant thereto)
a letter from each Person delivering such opinion (which shall in any event
include an opinion of special FCC counsel) authorizing reliance thereon by the
Administrative Agent and the Lenders.
(k) Repayment of Existing Indebtedness. Evidence that, to the extent the
----------------------------------
assets purchased in the Lower Delaware Acquisition shall be subject to any Liens
not permitted hereunder, such Liens shall have been released (or arrangements
for such release satisfactory to the Administrative Agent shall have been made).
(l) Subscribers. Evidence, that as of the Effective Date and after giving
-----------
effect to the Lower Delaware Acquisition, the Borrowers and their Subsidiaries
shall have at least 54,800 Basic Subscribers (or, if the Sea Colony Consent (as
defined in the Lower Delaware Acquisition Agreement) has not been obtained, at
least 53,800 Basic Subscribers).
(m) Financial Statements. An unaudited combined pro forma balance sheet
--------------------
of the Borrowers and their Subsidiaries as at the Effective Date giving effect
to the Lower Delaware Acquisition and the initial Loans hereunder to be
outstanding on the Effective Date (subject, however, to asset value adjustments
based on subsequent appraisals), in form and providing such details as are
reasonably satisfactory to the Administrative Agent, together with a certificate
of a Senior Officer stating that said balance sheet fairly presents the pro
forma financial condition of the Borrowers and their Subsidiaries as at such
date in accordance with GAAP, after giving effect to the Lower Delaware
Acquisition and the initial Loans hereunder to be outstanding on the Effective
Date.
(n) Adjusted System Cash Flow. Evidence, that as of the Effective Date
-------------------------
and after giving effect to the Lower Delaware Acquisition, based on the three-
month period ended May 31, 1997, the product of (i) such Adjusted System Cash
Flow times (ii) four is at least equal to $10,800,000 (or, if the Sea Colony
-----
Consent (as defined in the Lower Delaware Acquisition Agreement) has not been
obtained, at least equal to $10,600,000).
Credit Agreement
----------------
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(o) Approvals. Evidence of receipt of all licenses, permits,
---------
approvals and consents, if any, required with respect to the Lower Delaware
Acquisition (including, without limitation, the consents of the respective
municipal franchising authorities to the acquisition of the respective CATV
Systems being acquired by Mediacom Delaware pursuant to the Lower Delaware
Acquisition).
(p) Capitalization. Evidence that Mediacom Delaware has received net
--------------
cash consideration (prior to the payment of any transaction expenses) of
(i) not less than $18,500,000 representing an equity contribution by
Mediacom to Mediacom Delaware and (ii) not less than $2,100,000 (including
the $1,100,000 deposit made by Mediacom with respect to the Lower Delaware
Acquisition) representing proceeds of the issuance of Affiliate
Subordinated Indebtedness, in each case upon terms and conditions in form
and substance satisfactory to the Majority Lenders, and the Administrative
Agent shall have received copies of each of the instruments pursuant to
which such equity interests and Affiliate Subordinated Indebtedness shall
have been issued, certified by a Senior Officer.
(q) Other Documents. Such other documents as the Administrative
---------------
Agent or any Lender or special New York counsel to Chase may reasonably
request.
The effectiveness of this Agreement (and the amendment and restatement of the
Existing Credit Agreement contemplated hereby) and the obligation of any Lender
to make its initial Loan hereunder is also subject (i) to the payment by the
Borrowers of such fees as the Borrowers shall have agreed to pay or deliver to
any Lender or the Administrative Agent in connection herewith, including,
without limitation, the reasonable fees and expenses of Milbank, Tweed, Hadley &
McCloy, special New York counsel to Chase, in connection with the negotiation,
preparation, execution and delivery of this Agreement, the Notes and the other
Loan Documents and the making of the Loans hereunder (to the extent that
statements for such fees and expenses have been delivered to the Borrowers) and
(ii) to the payment by the Borrowers to the Existing Lenders of accrued interest
on, and all amounts owing pursuant to Section 5.05 of the Existing Credit
Agreement in respect of the "Loans" under the Existing Credit Agreement, on the
Effective Date as if such "Loans" were being prepaid in full on the Effective
Date.
Credit Agreement
----------------
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6.02 Initial and Subsequent Loans.
----------------------------
The obligation of the Lenders to make any Loan to the Borrowers upon the
occasion of each borrowing hereunder (including the initial borrowing) is
subject to the further conditions precedent that, both immediately prior to the
making of such Loan and also after giving effect thereto and to the intended use
thereof:
(a) no Default shall have occurred and be continuing;
(b) the representations and warranties made by the Borrowers in Section
7 hereof, and by each Obligor in the other Loan Documents to which it is a
party, shall be true and complete on and as of the date of the making of
such Loan with the same force and effect as if made on and as of such date
(or, if any such representation or warranty is expressly stated to have
been made as of a specific date, as of such specific date); and
(c) if the Sun City Acquisition shall not have occurred, the aggregate
principal amount of Loans outstanding shall not exceed $65,000,000.
Each notice of borrowing by the Borrowers hereunder shall constitute a
certification by the Borrowers to the effect set forth in the preceding sentence
(both as of the date of such notice and, unless the Borrowers otherwise notifies
the Administrative Agent prior to the date of such borrowing, as of the date of
such borrowing).
Section 7. Representations and Warranties. The Borrowers represent and
warrant to the Administrative Agent and the Lenders that:
7.01 Corporate Existence. Each Borrower and its Subsidiaries: (a) is a
-------------------
corporation, partnership, limited liability company or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where
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failure so to qualify could (either individually or in the aggregate) have a
Material Adverse Effect.
7.02 Financial Condition. The Borrowers have heretofore furnished to each of
-------------------
the Lenders the following financial statements:
(i) audited combined consolidated statements of income, retained
earnings and cash flows of Mediacom California and Mediacom Arizona and
their Subsidiaries for the fiscal year ended December 31, 1996, and the
related combined balance sheet of Mediacom California and Mediacom Arizona
and their Subsidiaries as at the end of such fiscal year;
(ii) unaudited balance sheets of the CATV Systems being acquired
pursuant to the Spring 1997 Acquisitions as at December 31, 1996 and the
related unaudited statements of operations for the fiscal year ended on
said date; and
(iii) an unaudited pro forma combined balance sheet of the Borrowers and
their Subsidiaries as at March 31, 1997, prepared under the assumption that
the Spring 1997 Acquisitions were consummated on said date and that all of
the transactions contemplated by Section 6.01 hereof had been effected on
such date.
All such financial statements are complete and correct and fairly present in all
material respects the actual or pro forma (as the case may be) consolidated
financial condition of the respective entities as at said respective dates and
the actual or pro forma (as the case may be) results of their operations for the
applicable periods ended on said respective dates, all in accordance with
generally accepted accounting principles and practices applied on a consistent
basis. None of the Borrowers nor any of its Subsidiaries has on the date hereof
any material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in said pro
forma balance sheet as at March 31, 1997. Since December 31, 1996, there has
been no material adverse change in the combined financial condition, operations,
business or prospects (x) of Mediacom California and Mediacom Arizona and their
Subsidiaries taken as a whole from that set forth in said financial statements
as at December 31, 1996 referred to in clause (i) above, (y) of the CATV Systems
(taken
Credit Agreement
----------------
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as a whole) to be purchased by Mediacom Delaware on or before the Effective Date
from that set forth in said financial statements as at December 31, 1996,
referred to in clause (ii) above, or (z) of the Borrowers and their Subsidiaries
taken as a whole from that set forth in said pro forma balance sheet as at March
31, 1997 referred to in clause (iii) above.
7.03 Litigation. There are no legal or arbitral proceedings, or any
----------
proceedings or investigations by or before any governmental or regulatory
authority or agency, now pending or (to the knowledge of any Borrower)
threatened against any Borrower or any of its Subsidiaries, or against American
Cable TV Investors 5, Ltd. (and in respect of which Mediacom Delaware would be
obligated after giving effect to the Lower Delaware Acquisition), or, on or
after the consummation of the Sun City Acquisition, against CoxCom, Inc. (and in
respect of which Mediacom California would be obligated after giving effect to
the Sun City Acquisition), that, if adversely determined could (either
individually or in the aggregate) have a Material Adverse Effect.
7.04 No Breach. None of the execution and delivery of this Agreement and the
---------
Notes and the other Basic Documents, the consummation of the transactions herein
and therein contemplated or compliance with the terms and provisions hereof and
thereof will conflict with or result in a breach of, or require any consent
under, the Operating Agreements, or any applicable law or regulation, or any
order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which any Borrower or any of its
Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any such
agreement or instrument, or (except for the Liens created pursuant to the
Security Documents) result in the creation or imposition of any Lien upon any
Borrower or any of its Subsidiaries pursuant to the terms of any such agreement
or instrument.
7.05 Action. Each Borrower has all necessary limited liability company
------
power, authority and legal right to execute, deliver and perform its obligations
under each of the Basic Documents to which it is a party; the execution,
delivery and performance by each Borrower of each of the Basic Documents to
which it is a party have been duly authorized by all necessary limited liability
company action on its part (including, without limitation, any required member
approvals); and this Agreement
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----------------
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has been duly and validly executed and delivered by each Borrower and
constitutes, and each of the Notes and the other Basic Documents to which it is
a party when executed and delivered (in the case of the Notes, for value) will
constitute, its legal, valid and binding obligation, enforceable against each
Borrower in accordance with its terms, except as such enforceability may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar
laws of general applicability affecting the enforcement of creditors' rights and
(b) the application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
7.06 Approvals. No authorizations, approvals or consents of, and no filings
---------
or registrations with, any governmental or regulatory authority or agency, or
any securities exchange, are necessary for the execution, delivery or
performance by any Borrower of this Agreement or any of the other Basic
Documents to which it is a party or for the legality, validity or enforceability
hereof or thereof, except for (i) filings and recordings in respect of the Liens
created pursuant to the Security Documents, (ii) the authorizations, approvals,
consents, filings and registrations contemplated by the Spring 1997 Acquisition
Agreements (each of which shall have been made or obtained on or before the date
of the closings of the Spring 1997 Acquisitions, to the extent required under
the Spring 1997 Acquisition Agreements to be obtained before such date, except
that orders of the FCC may not have become final under the rules and regulations
of the FCC) and (iii) the exercise of remedies under the Security Documents (and
the creation of a valid security interest in Franchises and the other Collateral
as described in Sections 6.01(f) and 8.18 hereof) may require the prior approval
of the FCC or the issuing municipalities or States under one or more of the
Franchises.
7.07 ERISA. Each Plan, and, to the knowledge of each Borrower, each
-----
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Borrowers would be
under an obligation to furnish a report to the Lenders under Section 8.01(e)
hereof.
7.08 Taxes. Each Borrower and its Subsidiaries have filed all Federal income
tax returns and all other material tax
Credit Agreement
----------------
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returns and information statements that are required to be filed by them and
have paid all taxes due pursuant to such returns or pursuant to any assessment
received by such Borrower or any of its Subsidiaries, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
set aside by such Borrower in accordance with GAAP. The charges, accruals and
reserves on the books of each Borrower and its Subsidiaries in respect of taxes
and other governmental charges are, in the opinion of the Borrowers, adequate.
None of the Borrowers has given or been requested to give a waiver of the
statute of limitations relating to the payment of any Federal, state, local and
foreign taxes or other impositions.
7.09 Investment Company Act. None of the Borrowers nor any of its
----------------------
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.10 Public Utility Holding Company Act. None of the Borrowers nor any of its
----------------------------------
Subsidiaries is a "holding company", or an "affiliate" of a "holding company" or
a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
7.11 Material Agreements and Liens.
-----------------------------
(a) Part A of Schedule I hereto sets forth (i) a complete and correct
list of each credit agreement, loan agreement, indenture, purchase agreement,
guarantee, letter of credit or other arrangement (other than the Loan Documents)
providing for or otherwise relating to any Indebtedness or any extension of
credit (or commitment for any extension of credit) to, or guarantee by, the
Borrowers or any of their Subsidiaries, outstanding on the date hereof, or that
(after giving effect to the transactions contemplated hereunder to occur on or
before the Effective Date) will be outstanding on the Effective Date, the
aggregate principal or face amount of which equals or exceeds (or may equal or
exceed) $100,000, and the aggregate principal or face amount outstanding or that
may become outstanding under each such arrangement is correctly described in
Part A of said Schedule I, and (ii) a statement of the aggregate amount of
obligations in respect of surety and performance bonds backing pole rental or
conduit attachments and the like, or backing obligations under Franchises, of
the Borrowers or any of their Subsidiaries outstanding on the date hereof, or
that (after giving effect to the transactions contemplated hereunder to occur
Credit Agreement
----------------
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on or before the Effective Date) will be outstanding on the Effective Date.
(b) Part B of Schedule I hereto is a complete and correct list of
each Lien (other than the Liens created pursuant to the Security Documents)
securing Indebtedness of any Person outstanding on the date hereof, or that
(after giving effect to the transactions contemplated hereunder to occur on or
before the Effective Date) will be outstanding on the Effective Date, the
aggregate principal or face amount of which equals or exceeds (or may equal or
exceed) $100,000 and covering any Property of the Borrowers or any of their
Subsidiaries, and the aggregate Indebtedness secured (or that may be secured) by
each such Lien and the Property covered by each such Lien is correctly described
in Part B of said Schedule I.
7.12 Environmental Matters. Each of the Borrowers and their Subsidiaries has
---------------------
obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business as
now being or as proposed to be conducted, except to the extent failure to have
any such permit, license or authorization would not (either individually or in
the aggregate) have a Material Adverse Effect. Each of such permits, licenses
and authorizations is in full force and effect and each of the Borrowers and its
Subsidiaries is in compliance with the terms and conditions thereof, and is also
in compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
therewith would not (either individually or in the aggregate) have a Material
Adverse Effect. In addition, no notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and, to the Borrowers' knowledge, no
investigation or review is pending or threatened by any governmental or other
entity with respect to any alleged failure by the Borrowers or any of their
Subsidiaries to have any environmental, health or safety permit, license or
other authorization required under any Environmental Law in connection with the
conduct of the business of the Borrowers or any of their Subsidiaries or with
respect to any generation, treatment, storage, recycling, transportation,
discharge or disposal, or any Release of any Hazardous Materials generated by
the Borrowers or any of their Subsidiaries. All environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or that are in
the possession of the Borrowers or
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----------------
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any of their Subsidiaries in relation to facts, circumstances or conditions at
or affecting any site or facility now or previously owned, operated or leased by
the Borrowers or any of their Subsidiaries and that could result in a Material
Adverse Effect have been made available to the Lenders.
7.13 Capitalization. The Borrowers have heretofore delivered to the Lenders
--------------
true and complete copies of the Operating Agreements. The only members of
Mediacom California on the date hereof are Mediacom and Mediacom Management
Corporation, the only member of Mediacom Delaware on the date hereof is Mediacom
and the only members of Mediacom Arizona on the date hereof are Mediacom and
Mediacom California. As of the date hereof, (x) there are no outstanding Equity
Rights with respect to any Borrower and (y) there are no outstanding obligations
of any Borrower or any of their Subsidiaries to repurchase, redeem, or otherwise
acquire any equity interests in any Borrower nor are there any outstanding
obligations of any Borrower or any of their Subsidiaries to make payments to any
Person, such as "phantom stock" payments, where the amount thereof is calculated
with reference to the fair market value or equity value of such Borrowers or any
of its Subsidiaries.
7.14 Subsidiaries, Etc.
------------------
(a) As of the date hereof, none of the Borrowers has any Subsidiaries.
(b) Set forth in Schedule II hereto is a complete and correct list of
all Investments (other than Investments of the type referred to in paragraphs
(b), (c) and (e) of Section 8.08 hereof) held by the Borrowers or any of their
Subsidiaries in any Person on the date hereof and, for each such Investment, (x)
the identity of the Person or Persons holding such Investment and (y) the nature
of such Investment. Except as disclosed in Schedule II hereto, each of the
Borrowers and their Subsidiaries owns, free and clear of all Liens (other than
the Liens created pursuant to the Security Documents), all such Investments.
(c) None of the Subsidiaries of the Borrowers is, on the date hereof,
subject to any indenture, agreement, instrument or other arrangement of the type
described in Section 8.18(d) hereof.
Credit Agreement
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7.15 True and Complete Disclosure. The information, reports, financial
----------------------------
statements, exhibits and schedules furnished in writing by or on behalf of the
Borrowers to the Administrative Agent or any Lender in connection with the
negotiation, preparation or delivery of this Agreement and the other Loan
Documents or included herein or therein or delivered pursuant hereto or thereto,
when taken as a whole do not contain any untrue statement of material fact or
omit to state any material fact necessary to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the date hereof by the
Borrowers and their Subsidiaries to the Administrative Agent and the Lenders in
connection with this Agreement and the other Loan Documents and the transactions
contemplated hereby and thereby will be true, complete and accurate in every
material respect, or (in the case of projections) based on reasonable estimates,
on the date as of which such information is stated or certified. There is no
fact known to the Borrowers that could have a Material Adverse Effect (other
than facts affecting the cable television industry in general) that has not been
disclosed herein, in the other Loan Documents or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Lenders for use in connection with the transactions contemplated hereby or
thereby.
7.16 Franchises. Set forth in Schedule III hereto is a complete and correct
----------
list of all Franchises (identified by issuing authority, franchisee and
expiration date) owned by the Borrowers and their Subsidiaries on the date
hereof. Each of the Borrowers and their Subsidiaries possesses or has the right
to use all such Franchises, and all copyrights, licenses, trademarks, service
marks, trade names or other rights, including licenses and permits granted by
the FCC, agreements with public utilities and microwave transmission companies,
pole or conduit attachment, use, access or rental agreements and utility
easements that are necessary for the conduct of the CATV Systems of the
Borrowers and their Subsidiaries, except for such of the foregoing the absence
of which could not have a Material Adverse Effect on the Borrowers or any of
their Subsidiaries, and each of such Franchises, copyrights, licenses, patents,
trademarks, service marks, trade names and rights is (or on the Effective Date
will be) in full force and effect and no material default has occurred and is
continuing thereunder. No approval, application, filing, registration, consent
or other action of any local, state or federal authority is required to enable
the
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----------------
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Borrowers or any of their Subsidiaries to operate the CATV Systems of the
Borrowers and their Subsidiaries, except for approvals, applications, filings,
registrations, consents or other actions that (if not made or obtained) could
not have a Material Adverse Effect on the Borrowers or any of their
Subsidiaries. None of the Borrowers nor any of its Subsidiaries has received
any notice from the granting body or any other governmental authority with
respect to any breach of any covenant under, or any default with respect to, any
Franchise. Complete and correct copies of all Franchises have heretofore been
delivered to the Administrative Agent.
7.17 The CATV Systems.
----------------
(a) Each of the Borrowers and their Subsidiaries, and, (after giving effect
to the transactions contemplated hereunder to occur on or before the Effective
Date), the CATV Systems to be owned by it, are in compliance with all applicable
federal, state and local laws, rules and regulations, including without
limitation, the Communications Act of 1934, the Cable Communications Policy Act
of 1984, the Cable Television Consumer Protection and Competition Act of 1992,
the Copyright Revision Act of 1976, and the rules and regulations of the FCC and
the United States Copyright Office, including, without limitation, rules and
laws governing system registration, use of aeronautical frequencies and signal
carriage, equal employment opportunity, cumulative leakage index testing and
reporting, signal leakage, and subscriber privacy, except to the extent that the
failure to so comply with any of the foregoing could not (either individually or
in the aggregate) reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing (except to the extent that the
failure to comply with any of the following could not (either individually or in
the aggregate) reasonably be expected to have a Material Adverse Effect and
except as set forth in Schedule IV hereto:
(i) the communities included in the areas covered by the
Franchises have been registered with the FCC;
(ii) all of the annual performance tests on such CATV Systems
required under the rules and regulations of the FCC have been performed and
the results of such tests demonstrate satisfactory compliance with the
applicable requirements being tested in all material respects;
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(iii) to the knowledge of the Borrowers, such CATV Systems
currently meet or exceed the technical standards set forth in the rules and
regulations of the FCC, including, without limitation, the leakage limits
contained in 47 C.F.R. Section 76.605(a)(11);
(iv) to the knowledge of the Borrowers, such CATV Systems are
being operated in compliance with the provisions of 47 C.F.R. Sections
76.610 through 76.619 (mid-band and super-band signal carriage), including
47 C.F.R. Section 76.611 (compliance with the cumulative signal leakage
index); and
(v) to the knowledge of the Borrowers, where required,
appropriate authorizations from the FCC have been obtained for the use of
all aeronautical frequencies in use in such CATV Systems and such CATV
Systems are presently being operated in compliance with such authorizations
(and all required certificates, permits and clearances from governmental
agencies, including the Federal Aviation Administration, with respect to
all towers, earth stations, business radios and frequencies utilized and
carried by such CATV Systems have been obtained).
(b) To the knowledge of the Borrowers, all notices, statements of account,
supplements and other documents required under Section 111 of the Copyright Act
of 1976 and under the rules of the Copyright Office with respect to the carriage
of off-air signals by the CATV Systems to be owned by the Borrowers and their
Subsidiaries (after giving effect to the transactions contemplated hereunder to
occur on or before the Effective Date) have been duly filed, and the proper
amount of copyright fees have been paid on a timely basis, and each such CATV
System qualifies for the compulsory license under Section 111 of the Copyright
Act of 1976, except to the extent that the failure to so file or pay could not
(either individually or in the aggregate) reasonably be expected to have a
Material Adverse Effect.
(c) The carriage of all off-air signals by the CATV Systems to be owned by
the Borrowers and their Subsidiaries (after giving effect to the transactions
contemplated hereunder to occur on or before the Effective Date) is permitted by
valid transmission consent agreements or by must-carry elections by
broadcasters, or is otherwise permitted under applicable law, except to the
extent the failure to obtain any of the foregoing
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could not (either individually or in the aggregate) reasonably be expected to
have a Material Adverse Effect.
(d) The assets of the CATV Systems to be owned by the Borrowers and their
Subsidiaries (after giving effect to the transactions contemplated hereunder to
occur on or before the Effective Date) are adequate and sufficient for all of
the current operations of such CATV System.
7.18 Rate Regulation. Each of the Borrowers and their Subsidiaries have each
---------------
reviewed and evaluated in detail the FCC rules currently in effect (the "Rate
----
Regulation Rules") implementing the rate regulation provisions of the Cable
- ----------------
Television Consumer Protection and Competition Act of 1992 (the "Rate Regulation
---------------
Act"). Based upon such review and completion by the Borrowers and their
- ---
Subsidiaries of all applicable worksheets contemplated by the Rate Regulation
Rules for each CATV System to be owned by the Borrowers and their Subsidiaries
(after giving effect to the transactions contemplated hereunder to occur on or
before the Effective Date):
(i) except as set forth in Schedule IV hereto, to the knowledge
of the Borrowers, none of such CATV Systems is subject to effective
competition as of the date hereof;
(ii) except as set forth in Schedule IV hereto, no franchising
authority has notified any Borrower or any of its Subsidiaries or any
Spring 1997 Seller of its application to be certified to regulate rates as
provided in Section 76.910 of the Rate Regulation Rules;
(iii) except as set forth in Schedule IV hereto, no franchising
authority has notified the Borrowers or any of their Subsidiaries or any
Spring 1997 Seller that it has been certified and has adopted regulations
required to commence regulation as provided in Section 76.910(c)(2) of the
Rate Regulation Rules; and
(iv) no reduction of rates or refunds to subscribers is required
as of the date hereof under the Rate Regulation Act and the Rate Regulation
Rules applicable to the CATV Systems of the Borrowers and their
Subsidiaries.
7.19 Real Property. Set forth on Schedule V attached hereto is a list of all
-------------
of the real property interests to be held by the Borrowers and their
Subsidiaries on the Effective Date
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(after giving effect to the transactions contemplated hereunder to occur on
or before the Effective Date), indicating in each case whether the respective
Property is to be owned or leased, the identity of the owner or lessee and the
location of the respective Property.
7.20 Acquisition Agreements. The Borrowers have heretofore delivered to the
----------------------
Administrative Agent a true and complete copy of each of the Spring 1997
Acquisition Agreements (including all modifications or supplements to any
thereof) and each of the Spring 1997 Acquisition Agreements has been duly
executed and delivered by each party thereto and is in full force and effect.
Section 8. Covenants of the Borrowers. Each Borrower covenants and agrees
with the Lenders and the Administrative Agent that, so long as any Commitment or
Loan is outstanding and until payment in full of all amounts payable by the
Borrowers hereunder:
8.01 Financial Statements Etc. The Borrowers shall deliver to each of the
------------------------
Lenders:
(a) as soon as available and in any event within 60 days after the end
of each quarterly fiscal period of each fiscal year of the Borrowers,
combined statements of income, retained earnings and cash flows of the
Borrowers and their Subsidiaries (and, separately stated, for each Borrower
and its Subsidiaries if requested by the Administrative Agent) for such
period and for the period from the beginning of the respective fiscal year
to the end of such period, and the related combined balance sheets of the
Borrowers and their Subsidiaries (and, separately stated, for each Borrower
and its Subsidiaries, if so requested) as at the end of such period,
setting forth, in each case (other than financial statements for any period
ending on or prior to December 31, 1996) in comparative form the
corresponding combined figures for the corresponding periods in the
preceding fiscal year (except that, in the case of balance sheets, such
comparison shall be to the last day of the prior fiscal year), accompanied
by a certificate of a Senior Officer, which certificate shall state that
said combined financial statements fairly present the combined financial
condition and results of operations of the Borrowers and their Subsidiaries
(and said separate financial statements fairly
Credit Agreement
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present the separate consolidated financial condition and results of
operations of the respective Borrower and its Subsidiaries), in accordance
with generally accepted accounting principles, consistently applied, as at
the end of, and for, such period (subject to normal year-end audit
adjustments);
(b) as soon as available and in any event within 120 days after the end
of each fiscal year of the Borrowers, combined statements of income,
retained earnings and cash flows of the Borrowers and their Subsidiaries
(and, separately stated, for each Borrower and its Subsidiaries if
requested by the Administrative Agent) for such fiscal year and the related
combined balance sheets of the Borrowers and their Subsidiaries (and,
separately stated, for each Borrower and its Subsidiaries, if requested) as
at the end of such fiscal year, setting forth, in each case (other than
financial statements for the fiscal year ending on December 31, 1996) in
comparative form the corresponding combined figures for the preceding
fiscal year, and accompanied (x) in the case of said combined financial
statements, by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that
said combined financial statements fairly present the combined financial
condition and results of operations of the Borrowers and their Subsidiaries
as at the end of, and for, such fiscal year in accordance with generally
accepted accounting principles, and a statement of such accountants to the
effect that, in making the examination necessary for their opinion, nothing
came to their attention that caused them to believe that the Borrowers were
not in compliance with Sections 8.07, 8.08, 8.09, 8.10, 8.11, 8.12 or 8.15
hereof, insofar as such Sections relate to accounting matters and (y) in
the case of said separate financial statements, by a certificate of a
Senior Officer, which certificate shall state that said separate financial
statements fairly present the separate consolidated financial condition and
results of operations of the respective Borrower and its Subsidiaries, in
accordance with generally accepted accounting principles, consistently
applied, as at the end of, and for, such period;
(c) promptly upon their becoming available, copies of all registration
statements and regular periodic reports, if any, that the Borrowers shall
have filed with the Securities
Credit Agreement
----------------
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and Exchange Commission (or any governmental agency substituted
therefor) or any national securities exchange;
(d) promptly upon the mailing thereof to the members of the Borrowers
generally or to holders of Affiliate Subordinated Indebtedness generally,
copies of all financial statements, reports and proxy statements so mailed;
(e) as soon as possible, and in any event within ten days after any
Borrower knows or has reason to believe that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan
has occurred or exists, a statement signed by a Senior Officer setting
forth details respecting such event or condition and the action, if any,
that such Borrower or its ERISA Affiliate proposes to take with respect
thereto (and a copy of any report or notice required to be filed with or
given to the PBGC by any Borrower or an ERISA Affiliate with respect to
such event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which the PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided that a failure to meet the minimum
--------
funding standard of Section 412 of the Code or Section 302 of ERISA,
including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the
Code); and any request for a waiver under Section 412(d) of the Code
for any Plan;
(ii) the distribution under Section 4041 of ERISA of a
notice of intent to terminate any Plan or any action taken by any
Borrower or an ERISA Affiliate to terminate any Plan;
(iii) the institution by the PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by any Borrower or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
Credit Agreement
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has been taken by the PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by any Borrower or any ERISA Affiliate that results
in liability under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a purchaser
default) or the receipt by any Borrower or any ERISA Affiliate of
notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it
intends to terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against any Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(vi) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA,
would result in the loss of tax-exempt status of the trust of which
such Plan is a part if any Borrower or an ERISA Affiliate fails to
timely provide security to the Plan in accordance with the provisions
of said Sections;
(f) within 60 days of the end of each quarterly fiscal period of the
Borrowers, a Quarterly Officer's Report as at the end of such period;
(g) promptly after any Borrower knows or has reason to believe that any
Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Borrowers have taken or
propose to take with respect thereto; and
(h) from time to time such other information regarding the financial
condition, operations, business or prospects of the Borrowers or any of
their Subsidiaries (including, without limitation, any Plan or
Multiemployer Plan and any reports or other information required to be
filed under ERISA) as any Lender or the Administrative Agent may reasonably
request.
Credit Agreement
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The Borrowers will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
Senior Officer (i) to the effect that no Default has occurred and is continuing
(or, if any Default has occurred and is continuing, describing the same in
reasonable detail and describing the action that the Borrowers have taken or
propose to take with respect thereto) and (ii) setting forth in reasonable
detail the computations necessary to determine whether the Borrowers are in
compliance with Sections 8.07, 8.08, 8.09, 8.10, 8.11, 8.12 and 8.15 hereof as
of the end of the respective quarterly fiscal period or fiscal year.
8.02 Litigation. The Borrowers will promptly give to each Lender notice of
----------
all legal or arbitral proceedings, and of all proceedings or investigations by
or before any governmental or regulatory authority or agency, and any material
development in respect of such legal or other proceedings, affecting the
Borrowers or any of their Subsidiaries or any of their Franchises, except
proceedings that, if adversely determined, would not (either individually or in
the aggregate) have a Material Adverse Effect. Without limiting the generality
of the foregoing, the Borrowers will give to each Lender (i) notice of the
assertion of any Environmental Claim by any Person against, or with respect to
the activities of, the Borrowers or any of their Subsidiaries and notice of any
alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations, other than any Environmental Claim or
alleged violation that, if adversely determined, would not (either individually
or in the aggregate) have a Material Adverse Effect and (ii) copies of any
notices received by the Borrowers or any of their Subsidiaries under any
Franchise of a material default by any Borrower or any of its Subsidiaries in
the performance of its obligations thereunder.
8.03 Existence, Etc. Each Borrower will, and will cause each of its
--------------
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (provided that nothing in this
--------
Section 8.03 shall prohibit any transaction expressly permitted under
Section 8.05 hereof);
Credit Agreement
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(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could (either individually or in the
aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its
Property prior to the date on which penalties attach thereto, except for
any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained;
(d) maintain, in all material respects, all of its Properties used or
useful in its business in good working order and condition, ordinary wear
and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Administrative Agent,
during normal business hours, to examine, copy and make extracts from its
books and records, to inspect any of its Properties, and to discuss its
business and affairs with its officers, all to the extent reasonably
requested by such Lender or the Administrative Agent (as the case may be).
Credit Agreement
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8.04 Insurance.
---------
Each Borrower will, and will cause each of its Subsidiaries to, maintain
insurance with financially sound and reputable insurance companies, and with
respect to Property and risks of a character usually maintained by corporations
engaged in the same or similar business similarly situated, against loss, damage
and liability of the kinds and in the amounts customarily maintained by such
corporations, provided that each Borrower will in any event maintain (with
--------
respect to itself and each of its Subsidiaries) casualty insurance and insurance
against claims for damages with respect to defamation, libel, slander, privacy
or other similar injury to person or reputation (including misappropriation of
personal likeness), in such amounts as are then customary for Persons engaged in
the same or similar business similarly situated.
8.05 Prohibition of Fundamental Changes.
----------------------------------
(a) Restrictions on Merger. None of the Borrowers will, nor will it permit
----------------------
any of it Subsidiaries to, enter into any transaction of merger or consolidation
or amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution).
(b) Restrictions on Acquisitions. None of the Borrowers will, nor will it
----------------------------
permit any of its Subsidiaries to, acquire any business or Property from, or
capital stock of, or be a party to any acquisition of, any Person except for
purchases of equipment, programming rights and other Property to be sold or used
in the ordinary course of business, Investments permitted under Section 8.08(f)
hereof, and Capital Expenditures permitted under Section 8.12 hereof.
(c) Restrictions on Sales and Other Dispositions. None of the Borrowers will,
--------------------------------------------
nor will it permit any of its Subsidiaries to, convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, any part
of its business or Property, whether now owned or hereafter acquired (including,
without limitation, receivables and leasehold interests, but excluding (i)
obsolete or worn-out Property, tools or equipment no longer used or useful in
its business so long as the amount thereof sold in any single fiscal year by the
Borrowers and their Subsidiaries shall not have a fair market value in excess of
$500,000 and (ii) any equipment, programming rights or other Property sold or
disposed of in the ordinary course of business and on ordinary business terms).
Credit Agreement
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(d) Certain Permitted Transactions. Notwithstanding the foregoing provisions
------------------------------
of this Section 8.05:
(i) Intercompany Mergers and Consolidations. Any Subsidiary of
---------------------------------------
a Borrower may be merged or consolidated with or into: (x) such Borrower
if such Borrower shall be the continuing or surviving corporation or (y)
any other such Subsidiary; provided that if any such transaction shall be
--------
between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned
Subsidiary shall be the continuing or surviving corporation.
(ii) Intercompany Dispositions. Any Subsidiary of a Borrower
-------------------------
may sell, lease, transfer or otherwise dispose of any or all of its
Property (upon voluntary liquidation or otherwise) to such Borrower or a
Wholly Owned Subsidiary of such Borrower.
(iii) Spring 1997 Acquisitions. The Borrowers may consummate
------------------------
the Spring 1997 Acquisitions, so long as the same are consummated in
accordance in all material respects with the respective Spring 1997
Acquisition Agreement and, in the case of the Sun City Acquisition:
(A) the Sun City Acquisition shall have been consummated
on or before September 30, 1997;
(B) at the time thereof, the Borrowers shall have
delivered to the Administrative Agent evidence that the Sun City
Acquisition has been duly consummated by Mediacom California in
accordance with the terms of the Sun City Acquisition Agreement,
including the schedules and exhibits thereto (except for any
modifications, supplements or waivers thereof, or written
consents or determinations made by any of the parties thereto,
each of which shall be satisfactory to the Majority Lenders), and
the Administrative Agent shall have received (and shall promptly
forward copies thereof to each Lender, if requested by such
Lender) a certificate of a Senior Officer to such effect and to
the effect that attached thereto are true and complete copies of
the documents delivered in connection with the closing
thereunder, together with (in the case of each legal opinion
delivered to the Borrowers pursuant thereto) a letter from each
Person delivering such opinion (which
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shall in any event include an opinion of special FCC counsel)
authorizing reliance thereon by the Administrative Agent and the
Lenders;
(C) to the extent the assets purchased in the Sun City
Acquisition shall be subject to any Liens not permitted
hereunder, such Liens shall have been released (or arrangements
for such release satisfactory to the Administrative Agent shall
have been made);
(D) after giving effect to the Sun City Acquisition, the
Borrowers and their Subsidiaries shall have at least 64,200 Basic
Subscribers, and the Administrative Agent shall have received a
certificate of a Senior Officer to such effect (and shall promptly
forward a copy thereof to each Lender, if requested by such
Lender);
(E) the Borrowers shall have delivered to the
Administrative Agent (which shall promptly forward copies thereof
to each Lender, if requested by such Lender) an unaudited combined
pro forma balance sheet of the Borrowers and their Subsidiaries as
at the date the Sun City Acquisition is consummated after giving
effect to the Sun City Acquisition and the Loans hereunder to be
outstanding on such date (subject, however, to asset value
adjustments based on subsequent appraisals), in form and providing
such details as are reasonably satisfactory to the Administrative
Agent, together with a certificate of a Senior Officer stating
that said balance sheet fairly presents the pro forma financial
condition of the Borrowers and their Subsidiaries as at such date
in accordance with GAAP, after giving effect to the Sun City
Acquisition and the Loans hereunder to be outstanding on such
date;
(F) after giving effect to the Sun City Acquisition,
based on the three-month period ended on the last day of the
calendar month immediately preceding the consummation of the Sun
City Acquisition, the product of (i) such Adjusted System Cash
Flow times (ii) four is at least equal to $12,100,000, and the
-----
Administrative Agent has received a certificate of a Senior
Officer to such effect (and shall promptly forward a copy thereof
to each Lender, if requested by such Lender);
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(G) the Borrowers shall have delivered to the
Administrative Agent evidence satisfactory to the Administrative
Agent and the Majority Lenders of receipt of all licenses,
permits, approvals and consents, if any, required with respect to
the Sun City Acquisition (including, without limitation, the
consents of the respective municipal franchising authorities to
the acquisition of the respective CATV Systems being acquired by
Mediacom California pursuant to the Sun City Acquisition);
(H) the Borrowers shall have delivered to the
Administrative Agent evidence that Mediacom California has
received net cash consideration (prior to the payment of any
transaction expenses) of not less than $3,500,000 representing (i)
an equity contribution by Mediacom to Mediacom California or (ii)
proceeds of the issuance of Affiliate Subordinated Indebtedness by
Mediacom California; and
(I) the Administrative Agent shall have received one or
more Deeds of Trust covering any material fee or leasehold
property of Mediacom California acquired pursuant to the Sun City
Acquisition, duly executed and delivered by Mediacom California
and to the extent necessary under applicable law, for filing in
the appropriate county land office(s), Uniform Commercial Code
financing statements covering fixtures relating to the Property
covered by such Deeds of Trust, in each case appropriately
completed and duly executed and the Borrowers shall have paid an
amount equal to any recording and stamp taxes payable in
connection with recording any such Deeds of Trust.
(iv) Subsequent Acquisitions. Any Borrower may acquire any
-----------------------
business or Property from, or capital stock of, or be a party to any
acquisition of, any Person, so long as:
(A) such acquisition (if by purchase of assets, merger or
consolidation) shall be effected in such manner so that the
acquired business, and the related assets, are owned either by a
Borrower or a Wholly Owned Subsidiary of a Borrower and, if
effected by merger or consolidation involving a Borrower, the
Borrower shall be the continuing or surviving entity
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and, if effected by merger or consolidation involving a Wholly
Owned Subsidiary of a Borrower, such Wholly Owned Subsidiary shall
be the continuing or surviving entity;
(B) such acquisition (if by purchase of stock) shall be
effected in such manner so that the acquired entity becomes a
Wholly Owned Subsidiary of a Borrower;
(C) the Company shall deliver to the Administrative Agent
(which shall promptly forward copies thereof to each Lender (1) no
later than five Business Days prior to the consummation of each
such acquisition (or such earlier date as shall be five Business
Days after the execution and delivery thereof), copies of the
respective agreements or instruments pursuant to which such
acquisition is to be consummated (including, without limitation,
any related management, non-compete, employment, option or other
material agreements), any schedules to such agreements or
instruments and all other material ancillary documents to be
executed or delivered in connection therewith and (2) promptly
following request therefor (but in any event within three Business
Days following such request), copies of such other information or
documents relating to each such acquisition as the Administrative
Agent or the Majority Lenders shall have requested;
(D) the Administrative Agent shall have received (and shall
promptly forward copies thereof to each Lender, if requested by
such Lender) a letter (in the case of each legal opinion delivered
to the Borrowers pursuant to such acquisition) from each Person
delivering such opinion (which shall in any event include an
opinion of special FCC counsel) authorizing reliance thereon by
the Administrative Agent and the Lenders;
(E) the Borrowers shall have delivered to the
Administrative Agent evidence satisfactory to the Administrative
Agent and the Majority Lenders of receipt of all licenses,
permits, approvals and consents, if any, required with respect to
such acquisition (including, without limitation, the consents of
the respective municipal franchising
Credit Agreement
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authorities to the acquisition of the respective CATV Systems
being acquired (if any));
(F) to the extent the assets purchased in such acquisition
shall be subject to any Liens not permitted hereunder, such Liens
shall have been released (or arrangements for such release
satisfactory to the Administrative Agent shall have been made);
(G) the Administrative Agent shall have received one or
more Deeds of Trust covering any material fee or leasehold
property of the Borrowers acquired pursuant to such acquisition,
duly executed and delivered by such Borrower and to the extent
necessary under applicable law, for filing in the appropriate
county land office(s), Uniform Commercial Code financing
statements covering fixtures relating to the Property covered by
such Deeds of Trust, in each case appropriately completed and duly
executed and the Borrowers shall have paid an amount equal to any
recording and stamp taxes payable in connection with recording any
such Deeds of Trust;
(H) to the extent applicable, the Company shall have
complied with the provisions of Section 8.18 hereof, including,
without limitation, to the extent not theretofore delivered,
delivery to the Administrative Agent of (x) the shares of stock or
other ownership interests, accompanied by undated stock powers or
other powers executed in blank, and (y) the agreements,
instruments, opinions of counsel and other documents required
under Section 8.18 hereof;
(I) immediately prior to such acquisition and after giving
effect thereto, no Default shall have occurred and be continuing;
(J) such acquisition shall have been approved by the
Majority Lenders and the Administrative Agent; and
(K) the Borrowers shall deliver such other documents and
shall have taken such other action as the Majority Lenders or the
Administrative Agent may request (which may include evidence that
a particular Borrower shall have received an equity contribution
from Mediacom or the proceeds of the issuance of
Credit Agreement
----------------
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Affiliate Subordinated Indebtedness pursuant to documentation and
in amounts in form and substance satisfactory to the Majority
Lenders and the Administrative Agent); and
(v) Other Acquisitions. Any Borrower may acquire any business
------------------
or Property from, or capital stock of, or be a party to any acquisition of,
any Person (in addition to the Spring 1997 Acquisitions and any Subsequent
Acquisitions), so long as the aggregate amount paid by the Borrowers in
respect of all such acquisitions (other than the Spring 1997 Acquisitions
and any Subsequent Acquisitions) after the date hereof shall not exceed
$1,000,000.
8.06 Limitation on Liens. None of the Borrowers will, nor will it permit
-------------------
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any of its Property, whether now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part B of Schedule I
hereto;
(c) Liens imposed by any governmental authority for taxes, assessments or
charges not yet due or that are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the respective Borrower or the affected
Subsidiaries, as the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or
other like Liens arising in the ordinary course of business that are not
overdue for a period of more than 30 days or that are being contested in good
faith and by appropriate proceedings and Liens securing judgments but only to
the extent for an amount and for a period not resulting in an Event of Default
under Section 9.01(i) hereof;
(e) pledges or deposits under worker's compensation, unemployment insurance
and other social security legislation;
(f) deposits to secure the performance of bids, trade contracts (other than
for Indebtedness), leases, statutory
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obligations, surety and appeal bonds, performance bonds and other obligations
of a like nature incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of Property
or minor imperfections in title thereto that, in the aggregate, are not
material in amount, and that do not in any case materially detract from the
value of the Property subject thereto or interfere with the ordinary conduct of
the business of the Borrower or any of their Subsidiaries; and
(h) Liens upon real and/or tangible personal Property acquired after the date
hereof (by purchase, construction or otherwise) by the Borrowers or any of
their Subsidiaries and securing Indebtedness permitted under Section 8.07(e)
hereof, each of which Liens either (A) existed on such Property before the time
of its acquisition and was not created in anticipation thereof or (B) was
created solely for the purpose of securing Indebtedness representing, or
incurred to finance, refinance or refund, the cost (including the cost of
construction) of such Property; provided that (i) no such Lien shall extend to
or cover any Property of a Borrower or any such Subsidiary other than the
Property so acquired and improvements thereon and (ii) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed the fair market
value (as determined in good faith by a Senior Officer) of such Property at the
time it was acquired (by purchase, construction or otherwise).
8.07 Indebtedness.
------------
None of the Borrowers will, nor will it permit any of its Subsidiaries to,
create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding on the date hereof and listed in Part A of
Schedule I hereto;
(c) the following Indebtedness: (x) Affiliate Subordinated Indebtedness
incurred in accordance with Section 8.14 hereof and (y) the Booth
Subordinated Indebtedness;
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(d) Indebtedness of the Borrowers and their Subsidiaries to the Borrowers and
their Subsidiaries; and
(e) additional Indebtedness of the Borrowers and their Subsidiaries
(including, without limitation, Capital Lease Obligations and other
Indebtedness secured by Liens permitted under Section 8.06(h) hereof) up to but
not exceeding an aggregate amount of $1,000,000 at any one time outstanding.
In addition to the foregoing, the Borrowers will not, nor will they permit
their Subsidiaries to, incur or suffer to exist any obligations in an aggregate
amount in excess of $1,250,000 at any one time outstanding in respect of surety
and performance bonds backing pole rental or conduit attachments and the like,
or backing obligations under Franchises, arising in the ordinary course of
business of the CATV Systems of the Borrowers and their Subsidiaries.
8.08 Investments. None of the Borrowers will, nor will it permit any of its
-----------
Subsidiaries to, make or permit to remain outstanding any Investments except:
(a) Investments outstanding on the date hereof and identified in Schedule II
hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) Investments by the Borrowers and their Subsidiaries in the Borrowers and
their Subsidiaries;
(e) Interest Rate Protection Agreements; provided that, without limiting the
--------
obligation of the Borrowers under Section 8.13 hereof, when entering into any
Interest Rate Protection Agreement that at the time has, or at any time in the
future may give rise to, any credit exposure, the aggregate credit exposure
under all Interest Rate Protection Agreements (including the Interest Rate
Protection Agreement being entered into) shall not exceed $2,500,000; and
(f) additional Investments (including, without limitation, Investments by the
Borrowers or any of their Subsidiaries in Affiliates of the Borrowers), so long
as the
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aggregate amount of all such Investments shall not exceed $1,000,000.
Without limiting the generality of the forgoing, the Borrowers will not create,
or make any Investment in, any Subsidiary after the date hereof without the
prior written consent of the Majority Lenders.
8.09 Restricted Payments. None of the Borrowers will make any Restricted
-------------------
Payment at any time, provided that, so long as at the time thereof, and after
giving effect thereto, no Default or Event of Default shall have occurred and be
continuing, the Borrowers may make the following Restricted Payments (subject,
in each case, to the applicable conditions set forth below):
(a) the Borrowers may make Restricted Payments to its members on or after
April 12 of each fiscal year (the "current year") in an amount equal to the Tax
Payment Amount for the immediately preceding fiscal year (the "prior year"), so
long as at least fifteen days prior to making any such Restricted Payment, the
Borrowers shall have delivered to each Lender (i) notification of the amount
and proposed payment date of such Restricted Payment and (ii) a statement from
the Borrowers' independent certified public accountants setting forth a
detailed calculation of the Tax Payment Amount for the prior year and showing
the amount of such Restricted Payment and all prior Restricted Payments;
(b) the Borrowers may make payments in respect of Management Fees to the
extent permitted under Section 8.11 hereof;
(c) the Borrowers may make payments in respect of the interest on Affiliate
Subordinated Indebtedness constituting Supplemental Capital or Cure Monies;
and
(d) the Borrowers may make payments in respect of the principal of Affiliate
Subordinated Indebtedness constituting Supplemental Capital or Cure Monies,
so long as
(i) in the case of any such payment in respect of the
principal of Affiliate Subordinated Indebtedness constituting Cure
Monies, at least one complete fiscal quarter shall have elapsed
subsequent to the last date upon which the Borrowers shall have
utilized its cure rights under Section 9.02 hereof, without the
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occurrence of any Event of Default (and, for purposes hereof, unless
the Borrowers indicate otherwise at the time of any such payment, such
payment shall be deemed to be made first from Cure Monies and second
from Supplemental Capital);
(ii) after giving effect to the payment of such principal,
the Borrowers would (as at the last day of the most recent fiscal
quarter) have been in compliance on a pro forma basis with Section
8.10 hereof and the Senior Leverage Ratio calculated on a pro forma
basis is at the time less than 5.50 to 1 (or, if lower, the applicable
requirement at the time under Section 8.10(a) hereof), the
determination of such compliance and such Senior Leverage Ratio to be
determined as if (x) for purposes of calculating the Senior Leverage
Ratio and the Total Leverage Ratio, the amount of such payment were
added to Indebtedness, and (y) for purposes of calculating the
Interest Coverage Ratio and Fixed Charges Coverage Ratio, the amount
of such payment (and any Cure Monies received during the period for
which the Interest Coverage Ratio or Fixed Charge Coverage Ratio is
calculated) represented additional principal of the Loans outstanding
hereunder at all times during the respective fiscal quarter for which
such Ratios are calculated and the amount of interest that would have
been payable hereunder during such fiscal quarter were recalculated to
take into account such additional principal; and
(iii) at least three Business Days prior to the date of any
such payment, the Borrowers shall have delivered to the Lenders a
certificate of a Senior Officer setting forth calculations, in form
and detail satisfactory to the Majority Lenders, demonstrating
compliance with the requirements of this paragraph (c) after giving
effect to such payment.
Nothing herein shall be deemed to prohibit the payment of dividends by
any Subsidiary of a Borrower to such Borrower or to any other Subsidiary of such
Borrower.
8.10 Certain Financial Covenants.
---------------------------
(a) Leverage Ratios. The Borrowers will not permit the Senior Leverage Ratio
---------------
and Total Leverage Ratio to exceed the
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following respective ratios at any time during the following respective periods:
Senior Total
Period Leverage Ratio Leverage Ratio
------ -------------- --------------
From the Effective Date
through September 29, 1997 6.25 to 1 6.50 to 1
From September 30, 1997
through June 29, 1998 6.00 to 1 6.50 to 1
From June 30, 1998
through September 29, 1998 5.90 to 1 6.40 to 1
From September 30, 1998
through March 30, 1999 5.75 to 1 6.25 to 1
From March 31, 1999
through September 29, 1999 5.50 to 1 6.00 to 1
From September 30, 1999
through June 29, 2000 5.00 to 1 5.50 to 1
From June 30, 2000
through June 29, 2001 4.50 to 1 5.00 to 1
From June 30, 2001
through June 29, 2002 3.50 to 1 4.00 to 1
From June 30, 2002
and at all times
thereafter 3.00 to 1 4.00 to 1
(b) Interest Coverage Ratio. The Borrowers will not permit the Interest
-----------------------
Coverage Ratio to be less than the following respective ratios as at the last
day of any fiscal quarter ending during the following respective periods:
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Period Ratio
------ -----
From the Effective Date
through September 29, 1998 1.50 to 1
From September 30, 1998
through June 29, 1999 1.60 to 1
From June 30, 1999
through March 30, 2000 1.75 to 1
From March 31, 2000
and at all times thereafter 2.00 to 1
(c) Fixed Charge Coverage Ratio. The Borrowers will not permit the Fixed
---------------------------
Charge Coverage Ratio to be less than 1.05 to 1 at any time on or after December
31, 1997.
8.11 Management Fees. The Borrowers will not permit the aggregate amount of
---------------
Management Fees accrued in respect of any fiscal year of the Borrowers to exceed
5% of the Gross Operating Revenue of the Borrowers and their Subsidiaries for
such fiscal year. In addition, the Borrowers will not, as at the last day of the
first, second and third fiscal quarters in any fiscal year, permit the amount of
Management Fees paid during the portion of such fiscal year ending with such
fiscal quarter to exceed 5% of the Gross Operating Revenue of the Borrowers and
their Subsidiaries for such portion of such fiscal year (based upon the
financial statements of the Borrowers provided pursuant to Section 8.01(a)
hereof), provided that in any event the Borrowers will not pay any Management
--------
Fees at any time following the occurrence and during the continuance of any
Default. Any Management Fees that are accrued for any fiscal quarter (the
"current fiscal quarter") but which are not paid during the current fiscal
----------------------
quarter may be paid at any time during the period of four fiscal quarters
following the current fiscal quarter (and for these purposes any payment of
Management Fees during such period shall be deemed to be applied to Management
Fees in the order of the fiscal quarters in respect of which such Management
Fees are accrued). Any Management Fees which may not be paid as a result of the
limitations set forth in the forgoing provisions of this Section 8.11 shall be
deferred and shall not be payable until the principal of and interest on the
Loans, and all other amounts owing hereunder, shall have been paid in full. For
purposes of this Section 8.11 "Gross Operating Revenue" shall mean the aggregate
-----------------------
gross operating revenues derived by the
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Borrowers from its CATV Systems, from RidgeNet and from other telecommunications
services as determined in accordance with GAAP excluding, however, revenue or
income derived by the Borrowers from any of the following sources: (i) from the
sale of any asset of such CATV Systems not in the ordinary course of business,
(ii) interest income, (iii) proceeds from the financing or refinancing of any
Indebtedness of the Borrowers or any of their Subsidiaries and (iv)
extraordinary gains in accordance with GAAP.
Neither the Borrowers nor any of their Subsidiaries shall be obligated to pay
Management Fees to any Person, unless the Borrowers and such Person shall have
executed and delivered to the Administrative Agent a Management Fee
Subordination Agreement, and neither the Borrowers nor any of their Subsidiaries
shall pay Management Fees to any person except to the extent permitted under the
respective Management Fee Subordination Agreement to which such Person is a
party.
Neither the Borrowers nor any of their Subsidiaries shall employ or retain any
executive management personnel (or pay any Person, other than the Manager, in
respect of executive management personnel or matters, for the Borrowers or any
of their Subsidiaries), it being the intention of the parties hereto that all
executive management personnel required in connection with the business or
operations of the Borrowers and their Subsidiaries shall be employees of the
Manager (and that the Executive Compensation for such employees shall be covered
by Management Fees payable hereunder). For purposes hereof, "executive
management personnel" shall not include any individual (such as a system
manager) who is employed solely in connection with the day-to-day operations of
a CATV System.
8.12 Capital Expenditures. The Borrowers will not permit the aggregate
--------------------
amount of Capital Expenditures to exceed (i) $14,500,000 for the period from and
including the Effective Date through December 31, 1998, (ii) $4,000,000 for the
fiscal year ending on December 31, 1999 and (iii) $3,500,000 for each fiscal
year commencing after December 31, 1999. If the aggregate amount of Capital
Expenditures shall be less than $14,500,000 for the period from and including
the Effective Date through December 31, 1998, then the shortfall shall be added
to the amount of Capital Expenditures permitted for the fiscal year ending on
December 31, 1999 so long as the upgrades and rebuilds with respect to the
Spring 1997 Acquisitions have not been completed.
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8.13 Interest Rate Protection Agreements. The Borrowers will within 90 days
-----------------------------------
of the Effective Date, enter into, and thereafter maintain in full force and
effect, one or more Interest Rate Protection Agreements with one or more of the
Lenders (and/or with a bank or other financial institution having capital,
surplus and undivided profits of at least $500,000,000), that effectively
enables the Borrowers (in a manner satisfactory to the Majority Lenders) to
protect itself, in a manner and on terms reasonably satisfactory to the Majority
Lenders, against adverse fluctuations in the three-month London interbank
offered rates as to a notional principal amount at least equal to 50% of the
aggregate outstanding principal amount of the Loans.
8.14 Affiliate Subordinated Indebtedness.
-----------------------------------
(a) The Borrowers may at any time after the date hereof incur Affiliate
Subordinated Indebtedness to Mediacom or one or more other Affiliates, so long
as the proceeds of any such Affiliate Subordinated Indebtedness constituting
Cure Monies are immediately applied to the reduction of the Revolving Credit
Commitments and the prepayment of principal of the Term Loans hereunder, applied
ratably to the Revolving Credit Commitments and Term Loans of each Class in
accordance with the respective then-outstanding aggregate amounts of such
Commitments and Loans (and to the simultaneous prepayment of the Revolving
Credit Loans in an amount equal to such required reduction of Revolving Credit
Commitments), provided that to the extent any such required prepayment of
--------
Revolving Credit Loans shall exceed the then-outstanding aggregate principal
amount of Revolving Credit Loans, such excess shall be applied to the prepayment
of Term Loans.
(b) The Borrowers will not, nor will it permit any of their Subsidiaries to,
purchase, redeem, retire or otherwise acquire for value, or set apart any money
for a sinking, defeasance or other analogous fund for the purchase, redemption,
retirement or other acquisition of, or make any voluntary payment or prepayment
of the principal of or interest on, or any other amount owing in respect of, any
Affiliate Subordinated Indebtedness or the Booth Subordinated Indebtedness,
except (in the case of Affiliate Subordinated Indebtedness) to the extent
permitted under Section 8.09 hereof.
8.15 Lines of Business. The Borrowers will at all times ensure that not
-----------------
more than 15% of gross operating revenue of the Borrowers and their Subsidiaries
for any fiscal year shall be
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derived from any line or lines of business activity other than the business of
owning and operating CATV Systems and related communications businesses.
8.16 Transactions with Affiliates. Except as expressly permitted by this
----------------------------
Agreement, none of the Borrowers will, nor will it permit any of its
Subsidiaries to, directly or indirectly: (a) make any Investment in an Affiliate
except for Investments permitted under Section 8.08(f), provided that, the
monetary or business consideration arising therefrom would be substantially as
advantageous to the Borrowers and their Subsidiaries as the monetary or business
consideration that would obtain in a comparable transaction with a Person not an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate; (c) merge into or consolidate with or purchase or
acquire Property from an Affiliate; (d) make any contribution towards, or
reimbursement for, any Federal income taxes payable by any member of any
Borrower or any of its Subsidiaries in respect of income of such Borrower; or
(e) enter into any other transaction directly or indirectly with or for the
benefit of an Affiliate (including, without limitation, Guarantees and
assumptions of obligations of an Affiliate); provided that
(i) any Affiliate who is an individual may serve as a director,
officer or employee of a Borrower or any of its Subsidiaries and receive
reasonable compensation for his or her services in such capacity,
(ii) the Borrowers and their Subsidiaries may enter into
transactions (other than extensions of credit by the Borrowers or any of
their Subsidiaries to an Affiliate) providing for the leasing of Property,
the rendering or receipt of services or the purchase or sale of equipment,
programming rights, advertising time and other Property in the ordinary
course of business if the monetary or business consideration arising
therefrom would be substantially as advantageous to the Borrowers and their
Subsidiaries as the monetary or business consideration that would obtain in
a comparable transaction with a Person not an Affiliate,
(iii) the Borrowers may enter into and perform their respective
obligations under, the Management Agreements,
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----------------
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(iv) the Borrowers and their Subsidiaries may reimburse the
Manager for up to $100,000 of Manager Expenses during any fiscal year and
(v) the Borrowers and their Subsidiaries may pay to the Manager
the aggregate amount of intercompany shared expenses payable to Mediacom
that are allocated by Mediacom to the Borrowers and their Subsidiaries in
accordance with Section 5.05 of the Guarantee and Pledge Agreement.
8.17 Use of Proceeds. The Borrowers will use the proceeds of the Loans
---------------
hereunder solely to (i) provide financing for Acquisitions and to pay the fees
and expenses related thereto, (ii) make Restricted Payments, (iii) pay
Management Fees and Manager Expenses, (iv) make Investments permitted under
Section 8.08 hereof and (v) finance capital expenditures and working capital
needs of the Borrowers and their Subsidiaries and acquisitions permitted
hereunder (in each case in compliance with all applicable legal and regulatory
requirements); provided that neither the Administrative Agent nor any Lender
--------
shall have any responsibility as to the use of any of such proceeds.
8.18 Certain Obligations Respecting Subsidiaries.
-------------------------------------------
(a) Subsidiary Guarantors. In the event that the Borrowers or any of their
---------------------
Subsidiaries shall form or acquire any Subsidiary after the Effective Date
(after obtaining any necessary consent of the Lenders), the Borrowers shall
cause, and shall cause their Subsidiaries to cause, such Subsidiary to:
(i) execute and deliver to the Administrative Agent a Subsidiary
Guarantee Agreement in the form of Exhibit E hereto (and, thereby, to
become a "Subsidiary Guarantor", and an "Obligor" hereunder and a "Securing
Party" under the Security Agreement);
(ii) deliver the shares of its stock or other ownership
interests accompanied by undated stock powers or other powers executed in
blank to the Administrative Agent, and to take other such action, as shall
be necessary to create and perfect valid and enforceable first priority
Liens (subject to Liens permitted under Section 8.06 hereof) on
substantially all of the Property of such new Subsidiary as collateral
security for the obligations of such new Subsidiary under the Subsidiary
Guarantee Agreement, and
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(iii) deliver such proof of corporate action, limited liability
company action or partnership action, as the case may be, incumbency of
officers, opinions of counsel and other documents as is consistent with
those delivered by each Obligor pursuant to Section 6.01 hereof on the
Effective Date or as the Administrative Agent shall have reasonably
requested.
(b) Ownership of Subsidiaries. The Borrowers will, and will cause each of
-------------------------
their Subsidiaries to, take such action from time to time as shall be necessary
to ensure that each of its Subsidiaries is a Wholly Owned Subsidiary. In the
event that any additional shares of stock or other ownership interests shall be
issued by any Subsidiary, the respective Borrower agrees forthwith to deliver to
the Administrative Agent pursuant to the Security Agreement the certificates
evidencing such shares of stock or other ownership interests, accompanied by
undated stock or other powers executed in blank and to take such other action as
the Administrative Agent shall request to perfect the security interest created
therein pursuant to the Security Agreement.
(c) Further Assurances. The Borrowers will, and will cause each of their
------------------
Subsidiaries to, take such action from time to time (including filing
appropriate Uniform Commercial Code financing statements and executing and
delivering such assignments, security agreements, Deeds of Trust and other
instruments) as shall be requested by the Administrative Agent to create, in
favor of the Administrative Agent for the benefit of the Lenders, perfected
security interests and Liens in substantially all of the personal Property, and
all of the material fee and leasehold property, of the Borrowers and each of
their Subsidiaries.
(d) Certain Restrictions. The Borrowers will not permit any of their
--------------------
Subsidiaries to enter into, after the date hereof, any indenture, agreement,
instrument or other arrangement that, directly or indirectly, prohibits or
restrains, or has the effect of prohibiting or restraining, or imposes
materially adverse conditions upon, the incurrence or payment of Indebtedness,
the granting of Liens, the declaration or payment of dividends, the making of
loans, advances or Investments or the sale, assignment, transfer or other
disposition of Property.
8.19 Modifications of Certain Documents.
----------------------------------
None of the Borrowers will consent to any modification, supplement or waiver
of any of the provisions of the Management Agreements, any
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Acquisition Agreement, or any agreement, instrument or other document evidencing
or relating to Affiliate Subordinated Indebtedness or the Booth Subordinated
Indebtedness without the prior consent of the Administrative Agent (with the
approval of the Majority Lenders).
Section 9. Events of Default.
9.01 Events of Default.
-----------------
If one or more of the following events (herein called "Events of Default")
-----------------
shall occur and be continuing:
(a) Any Borrower shall default in the payment when due (whether at stated
maturity or upon mandatory or optional prepayment) of any principal of or
interest on any Loan, any fee or any other amount payable by them hereunder
or under any other Loan Document; or
(b) Mediacom, any Borrower or any Subsidiary of a Borrower shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $500,000 or more; or any event specified in any
note, agreement, indenture or other document evidencing or relating to any
such Indebtedness shall occur if the effect of such event is to cause, or
(without the lapse of time or the taking of any action, other than the
giving of notice) to permit the holder or holders of such Indebtedness (or
a trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity; or the Borrowers shall default in the payment when due of any
amount aggregating $500,000 or more under any Interest Rate Protection
Agreement; or any event specified in any Interest Rate Protection Agreement
shall occur if the effect of such event is to cause, or (with the giving of
any notice or the lapse of time or both) to permit, termination or
liquidation payment or payments aggregating $500,000 or more to become due;
or
(c) Any representation, warranty or certification made or deemed made herein or
in any other Loan Document (or in any modification or supplement hereto or
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----------------
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thereto) by any Borrower, or any certificate furnished to any Lender or the
Administrative Agent pursuant to the provisions hereof or thereof, shall
prove to have been false or misleading as of the time made or furnished in
any material respect; or any representation or warranty made or deemed made
in any Acquisition Agreement by the respective seller(s) thereunder, shall
prove to have been false or misleading as of the time made or furnished in
any material respect (except to the extent fully covered by amounts held on
deposit pursuant to the respective escrow agreements under the relevant
Acquisition Agreement); or
(d) Any Borrower shall default in the performance of any of its obligations
under any of Sections 8.01(g), 8.05, 8.06, 8.07, 8.08, 8.09, 8.10, 8.11,
8.12, 8.14, 8.16, 8.18 or 8.19 hereof; or any Borrower shall default in the
performance of any of its other obligations in this Agreement or any
Obligor shall default in the performance of its obligations under any other
Loan Document to which it is a party, and such default shall continue
unremedied for a period of thirty or more days after notice thereof to the
Borrowers by the Administrative Agent or any Lender (through the
Administrative Agent); or
(e) Any Obligor shall admit in writing its inability to, or be generally unable
to, pay its debts as such debts become due; or
(f) Any Obligor shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee, examiner or
liquidator of itself or of all or a substantial part of its Property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code or (vi) take
any corporate action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application or consent
of any Obligor, in any court of competent jurisdiction, seeking (i) its
reorganization, liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the
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----------------
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appointment of a receiver, custodian, trustee, examiner, liquidator or the
like of such Obligor or of all or any substantial part of its Property or
(iii) similar relief in respect of such Obligor under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of
the foregoing shall be entered and continue unstayed and in effect, for a
period of 60 or more days; or an order for relief against such Obligor
shall be entered in an involuntary case under the Bankruptcy Code; or
(h) Any Borrower shall be terminated, dissolved or liquidated (as a matter of
law or otherwise), or proceedings shall be commenced by a Borrower seeking
the termination, dissolution or liquidation of a Borrower, or proceedings
shall be commenced by any Person (other than the Borrowers) seeking the
termination, dissolution or liquidation of a Borrower and such proceeding
shall continue undismissed for a period of 60 or more days; or
(i) A final judgment or judgments for the payment of money of $600,000 or more
in the aggregate (exclusive of judgment amounts fully covered by insurance
where the insurer has admitted liability in respect of such judgment) or of
$5,000,000 or more in the aggregate (regardless of insurance coverage)
shall be rendered by one or more courts, administrative tribunals or other
bodies having jurisdiction against the Borrowers or any of their
Subsidiaries and the same shall not be discharged (or provision shall not
be made for such discharge), or a stay of execution thereof shall not be
procured, within 30 days from the date of entry thereof and the relevant
Borrower or Subsidiary shall not, within said period of 30 days, or such
longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(j) An event or condition specified in Section 8.01(e) hereof shall occur or
exist with respect to any Plan or Multiemployer Plan and, as a result of
such event or condition, together with all other such events or conditions,
the Borrowers or any ERISA Affiliate shall incur or in the opinion of the
Majority Lenders shall be reasonably likely to incur a liability to a Plan,
a
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Multiemployer Plan or the PBGC (or any combination of the foregoing) that,
in the determination of the Majority Lenders, would (either individually or
in the aggregate) have a Material Adverse Effect; or
(k) A reasonable basis shall exist for the assertion against any Borrower or
any of its Subsidiaries, or any predecessor in interest of any Borrower or
any of their Subsidiaries or Affiliates, of (or there shall have been
asserted against any Borrower or any of its Subsidiaries) an Environmental
Claim that, in the judgment of the Majority Lenders is reasonably likely to
be determined adversely to such Borrower or any of its Subsidiaries, and
the amount thereof (either individually or in the aggregate) is reasonably
likely to have a Material Adverse Effect (insofar as such amount is payable
by such Borrower or any of its Subsidiaries but after deducting any portion
thereof that is reasonably expected to be paid by other creditworthy
Persons jointly and severally liable therefor); or
(l) Any one or more of the following events shall occur and be continuing:
(i) Rocco Commisso shall cease to be Chairman and Chief
Executive Officer of the Manager;
(ii) Mediacom Management Corporation shall cease to act as
Manager of the Borrowers;
(iii) the Parent Guarantors and Mediacom California shall
cease to own 100% of the aggregate ownership interests in each
Borrower;
(iv) any person or group (within the meaning of Rule 13d-5
under the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act") and Section 13(d) and 14(d) of the Exchange Act (other than a
---
Commisso Entity, or any entity controlled by or under common control
with Chase Manhattan Capital Corporation or Booth American Company
becomes, directly or indirectly, in a single transaction or in a
related series of transactions by way of merger, consolidation or
other business combination or otherwise, the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 25% of the
capital stock of any Borrower on a fully-diluted basis (in other
words,
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giving effect to the exercise of any warrants, options and conversion
and other rights); or
(v) the Commisso Entities shall sell, transfer, pledge or
otherwise dispose of more than 20% of the aggregate equity interests
in Mediacom held by them on the Effective Date (after giving effect to
the transactions contemplated hereunder to occur on the Effective
Date); or
(m) Except for Franchises that cover fewer than 5% of the Subscribers of the
Borrowers and their Subsidiaries (determined as at the last day of the most
recent fiscal quarter for which a Quarterly Officers' Report shall have
been delivered), one or more Franchises relating to the CATV Systems of the
Borrowers and their Subsidiaries shall be terminated or revoked such that
the respective Borrower or Subsidiary is no longer able to operate such
Franchises and retain the revenue received therefrom or the respective
Borrower or Subsidiary or the grantors of such Franchises shall fail to
renew such Franchises at the stated expiration thereof such that the
respective Borrower or Subsidiary is no longer able to operate such
Franchises and retain the revenue received therefrom; or
(n) The Liens created by the Security Documents shall at any time not
constitute a valid and perfected Lien on the collateral intended to be
covered thereby (to the extent perfection by filing, registration,
recordation or possession is required herein or therein) in favor of the
Administrative Agent, free and clear of all other Liens (other than Liens
permitted under Section 8.06 hereof or under the respective Security
Documents), or, except for expiration in accordance with its terms, any of
the Security Documents shall for whatever reason be terminated or cease to
be in full force and effect, or the enforceability thereof shall be
contested by any Borrower; or
(o) The Operating Agreements, or the Amended and Restated Operating Agreement
dated as of March 12, 1996 with respect to Mediacom, shall be modified in
any manner that would adversely affect the obligations of the Borrowers, or
the rights of the Lenders or the Administrative Agent, hereunder or under
any of the other Loan Documents; or
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(p) A material adverse change shall have occurred subsequent to the date hereof
in the proceedings of the federal Defense Base Closure Commission with
respect to the China Lake Naval Base;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to the Borrowers, the
Administrative Agent shall, if instructed by the Majority Lenders, by notice to
the Borrowers, terminate the Commitments and/or declare the principal amount
then outstanding of, and the accrued interest on, the Loans and all other
amounts payable by the Borrowers hereunder and under the Notes (including,
without limitation, any amounts payable under Section 5.05 hereof) to be
forthwith due and payable, whereupon such amounts shall be immediately due and
payable without presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrowers; and (2) in the case
of the occurrence of an Event of Default referred to in clause (f) or (g) of
this Section 9 with respect to the Borrowers, the Commitments shall
automatically be terminated and the principal amount then outstanding of, and
the accrued interest on, the Loans and all other amounts payable by the
Borrowers hereunder and under the Notes (including, without limitation, any
amounts payable under Section 5.05 hereof) shall automatically become
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrowers.
9.02 Certain Cure Rights.
-------------------
(a) Notwithstanding the provisions of Section 9.01 hereof, but without
limiting the obligations of the Borrowers under Section 8.10(a) hereof, a breach
by the Borrowers as of the last day of any fiscal quarter or any fiscal year of
its obligations under said Section 8.10(a) shall not constitute an Event of
Default hereunder (except for purposes of Section 6 hereof) until the date (the
"Cut-Off Date") which is the earlier of the date thirty days after (a) the date
------------
the financial statements for the Borrowers and their Subsidiaries with respect
to such fiscal quarter or fiscal year, as the case may be, are delivered
pursuant to Section 8.01(a) or 8.01(b) hereof or (b) the latest date on which
such financial statements are required to be delivered pursuant to said Section
8.01(a) or 8.01(b), provided that, if following the last day of such fiscal
--------
quarter or fiscal year and prior to the Cut-Off Date, the Borrowers shall have
received Cure Monies (and shall have applied the proceeds
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thereof to the prepayment of the Loans hereunder, which prepayment, in the case
of Affiliate Subordinated Indebtedness, shall be effected in the manner provided
in Section 8.14(a) hereof), or shall have prepaid the Loans hereunder from
available cash, in an amount sufficient to bring the Borrowers into compliance
with said Section 8.10(a) assuming that the Senior Leverage Ratio or Total
Leverage Ratio (as the case may be), as of the last day of such fiscal quarter
or fiscal year, as the case may be, were recalculated to subtract such
prepayment from the aggregate outstanding amount of Indebtedness, then such
breach or breaches shall be deemed to have been cured; provided, further, that
-------- -------
breaches of Section 8.10 hereof (including pursuant to paragraph (b) below) may
not be deemed to be cured pursuant to this Section 9.02 (x) more than three
times during the term of this Agreement or (y) during consecutive fiscal
quarters.
(b) Notwithstanding the provisions of Section 9.01 hereof, but without
limiting the obligations of the Borrowers under Section 8.10(b) or 8.10(c)
hereof, a breach by the Borrowers as of the last day of any fiscal quarter or
any fiscal year of its obligations under said Section 8.10(b) or 8.10(c) shall
not constitute an Event of Default hereunder (except for purposes of Section 6
hereof) until the date (the "Cut-Off Date") which is the earlier of the date
------------
thirty days after (a) the date the financial statements for the Borrowers and
their Subsidiaries with respect to such fiscal quarter or fiscal year, as the
case may be, are delivered pursuant to Section 8.01(a) or 8.01(b) hereof or (b)
the latest date on which such financial statements are required to be delivered
pursuant to said Section 8.01(a) or 8.01(b), provided that, if following the
--------
last day of such fiscal quarter or fiscal year and prior to the Cut-Off Date,
the Borrowers shall have received Cure Monies (and shall have applied the
proceeds thereof to the prepayment of the Loans hereunder, which prepayment, in
the case of Affiliate Subordinated Indebtedness, shall be effected in the manner
provided in Section 8.14(a) hereof), or shall have prepaid the Loans hereunder
from available cash, in an amount sufficient to bring the Borrowers into
compliance with said Section 8.10(b) or 8.10(c) assuming that the Interest
Coverage Ratio and Fixed Charge Coverage Ratio (as the case may be), as of the
last day of such fiscal quarter or fiscal year, as the case may be, were
recalculated to deduct from Interest Expense the aggregate amount of interest
that would not have been required to be paid hereunder if such prepayment had
been made on the first day of the period for which the Interest Coverage Ratio
and Fixed Charge Coverage Ratio is determined under said Section 8.10(b) or
8.10(c), then such
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breach or breaches shall be deemed to have been cured; provided, further, that
-------- -------
breaches of Section 8.10 hereof (including pursuant to paragraph (a) above) may
not be deemed to be cured pursuant to this Section 9.02 (x) more than three
times during the term of this Agreement or (y) during consecutive fiscal
quarters.
Section 10. The Administrative Agent.
10.01 Appointment, Powers and Immunities.
----------------------------------
Each Lender hereby appoints and authorizes the Administrative Agent to act as
its agent hereunder and under the other Loan Documents with such powers as are
specifically delegated to the Administrative Agent by the terms of this
Agreement and under the other Loan Documents, together with such other powers as
are reasonably incidental thereto. The Administrative Agent (which term as used
in this sentence and in Section 10.05 and the first sentence of Section 10.06
hereof shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents):
(a) shall have no duties or responsibilities except those expressly set forth
in this Agreement and in the other Loan Documents, and shall not by reason
of this Agreement or any other Loan Document be a trustee for any Lender;
(b) shall not be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any other
Loan Document, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any
other Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, any Note or
any other Loan Document or any other document referred to or provided for
herein or therein or for any failure by the Borrowers or any other Person
to perform any of its obligations hereunder or thereunder;
(c) shall not, except to the extent expressly instructed by the Majority
Lenders with respect to the collateral security under the Security
Documents, be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; and
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(d) shall not be responsible for any action taken or omitted to be taken by it
hereunder or under any other Loan Document or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful
misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or attorneys-
in-fact selected by it in good faith. The Administrative Agent may deem and
treat the payee (or Registered Holder, as the case may be) of a Note as the
holder thereof for all purposes hereof unless and until a notice of the
assignment or transfer thereof shall have been filed with the Administrative
Agent.
10.02 Reliance by Administrative Agent.
--------------------------------
The Administrative Agent shall be entitled to rely upon any certification,
notice or other communication (including, without limitation, any thereof by
telephone, telecopy, telegram or cable) reasonably believed by it to be genuine
and correct and to have been signed or sent by or on behalf of the proper Person
or Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by the Administrative Agent. As to any
matters not expressly provided for by this Agreement or any other Loan Document,
the Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or thereunder in accordance with instructions
given by the Majority Lenders or, if provided herein, in accordance with the
instructions given by the Majority Revolving Credit Lenders, the Majority Term A
Lenders, the Majority Term B Lenders or all of the Lenders as is required in
such circumstance, and such instructions of such Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders.
10.03 Defaults.
--------
The Administrative Agent shall not be deemed to have knowledge or notice of
the occurrence of a Default unless the Administrative Agent has received notice
from a Lender or the Borrowers specifying such Default and stating that such
notice is a "Notice of Default". In the event that the Administrative Agent
receives such a notice of the occurrence of a Default, the Administrative Agent
shall give prompt notice thereof to the Lenders. The Administrative Agent shall
(subject to Section 10.07 hereof) take such action with respect to such Default
as shall be directed by the Majority Lenders or, if
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provided herein, the Majority Revolving Credit Lenders, the Majority Term A
Lenders or the Majority Term B Lenders, provided that, unless and until the
--------
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interest of the Lenders except to the extent that this Agreement
expressly requires that such action be taken, or not be taken, only with the
consent or upon the authorization of the Majority Lenders, the Majority
Revolving Credit Lenders, the Majority Term A Lenders, the Majority Term B
Lenders or all of the Lenders.
10.04 Rights as a Lender.
------------------
With respect to its Commitments and the Loans made by it, Chase (and any
successor acting as Administrative Agent) in its capacity as a Lender hereunder
shall have the same rights and powers hereunder as any other Lender and may
exercise the same as though it were not acting as the Administrative Agent, and
the term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include the Administrative Agent in its individual capacity. Chase (and any
successor acting as Administrative Agent) and its affiliates may (without having
to account therefor to any Lender) accept deposits from, lend money to, make
investments in and generally engage in any kind of banking, trust or other
business with the Borrowers (and any of their Subsidiaries or Affiliates) as if
it were not acting as the Administrative Agent, and Chase (and any such
successor) and its affiliates may accept fees and other consideration from the
Borrowers for services in connection with this Agreement or otherwise without
having to account for the same to the Lenders.
10.05 Indemnification.
---------------
The Lenders agree to indemnify the Administrative Agent (to the extent not
reimbursed under Section 11.03 hereof, but without limiting the obligations of
the Borrowers under said Section 11.03) ratably in accordance with the aggregate
principal amount of the Loans held by the Lenders (or, if no Loans are at the
time outstanding, ratably in accordance with their respective Commitments), for
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against the
Administrative Agent (including by any Lender) arising out of or by reason of
any investigation in or in any way relating to or arising out of this Agreement
or any other Loan Document any other documents contemplated by or referred to
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herein or therein or the transactions contemplated hereby or thereby (including,
without limitation, the costs and expenses that the Borrowers are obligated to
pay under Section 11.03 hereof, but excluding, unless a Default has occurred and
is continuing, normal administrative costs and expenses incident to the
performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents, provided that no Lender
--------
shall be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified.
10.06 Non-Reliance on Administrative Agent and Other Lenders.
------------------------------------------------------
Each Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrowers and their Subsidiaries and decision to enter into this Agreement and
that it will, independently and without reliance upon the Administrative Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or under any other Loan
Document. The Administrative Agent shall not be required to keep itself
informed as to the performance or observance by the Borrowers of this Agreement
or any of the other Loan Documents or any other document referred to or provided
for herein or therein or to inspect the Properties or books of the Borrowers or
any of their Subsidiaries. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or under the Security Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Borrowers or any of their Subsidiaries (or any of
their affiliates) that may come into the possession of the Administrative Agent
or any of its affiliates.
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10.07 Failure to Act.
--------------
Except for action expressly required of the Administrative Agent hereunder and
under the other Loan Documents, the Administrative Agent shall in all cases be
fully justified in failing or refusing to act hereunder or thereunder unless it
shall receive further assurances to its satisfaction from the Lenders of their
indemnification obligations under Section 10.05 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
10.08 Resignation or Removal of Administrative Agent.
----------------------------------------------
Subject to the appointment and acceptance of a successor Administrative Agent
as provided below, the Administrative Agent may resign at any time by giving
five days prior notice thereof to the Lenders and the Borrowers, and the
Administrative Agent may be removed at any time with or without cause by the
Majority Lenders. Upon any such resignation or removal, the Majority Lenders
shall have the right, in consultation with the Borrowers, to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Majority Lenders and shall have accepted such appointment
within 30 days after the retiring Administrative Agent's giving of notice of
resignation or the Majority Lenders' removal of the retiring Administrative
Agent, then the retiring Administrative Agent may, on behalf of the Lenders, in
consultation with the Borrowers, appoint a successor Administrative Agent, that
shall be a bank that has an office in New York, New York with a combined capital
and surplus of at least $500,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Administrative
Agent, and the retiring Administrative Agent shall be discharged from its duties
and obligations hereunder. After any retiring Administrative Agent's
resignation or removal hereunder as Administrative Agent, the provisions of this
Section 10 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as the Administrative
Agent.
10.09 Consents under Other Loan Documents.
-----------------------------------
Except as otherwise provided in Section 11.04 hereof with respect to this
Agreement, the Administrative Agent may, with the prior consent of the Majority
Lenders (but not otherwise), consent to any modification, supplement or waiver
under any of the Loan Documents, provided that, without the prior consent of
--------
each
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Lender, the Administrative Agent shall not (except as provided herein or in the
Security Documents) release any collateral or otherwise terminate any Lien under
any Security Document providing for collateral security, or agree to additional
obligations being secured by such collateral security (unless the Lien for such
additional obligations shall be junior to the Lien in favor of the other
obligations secured by such Security Document, in which event the Administrative
Agent may consent to such junior Lien provided that it obtains the consent of
the Majority Lenders thereto), alter the relative priorities of the obligations
entitled to the benefits of the Liens created under the Security Documents or
release any guarantor under any Security Document from its guarantee obligations
thereunder, except that no such consent shall be required, and the
Administrative Agent is hereby authorized, to release any Lien covering Property
(and to release any such guarantor) that is the subject of either a disposition
of Property permitted hereunder or a Disposition to which the Majority Lenders
have consented.
10.10 Documentation Agent.
-------------------
The Documentation Agent shall not have any rights or obligations under this
Agreement except in its capacity as a "Lender" hereunder.
Section 11. Miscellaneous.
-------------
11.01 Waiver.
------
No failure on the part of the Administrative Agent or any Lender to exercise
and no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement or any Note shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or any Note preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
Each Borrower irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the
Administrative Agent or any Lender relating in any way to this Agreement should
be dismissed or stayed by reason, or pending the resolution, of any action or
proceeding commenced by a Borrower relating in any way to this Agreement whether
or not commenced earlier. To the fullest extent permitted by applicable law,
the Borrowers shall take all measures necessary for any such action or
proceeding commenced by
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the Administrative Agent or any Lender to proceed to judgment prior to the entry
of judgment in any such action or proceeding commenced by a Borrower.
11.02 Notices.
-------
All notices, requests and other communications provided for herein and under
the Security Documents (including, without limitation, any modifications of, or
waivers, requests or consents under, this Agreement) shall be given or made in
writing (including, without limitation, by telecopy) delivered to the intended
recipient at (i) in the case of the Borrowers, the Administrative Agent and the
Documentation Agent at the "Address for Notices" specified below its name on the
signature pages hereof and (ii) in the case of each of the Lenders, the address
(or telecopy number) set forth in its Administrative Questionnaire; or, as to
any party, at such other address as shall be designated by such party in a
notice to each other party, provided that notwithstanding the foregoing, all
--------
notices to any Borrower by the Administrative Agent or any Lender may be given
to Mediacom California, and the Administrative Agent and each Lender is
authorized to rely on any notice (including notices of borrowing) given by
Mediacom California with respect to matters relating to any Borrower (and shall
not be required to receive a notice from Mediacom Delaware or Mediacom Arizona).
Notwithstanding the foregoing, notices of borrowing, prepayment and Conversion
of Loans pursuant to Section 4.05 hereof may be made by telephone, so long as
the same are promptly confirmed in writing. Except as otherwise provided in
this Agreement, all such communications shall be deemed to have been duly given
when transmitted by telecopier or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as aforesaid.
11.03 Expenses, Etc.
--------------
The Borrowers jointly and severally agree to pay or reimburse each of the
Lenders and the Administrative Agent for: (a) all reasonable out-of-pocket costs
and expenses of the Administrative Agent (including, without limitation, the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New
York counsel to Chase) in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement and the other Loan Documents and the
making of the Loans hereunder and (ii) the negotiation or preparation of any
modification, supplement or waiver of any of the terms of this Agreement or any
of the other Loan Documents (whether or not consummated); (b) all reasonable
out-of-pocket costs and expenses of the Lenders and the Administrative Agent
(including, without limitation, the reasonable fees and expenses of legal
counsel) in
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connection with (i) any Default and any enforcement or collection
proceedings resulting therefrom, including, without limitation, all manner of
participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (ii) the enforcement of this Section
11.03; and (c) all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of this Agreement or any of the other Loan Documents or any other
document referred to herein or therein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated by
any Security Document or any other document referred to therein.
The Borrowers hereby jointly and severally agree to indemnify the
Administrative Agent and each Lender and their respective directors, officers,
employees, attorneys and agents from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages or expenses incurred by any of
them (including, without limitation, any and all losses, liabilities, claims,
damages or expenses incurred by the Administrative Agent to any Lender, whether
or not the Administrative Agent or any Lender is a party thereto) arising out of
or by reason of any investigation or litigation or other proceedings (including
any threatened investigation or litigation or other proceedings) relating to the
Loans hereunder or any actual or proposed use by the Borrowers or any of their
Subsidiaries of the proceeds of any of the Loans hereunder, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation or litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified). Without limiting the generality of the foregoing, the Borrowers
will indemnify the Administrative Agent and each Lender from, and hold the
Administrative Agent and each Lender harmless against, any losses, liabilities,
claims, damages or expenses described in the preceding sentence (including any
Lien filed against the Property covered by the Deeds of Trust or any part of the
Trust Estate thereunder in favor of any governmental entity, but excluding, as
provided in the preceding sentence, any loss, liability, claim, damage or
expense incurred by reason of the gross negligence or
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willful misconduct of the Person to be indemnified) arising under any
Environmental Law as a result of the past, present or future operations of the
Borrowers or any of their Subsidiaries (or any predecessor in interest to the
Borrowers or any of their Subsidiaries), or the past, present or future
condition of any site or facility owned, operated or leased at any time by the
Borrowers or any of their Subsidiaries (or any such predecessor in interest), or
any Release or threatened Release of any Hazardous Materials at or from any such
site or facility, excluding any such Release or threatened Release that shall
occur during any period when the Administrative Agent or any Lender shall be in
possession of any such site or facility following the exercise by the
Administrative Agent or any Lender of any of its rights and remedies hereunder
or under any of the Security Documents, but including any such Release or
threatened Release occurring during such period that is a continuation of
conditions previously in existence, or of practices employed by the Borrowers
and their Subsidiaries, at such site or facility.
11.04 Amendments, Etc.
----------------
Except as otherwise expressly provided in this Agreement, any provision of
this Agreement may be modified or supplemented only by an instrument in writing
signed by the Borrowers and the Majority Lenders, or by the Borrowers and the
Administrative Agent acting with the consent of the Majority Lenders, and any
provision of this Agreement may be waived by the Majority Lenders or by the
Administrative Agent acting with the consent of the Majority Lenders; provided
--------
that: (a) no modification, supplement or waiver shall, unless by an instrument
signed by all of the Lenders or by the Administrative Agent acting with the
consent of all of the Lenders: (i) increase, or extend the term of any of the
Commitments, or extend the time or waive any requirement for the reduction or
termination of any of the Commitments, (ii) extend the date fixed for the
payment of principal of or interest on any Loan or any fee hereunder, (iii)
reduce the amount of any such payment of principal, (iv) reduce the rate at
which interest is payable thereon or any fee is payable hereunder, (v) alter the
rights or obligations of the Borrowers to prepay Loans, (vi) alter the manner in
which payments or prepayments of principal, interest or other amounts hereunder
shall be applied as between the Lenders or Types or Classes of Loans, (vii)
alter the terms of this Section 11.04, (viii) modify the definition of the term
"Majority Lenders", "Majority Revolving Credit Lenders", "Majority Term A
Lenders" or "Majority Term B Lenders", or modify in any other manner the number
or percentage of the Lenders required to make any determinations or waive any
rights hereunder or to modify any
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provision hereof, or (ix) waive any of the conditions precedent set forth in
Section 6.01 hereof; and (b) any modification or supplement of Section 10
hereof, or of any of the rights or duties of the Administrative Agent hereunder,
shall require the consent of the Administrative Agent.
Anything in this Agreement to the contrary notwithstanding, no waiver or
modification of any provision of this Agreement that has the effect (either
immediately or at some later time) of enabling the Borrowers to satisfy a
condition precedent to the making of a Revolving Credit Loan shall be effective
against the Revolving Credit Lenders for the purposes of the Revolving Credit
Commitments unless the Majority Revolving Credit Lenders shall have concurred
with such waiver or modification.
11.05 Successors and Assigns.
----------------------
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
11.06 Assignments and Participations.
------------------------------
(a) None of the Borrowers may assign any of its rights or obligations
hereunder or under the Notes without the prior consent of all of the Lenders and
the Administrative Agent.
(b) Each Lender may assign any of its Loans, its Notes, and its Commitments
(but only with the consent of, in the case of its outstanding Commitments, the
Borrowers and the Administrative Agent, which consents shall not be unreasonably
withheld or delayed); provided that
--------
(i) no such consent by the Borrowers or the Administrative Agent
shall be required in the case of any assignment to another Lender or an
affiliate of a Lender;
(ii) except to the extent the Borrowers and the Administrative
Agent shall otherwise consent, any such partial assignment (other than to
another Lender) shall be in an amount at least equal to $5,000,000;
(iii) each such assignment by a Lender of its Revolving Credit
Loans, Revolving Credit Note or Revolving Credit Commitment shall be made
in such manner so that the same portion of its Revolving Credit Loans,
Revolving Credit
Credit Agreement
----------------
- 122 -
Note and Revolving Credit Commitment is assigned to the respective
assignee;
(iv) each such assignment by a Lender of its Term A Loans or
Term A Commitment shall be made in such manner so that the same portion of
its Term A Loans and Term A Commitment is assigned to the respective
assignee;
(v) each such assignment by a Lender of its Term B Loans or Term
B Commitment shall be made in such manner so that the same portion of its
Term B Loans and Term B Commitment is assigned to the respective assignee;
and
(vi) upon each such assignment, the assignor and assignee shall
deliver to the Borrowers and the Administrative Agent an Assignment and
Acceptance in the form of Exhibit J hereto.
Upon execution and delivery by the assignor and the assignee to the Borrowers
and the Administrative Agent of such Assignment and Acceptance, and upon consent
thereto by the Borrowers and the Administrative Agent to the extent required
above, the assignee shall have, to the extent of such assignment (unless
otherwise consented to by the Borrowers and the Administrative Agent), the
obligations, rights and benefits of a Lender hereunder holding the Commitment(s)
and Loans (or portions thereof) assigned to it and specified in such Assignment
and Acceptance (in addition to the Commitment(s) and Loans, if any, theretofore
held by such assignee) and the assigning Lender shall, to the extent of such
assignment, be released from the Commitment(s) (or portion(s) thereof) so
assigned. Upon each such assignment the assigning Lender shall pay the
Administrative Agent an assignment fee of $3,000.
(c) A Lender may sell or agree to sell to one or more other Persons (each a
"Participant") a participation in all or any part of any Loans held by it, or in
- ------------
its Commitments, provided that (i) such Participant shall not have any rights or
--------
obligations under this Agreement or any Note or any other Loan Document (the
Participant's rights against such Lender in respect of such participation to be
those set forth in the agreements executed by such Lender in favor of the
Participant) and (ii) such Lender shall promptly notify the Borrowers of the
sale of such participation. All amounts payable by the Borrowers to any Lender
under Section 5 hereof in respect of Loans held by it, and its Commitments,
shall be determined as if such Lender had not
Credit Agreement
----------------
- 123 -
sold or agreed to sell any participations in such Loans and Commitments, and as
if such Lender were funding each of such Loan and Commitments in the same way
that it is funding the portion of such Loan and Commitments in which no
participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Loan Document except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term of such Lender's related
Commitment or extend the amount or date of any scheduled reduction of such
Commitment pursuant to Section 2.03 hereof, (ii) extend the date fixed for the
payment of principal of or interest on the related Loan or Loans or any portion
of any fee hereunder payable to the Participant, (iii) reduce the amount of any
such payment of principal, (iv) reduce the rate at which interest is payable
thereon, or any fee hereunder payable to the Participant, to a level below the
rate at which the Participant is entitled to receive such interest or fee or (v)
consent to any modification, supplement or waiver hereof or of any of the other
Loan Documents to the extent that the same, under Section 10.09 or Section 11.04
hereof, requires the consent of each Lender.
(d) In addition to the assignments and participations permitted under the
foregoing provisions of this Section 11.06, any Lender may (without notice to
the Borrowers, the Administrative Agent or any other Lender and without payment
of any fee) (i) assign and pledge all or any portion of its Loans and its Notes
to any Federal Reserve Bank as collateral security pursuant to Regulation A and
any Operating Circular issued by such Federal Reserve Lender and (ii) assign all
or any portion of its rights under this Agreement and its Loans and its Notes to
an affiliate. No such assignment shall release the assigning Lender from its
obligations hereunder.
(e) A Lender may furnish any information concerning the Borrowers or any of
their Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 11.12(b) hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding, no Lender
may assign or participate any interest in any Loan held by it hereunder to the
Borrowers or any of their Affiliates or Subsidiaries without the prior consent
of each Lender.
Credit Agreement
----------------
- 124 -
(g) At the request of any Lender that is not a U.S. Person and is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code, the Borrowers
shall maintain, or cause to be maintained, a register (the "Register") that, at
--------
the request of the Borrowers, shall be kept by the Administrative Agent on
behalf of the Borrowers at no charge to the Borrowers at the address to which
notices to the Administrative Agent are to be sent hereunder, on which it enters
the name of such Lender as the registered owner of each Registered Loan held by
such Lender. A Registered Loan (and the Registered Note, if any, evidencing the
same) may be assigned or otherwise transferred in whole or in part by
registration of such assignment or transfer on the Register (and each Registered
Note shall expressly so provide). Any assignment or transfer of all or part of
such Loan (and the Registered Note, if any, evidencing the same) may be effected
by registration of such assignment or transfer on the Register, together with
the surrender of the Registered Note, if any, evidencing the same duly endorsed
by (or accompanied by a written instrument of assignment or transfer duly
executed by) the holder of such Registered Note, whereupon, at the request of
the designated assignee(s) or transferee(s), one or more new Registered Notes in
the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s). Prior to the registration of assignment or
transfer of any Registered Loan (and the Registered Note, if any, evidencing the
same), the Borrowers shall treat the Person in whose name such Loan (and the
Registered Note, if any, evidencing the same) is registered as the owner thereof
for the purpose of receiving all payments thereon and for all other purposes,
notwithstanding notice to the contrary.
(h) The Register shall be available for inspection by the Borrowers and any
Lender that is a Registered Holder at any reasonable time upon reasonable prior
notice.
11.07 Survival.
--------
The obligations of the Borrowers under Sections 5.01, 5.05, 5.06 and 11.03
hereof, and the obligations of the Lenders under Section 10.05 hereof, shall
survive the repayment of the Loans and the termination of the Commitments and,
in the case of any Lender that may assign any interest in its Commitments or
Loans hereunder, shall survive the making of such assignment, notwithstanding
that such assigning Lender may cease to be a "Lender" hereunder. In addition,
each representation and warranty made, or deemed to be made by a notice of any
Loan, herein or pursuant hereto shall survive the
Credit Agreement
----------------
- 125 -
making of such representation and warranty, and no Lender shall be deemed to
have waived, by reason of making any Loan, any Default that may arise by reason
of such representation or warranty proving to have been false or misleading,
notwithstanding that such Lender or the Administrative Agent may have had notice
or knowledge or reason to believe that such representation or warranty was false
or misleading at the time such Loan was made.
11.08 Captions.
--------
The table of contents and captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
11.09 Counterparts.
------------
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
11.10 Governing Law; Submission to Jurisdiction.
-----------------------------------------
This Agreement and the Notes shall be governed by, and construed in accordance
with, the law of the State of New York. Each Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of the Supreme Court of the State of New York sitting
in New York County (including its Appellate Division), and of any other
appellate court in the State of New York, for the purposes of all legal
proceedings arising out of or relating to this Agreement or the transactions
contemplated hereby. Each Borrower hereby irrevocably waives, to the fullest
extent permitted by applicable law, any objection that it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
Credit Agreement
----------------
- 126 -
11.11 Waiver of Jury Trial.
--------------------
EACH OF THE BORROWERS, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.
11.12 Treatment of Certain Information; Confidentiality.
-------------------------------------------------
(a) The Borrowers acknowledge that from time to time financial advisory,
investment banking and other services may be offered or provided to the
Borrowers or one or more of their Subsidiaries (in connection with this
Agreement or otherwise) by any Lender or by one or more subsidiaries or
affiliates of such Lender and the Borrowers hereby authorize each Lender to
share any information delivered to such Lender by the Borrowers and their
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such subsidiary or affiliate,
it being understood that any such subsidiary or affiliate receiving such
information shall be bound by the provisions of paragraph (b) below as if it
were a Lender hereunder. Such authorization shall survive the repayment of the
Loans and the termination of the Commitments.
(b) Each Lender and the Administrative Agent agrees (on behalf of itself and
each of its affiliates, directors, officers, employees and representatives) to
use reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of the same nature
and in accordance with safe and sound banking practices, any non-public
information supplied to it by any Obligor pursuant to this Agreement or any
other Loan Document that is identified by the Borrowers as being confidential at
the time the same is delivered to the Lenders or the Administrative Agent,
provided that nothing herein shall limit the disclosure of any such information
- --------
(i) after such information shall have become public (other than through a
violation of this Section 11.12), (ii) to the extent required by statute, rule,
regulation or judicial process, (iii) to counsel for any of the Lenders or the
Administrative Agent, (iv) to bank examiners (or any other regulatory authority
having jurisdiction over any Lender or the Administrative Agent), or to auditors
or accountants, (v) to the Administrative Agent or any other Lender (or to Chase
Securities Inc.), (vi) in connection with any litigation to which any one or
more of the Lenders or the Administrative Agent is a party, or in
Credit Agreement
----------------
- 127 -
connection with the enforcement of rights or remedies hereunder or under any
other Loan Document, (vii) to a subsidiary or affiliate of such Lender as
provided in paragraph (a) above or (viii) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) first executes and delivers to the
respective Lender a Confidentiality Agreement substantially in the form of
Exhibit I hereto (or executes and delivers to such Lender an acknowledgement to
the effect that it is bound by the provisions of this Section 11.12(b), which
acknowledgement may be included as part of the respective assignment or
participation agreement pursuant to which such assignee or participant acquires
an interest in the Loans hereunder); provided, further, that obligations of any
-------- -------
assignee that has executed a Confidentiality Agreement in the form of Exhibit I
hereto shall be superseded by this Section 11.12 upon the date upon which such
assignee becomes a Lender hereunder pursuant to Section 11.06(b) hereof.
Credit Agreement
----------------
- 128 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
MEDIACOM CALIFORNIA LLC
By MEDIACOM LLC, a Member
By_______________________________
Title: Manager
Address for Notices:
Mediacom California LLC
c/o Mediacom LLC
90 Crystal Run Road
Suite 406A
Middletown, New York 10940
Attention: Rocco B. Commisso
Telecopier No.: (914) 695-2699
Telephone No.: (914) 695-2600
MEDIACOM DELAWARE LLC
By MEDIACOM LLC, a Member
By_______________________________
Title: Manager
MEDIACOM ARIZONA LLC
By MEDIACOM LLC, a Member
By_______________________________
Title: Manager
Credit Agreement
----------------
- 129 -
Lenders
-------
Revolving Credit Commitment THE CHASE MANHATTAN BANK
- ---------------------------
$8,000,000
Term A Commitment By________________________________
- -----------------
$10,000,000 Title:
Term B Commitment
- -----------------
$2,000,000
Revolving Credit Commitment FIRST UNION NATIONAL BANK
- ---------------------------
$8,000,000
Term A Commitment By________________________________
- -----------------
$10,000,000 Title:
Term B Commitment
- -----------------
$2,000,000
Revolving Credit Commitment FIRST NATIONAL BANK OF CHICAGO
- ---------------------------
$6,000,000
Term A Commitment By________________________________
- -----------------
$7,500,000 Title:
Term B Commitment
- -----------------
$1,500,000
Revolving Credit Commitment MELLON BANK, N.A.
- ---------------------------
$6,000,000
Term A Commitment By________________________________
- -----------------
$7,500,000 Title:
Term B Commitment
- -----------------
Credit Agreement
----------------
- 130 -
$1,500,000
Revolving Credit Commitment CIBC, INC.
- ---------------------------
$6,000,000
Term A Commitment By________________________________
- -----------------
$7,500,000 Title:
Term B Commitment
- -----------------
$1,500,000
Revolving Credit Commitment BANK OF MONTREAL
- ---------------------------
$6,000,000
Term A Commitment By________________________________
- -----------------
$7,500,000 Title:
Term B Commitment
- -----------------
$1,500,000
Credit Agreement
----------------
- 131 -
THE CHASE MANHATTAN BANK,
as Administrative Agent
By__________________________________
Title:
Address for Notices to
Chase as Administrative Agent:
The Chase Manhattan Bank
Agent Bank Services
1 Chase Manhattan Plaza
New York, New York 10081
Telecopier No.: (212) 552-5700
Telephone No.: (212) 552-7440
Credit Agreement
----------------
- 132 -
FIRST UNION NATIONAL BANK,
as Documentation Agent
By________________________________
Title:
Address for Notices to
First Union National Bank as
Documentation Agent:
First Union National Bank
Specialized Industries/
Communications Group
One First Union Center, DC5
Charlotte, North Carolina 28288-0735
Attention: Mark Misenheimer
Vice President
Telecopier No.: (704) 374-4092
Telephone No.: (704) 374-6659
Credit Agreement
----------------
SCHEDULE I
Material Agreements and Liens
-----------------------------
[See Sections 7.11, 8.06(b) and 8.07(b)]
Part A - Material Agreements
-------------------
Mediacom California LLC
San Bernardino County, California - $18,500 performance bond
Kern County, California - (i) $25,000 performance bond and (ii) $10,000
performance bond
Ridgecrest, California - $15,000 performance bond
Contel of California - (1) $110,000 pole attachment bond and
(ii) $136,700 pole attachment bond
Booth Subordinated Indebtedness
San Diego County, California - $5,000 performance bond
San Diego Gas & Electric of California - $10,000 pole attachment bond
MEDIACOM ARIZONA LLC
Pima County, Arizona - $100,000 performance bond
Booth Subordinated Indebtedness
MEDIACOM DELAWARE LLC
Bethany Beach, Delaware - $10,000 performance bond
Delaware Public Service Commission - $10,000 performance bond
Pittsville, Maryland - $10,000 performance bond
Willards, Maryland - $10,000 performance bond
Wicomico County, Maryland - $10,000 franchise bond
Bell Atlantic - $10,000 pole attachment bond
Booth Subordinated Indebtedness
Schedule I
----------
- 2 -
Part B - Liens
-----
None
Schedule I
----------
SCHEDULE II
Investments
-----------
[See Sections 7.14 and 8.08(a)]
NONE
SCHEDULE III
Franchises
----------
[See definition of "Franchises" in
Section 1.01 and Section 7.16]
Mediacom California (Franchisee)
Issuing Authority Expiration
- ----------------- ----------
City of Ridgecrest August 31, 2001
County of San Bernardino June 30, 2006
County of Kern September 30, 2009
United States Department February 13, 2000
of Navy Naval Weapons Center
China Lake, California
San Diego County July 8, 2007
Rincon Indian Reservation June 19, 2001
San Pasqual Reservation January 28, 1999
Mediacom Arizona (Franchisee)
Issuing Authority Expiration
- ----------------- ----------
County of Pima (Ajo Area) May 5, 2000
County of Pima (Arivaca area) September 5, 2004
County of Santa Cruz (Rio Rico area) June 8, 2003
County of Santa Cruz (Nogales area) June 22, 2003
City of Nogales June 10, 2020
Mediacom Delaware (Franchisee)
Issuing Authority Expiration
- ----------------- ----------
Delaware
- --------
Town of Bethany Beach December 31, 2001
- 2 -
Town of Dagsboro January 5, 2001
Delaware Public Service Commission June 10, 2001
Town of Frankford October 3, 2001
Town of Millsboro January 5, 2002
Town of Millville July 17, 2004
Town of Ocean View May 4, 2001
Town of Selbyville March 8, 2001
Town of South Bethany Beach October 9, 2002
Town of Willards July 31 2006
Maryland
- --------
Wicomico County June 30, 2002
Town of Pittsville February 8, 2001
Worcester County*
*Worcester County does not issue franchise agreements.
SCHEDULE IV
Certain Matters related to CATV Systems
---------------------------------------
[See Sections 7.17 and 7.18]
All Systems Currently Owned by the Borrowers
--------------------------------------------
and their Subsidiaries
----------------------
1. 1997 Cable Television Employment Reports (FCC Forms 395-A) were due to be
filed on may 30, 1997. The Borrowers and their Subsidiaries have received
an extension from the Federal Communications Commission ("FCC") to file
1997 FCC Forms 395-A covering all of the cable systems currently owned and
operated by the Borrowers and their Subsidiaries, without penalty, by June
27, 1997.
Arizona Systems Acquired from Saguaro Cable
-------------------------------------------
Television Investors, L.P.
--------------------------
1. Saguaro Cable Television Investors, L.P. ("SCT") represented to the
Borrowers and their Subsidiaries in connection with the acquisition of the
CATV Systems formerly owned and operated by SCT that:
a. Aerial plant for the CATV Systems formerly owned and operated by SCT
has violations of the National Electrical Safety Code and/or pole
attachment agreements, including, but not limited to, lines below
minimum road/alley clearance heights, less than required separation
from power or phone facilities, and lack of proper grounding and
bonding.
b. Underground cables may not be buried to depths required by the
National Electrical Safety Code or other requirements.
c. Lighting checks required by Sections 17.47 and 17.49 of the FCC rules
may not have been performed for certain antenna structures requiring
illumination pursuant to applicable federal law which are used in
connection with the operation of the CATV Systems.
2. The Borrowers and their Subsidiaries were unable to verify the filing of
the following:
a. 1996 FCC Form 320 (Basic Signal Leakage Performance Report) for the
community of Amado, AZ0320
b. A Statement of Account for the 1996/1 accounting period listing
Amado, Arizona as the lead community
- 2 -
While copies of such completed forms were supplied to the Borrowers and
their Subsidiaries, such copies did not contain a date-stamp indicating
that such forms were in fact filed in a timely fashion with the appropriate
government agency. The Borrowers and their Subsidiaries did not own and
operate such cable systems at the time such reports were due.
California Systems Acquired from Valley Center Cablesystems, L.P.
- -----------------------------------------------------------------
1. The FCC has determined that the CATV System owned by the Borrowers and
their Subsidiaries in the San Diego County franchise area is subject to
effective competition, and thus, exempt from rate regulation under the
FCC's rules.
2. Valley Center Cablesystems, L.P. ("VCC") represented to the Borrowers and
their Subsidiaries in connection with the acquisition of the CATV Systems
formerly owned and operated by VCC that:
a. Aerial plant for the CATV Systems formerly owned and operated by VCC
may have violations of the National Electrical Safety Code and/or
pole attachment agreements, including, but not limited to, lines
below minimum road/alley clearance heights, less than required
separation from power or phone facilities, and lack of proper
grounding and bonding.
b. Underground cables may not be buried to depths required by the
National Electrical safety Code or other requirements.
Delaware and Maryland Systems to be Acquired from
--------------------------------------------------
American CableTV Investors 5, Ltd.
----------------------------------
1. The Delaware Public Service Commission is certified to regulate basic
service tier reports.
SCHEDULE V
Real Property
-------------
[See Section 7.19]
Mediacom California
Real Property Location Owned/Leased Owner
- ---------------------- ------------ -----
1. 543 Inyokern Road Owned Mediacom
California
Ridgecrest, CA
Parcel 1:
---------
Lot 12 of Tract No. 1242, in the City of
Ridgecrest, County of Kern, State of
California, as per Map recorded May 29, 1945
in Book 5, Page 96 of Maps, in the Office of
the County Recorder of said County. EXCEPTING
THEREFROM the Southerly 35 feet thereof.
Parcel 2:
---------
The Southerly 35 feet of Lot 12 of Tract No.
1242, in the City of Ridgecrest, County of
Kern, State of California, as per Map
recorded May 29 1945 in Book 5, Page 96 of
Maps, in the Office of the County Recorder
of said County.
Parcel 3:
---------
Lot 13 of Tract No. 1242, in the city of
Ridgecrest, County of Kern, State of
California, as per Map recorded May 29, 1945
in Book 5, Page 96 of Maps, in the Office of
the County Recorder of said County.
2. Parcels 1 and 2 of Lot 46 of Tract 1542 in Leased Tharp
the City of Ridgecrest, County of Kern, Enterprises
State of California, as per Map recorded Clifford P.
February 20, 1950 in Book inclusive, of Tharp,
Maps, in the Office of Page 67 to 71, the and
the County Recorder of said County, Betty J. Tharp
located at 123 Grande Way, Bldg. No. 123D,
in the COSO CENTER GRANDE WAY building,
Ridgecrest, California
3. 208 via Alegra, Ridgecrest, California Leased JJ Guest
4. Vacant property located directly west Leased Larry J. Nixon
of 206 Station Street, Ridgecrest,
California
5. Approximately 1/4 mile section on Stockwell Leased Kerr-McGee
Mine Road from Trona - Wildwood Road Chemical
intersection in County of lnyo, Trona,
California (antenna site) Corporation
6. Southeast quarter of the northeast quarter Leased Don L.
of Section 6, Township 26, South, Range Deadrich,
33 East M.D.B.&M, Kern, California Audrey J.
(headend site) Deadrich
and
Donna Higgins
7. 8 Tobias Road, Kernville, California Leased Loraine Wade
8. 29235 Valley Center Road, Suite E Leased Robert J.
Schostag
9. Yellow Brick Road, Portion of Tank Site Leased Valley Center
- 2 -
Municipal
Water
District
10. 139 North Balsam Street, Ridgecrest, Leased Ridgecrest
California Redevelopment
Agency
- 3 -
Mediacom Arizona
Real Property Location Owned/Leased Owner
- ---------------------- ------------ -----
1. 248 Elm Street, Nogales, Arizona Owned Mediacom
Lots 21 and 22 of Block 3 of the City of Arizona
Nogales
2. Reservoir Hill, Nogales, Arizona Owned Mediacom
Lot 16 of Block 16 of the City of Nogales, Arizona
according to the official plat on file and
of record with the Office of the County
Recorder for Santa Cruz County.
3. Antenna Hill, Nogales, Arizona Owned Mediacom
All of that portion of Section 20, Township Arizona
24 South, range 14 East, Gila and Salt River
Base and Meridian, Santa Cruz County,
Arizona
Easement: Included in the deeded parcel is a
three foot easement for utilities and TV
cables, lying immediately north of the sixty
foot neutral strip between the United States
and Mexico, running from the Southeast corner
of the Nogales Townsite to the above
described property, AND included in the
deeded parcel is an easement through existing
roads for ingress and egress of motor
vehicles to the above described parcel of
land.
4. Rio Rico, Arizona Owned Mediacom
Arizona
Parcel 1:
---------
A parcel of land situated in and being a part
of Lot A, Block 699, as recorded in the plat
of Rio Rico Unit No. 7, Book 3 of Maps and
Plats at Page 32, Santa Cruz County, Arizona
Parcel 2:
---------
Lot 3 in Block 134 of Rio Rico Estates Unit
No. 7, a subdivision of Santa Cruz County,
Arizona, as set forth in the office of the
Santa Cruz County Recorder in Book 2 of Maps
and Plats at Page 230.
5. 1 Pajaro Street, Ajo, Arizona Owned Mediacom
Lot 21 in Block 3, except the southerly 75 Arizona
feet thereof, of Ajo Townsite, a
subdivision of Pima County, Arizona,
according to the Map of Record in the Pima
County Recorder's Office, in Book 3 of the
Maps and Plats at Page 61, excepting
therefrom and reserving unto the Grantor that
portion of said lot lying below a depth of 25
feet.
6. Amado, Arizona Leased Esther G.
headend site Geisman
7. Keystone Peak, Arizona Leased Bureau of Land
Right of Way A-9630, easement for Management
communication site, cable and use of access
road
- 4 -
8. Keystone Mountain, Arizona Leased Sierrita
Access Road Use Agreement to Keystone Peak Mining and
microwave site Ranching
9. Ajo, Arizona Leased Jodean Murrow
Morrow-Ajo headend site and Sally
Murrow
10. Childs Mountain, Arizona, Permit M-6 for Leased U.S. Fish and
television microwave site Wildlife Service
Mediacom Delaware
1. County Road 353, Omar, Delaware Leased George Hudson
headend site and
Barbara Hudson
2. County Road 299, Millsboro, Delaware Leased Elva Johnson
microwave site
3. Main Street, Willards, Maryland Leased Town of Willards
microwave site
4. Dagsboro, Delaware office Leased Parker
Route 133, County Village Square Enterprises,
Inc.
5. Willards, Maryland office Leased D&L
Dock Street Enterprises,
Inc.
6. City of Harrington Tower Space Leased Simmons
and Ground Lease Agreement Communications
Company, L.P.
Corporation
(now Comcast)
SCHEDULE VI
Certain Adjustments to Operating Cash Flow and System Cash Flow
---------------------------------------------------------------
ADJUSTED SYSTEM CASH FLOW (ASCF)/(1)/
ADJUSTED OPERATING CASH FLOW (AOCF)/(1)/
FOR THE THREE MONTHS ENDING MAY 31, 1997
Adjusted System Cash Flow (ASCF)
System Cash Flow $ 683,724
Ridgecrest $ 380,929
Kern Valley $ 391,033
Nogales $ 102,835
RidgeNet $ 44,396
L. Delaware/Maryland (TCI) $ 1,201,855
------------
Total System Cash Flow $ 2,804,772
============
Adjustment to System Cash Flow
Programming Increases incurred by $ (95,670)
Buyer
Operational Savings realized by Buyer $ 41,177
------------
Total Adjustments to SCF $ (54,493)
============
ASCF $ 2,750,279
============
Annualized ASCF $ 11,001,116
============
Adjusted Operating Cash Flow (AOCF)
Revenues $ 5,173,272
System Cash Flow
Ridgecrest $ 683,724
Kern Valley $ 380,929
Nogales $ 391,033
Valley Center $ 102,835
RidgeNet $ 44,396
L. Delaware/Maryland (TCI) $ 1,201,855
------------
Total System Cash Flow $ 2,804,772
============
Management Fees $ (258,664)
===========
Operating Cash Flow $ 2,546,108
Adjustment to Operating Cash Flow
Programming Increases incurred by $ (95,670)
Buyer
Operational Saving realized by Buyer $ 41,177
-----------
Total Adjustments to SCF $ (54,493)
===========
AOCF $ 2,491,615
===========
Annualized AOCF $ 9,966,462
- --------------- ===========
Note: (1) Assumes 100% of the System Cash Flow from Sea Colony.
EXHIBIT A-1
[Form of Revolving Credit Note]
PROMISSORY NOTE
$
------------------
, 1997
---
New York, New York
FOR VALUE RECEIVED, MEDIACOM CALIFORNIA LLC, a Delaware limited liability
company ("Mediacom California"), MEDIACOM DELAWARE LLC, a Delaware limited
-------------------
liability company ("Mediacom Delaware") and MEDIACOM ARIZONA LLC, a Delaware
-----------------
limited liability company ("Mediacom Arizona" and, together with Mediacom
----------------
California and Mediacom Delaware, the "Borrowers"), hereby promise to pay to
---------
__________________ (the "Lender") [or registered assigns]/1/, for account of its
------
respective Applicable Lending Offices provided for by the Credit Agreement
referred to below, at the principal office of The Chase Manhattan Bank at 270
Park Avenue, New York, New York 10017, the principal sum of _______________
Dollars (or such lesser amount as shall equal the aggregate unpaid principal
amount of the Revolving Credit Loans made by the Lender to the Borrowers under
the Credit Agreement), in lawful money of the United States of America and in
immediately available funds, on the dates and in the principal amounts provided
in the Credit Agreement, and to pay interest on the unpaid principal amount of
each such Revolving Credit Loan, at such office, in like money and funds, for
the period commencing on the date of such Revolving Credit Loan until such
Revolving Credit Loan shall be paid in full, at the rates per annum and on the
dates provided in the Credit Agreement.
[This Note and the Loans evidenced hereby may be transferred in whole or in
part only by registration of such transfer on the register maintained for such
purpose by or on behalf of the Borrowers as provided in Section 11.06(g) of the
Credit Agreement.]
The date, amount, Type, interest rate and duration of Interest Period (if
applicable) of each Revolving Credit Loan made by the Lender to the Borrowers,
and each payment made on account of the principal thereof, shall be recorded by
the Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof, provided
--------
that the failure of the Lender to make any such recordation or endorsement shall
not affect the obligations of the Borrowers to make a payment when due of any
amount owing under the Credit Agreement or hereunder in respect of the Revolving
Credit Loans made by the Lender.
- --------------------
/1/ Bracketed language to be inserted into Registered Notes.
-2-
This Note is one of the Revolving Credit Notes [(constituting a Registered
Note)] referred to in the Second Amended and Restated Credit Agreement dated as
of June 24, 1997 (as modified and supplemented and in effect from time to time,
the "Credit Agreement") between the Borrowers, the lenders party thereto
----------------
(including the Lender), The Chase Manhattan Bank, as Administrative Agent, and
First Union National Bank, as Documentation Agent, and evidences Revolving
Credit Loans made by the Lender thereunder. Terms used but not defined in this
Note have the respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of this
Note upon the occurrence of certain events and for prepayments of Loans upon the
terms and conditions specified therein.
Except as permitted by Section 11.06 of the Credit Agreement, this Note may
not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the law
of the State of New York.
MEDIACOM CALIFORNIA LLC
By MEDIACOM LLC, a Member
By
-------------------------
Title:
MEDIACOM DELAWARE LLC
By MEDIACOM LLC, a Member
By
-------------------------
Title:
MEDIACOM ARIZONA LLC
By MEDIACOM LLC, a Member
By
-------------------------
Title:
-3-
SCHEDULE OF REVOLVING CREDIT LOANS
This Note evidences Revolving Credit Loans made, Continued or Converted
under the within-described Credit Agreement to the Borrowers, on the dates, in
the principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Prin-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------ ---- -------- -------- --------- ------ --------
EXHIBIT A-2
[Form of Term A Note]
PROMISSORY NOTE
$
------------------
, 1997
--------
New York, New York
FOR VALUE RECEIVED, MEDIACOM CALIFORNIA LLC, a Delaware limited
liability company ("Mediacom California"), MEDIACOM DELAWARE LLC, a Delaware
-------------------
limited liability company ("Mediacom Delaware") and MEDIACOM ARIZONA LLC, a
-----------------
Delaware limited liability company ("Mediacom Arizona" and, together with
----------------
Mediacom California and Mediacom Delaware, the "Borrowers"), hereby promise to
---------
pay to __________________ (the "Lender") [or registered assigns]/2/, for account
------
of its respective Applicable Lending Offices provided for by the Credit
Agreement referred to below, at the principal office of The Chase Manhattan Bank
at 270 Park Avenue, New York, New York 10017, the principal sum of
_______________ Dollars (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Term A Loans made by the Lender to the Borrowers
under the Credit Agreement), in lawful money of the United States of America and
in immediately available funds, on the dates and in the principal amounts
provided in the Credit Agreement, and to pay interest on the unpaid principal
amount of each such Term A Loan, at such office, in like money and funds, for
the period commencing on the date of such Term A Loan until such Term A Loan
shall be paid in full, at the rates per annum and on the dates provided in the
Credit Agreement.
[This Note and the Loans evidenced hereby may be transferred in whole
or in part only by registration of such transfer on the register maintained for
such purpose by or on behalf of the Borrowers as provided in Section 11.06(g) of
the Credit Agreement.]
The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Term A Loan made by the Lender to the Borrowers, and
each payment made on account of the principal thereof, shall be recorded by the
Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof, provided
--------
that the failure of the Lender to make any such recordation or endorsement shall
not affect the obligations of the Borrowers to make a payment when due of any
amount owing under the Credit Agreement or hereunder in respect of the Term A
Loans made by the Lender.
- --------------------
/2/ Bracketed language to be inserted into Registered Notes.
-2-
This Note is one of the Term A Notes [(constituting a Registered
Note)] referred to in the Second Amended and Restated Credit Agreement dated as
of June 24, 1997 (as modified and supplemented and in effect from time to time,
the "Credit Agreement") between the Borrowers, the lenders party thereto
----------------
(including the Lender), The Chase Manhattan Bank, as Administrative Agent, and
First Union National Bank, as Documentation Agent, and evidences Term A Loans
made by the Lender thereunder. Terms used but not defined in this Note have the
respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Term A
Loans upon the terms and conditions specified therein.
Except as permitted by Section 11.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
MEDIACOM CALIFORNIA LLC
By MEDIACOM LLC, a Member
By
-------------------------
Title:
MEDIACOM DELAWARE LLC
By MEDIACOM LLC, a Member
By
-------------------------
Title:
MEDIACOM ARIZONA LLC
By MEDIACOM LLC, a Member
By
-------------------------
Title:
-3-
SCHEDULE OF TERM A LOANS
This Note evidences Term A Loans made, Continued or Converted under
the within-described Credit Agreement to the Borrowers, on the dates, in the
principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Prin-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------ ---- -------- -------- --------- ------ --------
EXHIBIT A-3
[Form of Term B Note]
PROMISSORY NOTE
$
------------------
, 1997
---------
New York, New York
FOR VALUE RECEIVED, MEDIACOM CALIFORNIA LLC, a Delaware limited
liability company ("Mediacom California"), MEDIACOM DELAWARE LLC, a Delaware
-------------------
limited liability company ("Mediacom Delaware") and MEDIACOM ARIZONA LLC, a
-----------------
Delaware limited liability company ("Mediacom Arizona" and, together with
----------------
Mediacom California and Mediacom Delaware, the "Borrowers"), hereby promise to
---------
pay to __________________ (the "Lender") [or registered assigns]/3/, for account
------
of its respective Applicable Lending Offices provided for by the Credit
Agreement referred to below, at the principal office of The Chase Manhattan Bank
at 270 Park Avenue, New York, New York 10017, the principal sum of
_______________ Dollars (or such lesser amount as shall equal the aggregate
unpaid principal amount of the Term B Loans made by the Lender to the Borrowers
under the Credit Agreement), in lawful money of the United States of America and
in immediately available funds, on the dates and in the principal amounts
provided in the Credit Agreement, and to pay interest on the unpaid principal
amount of each such Term B Loan, at such office, in like money and funds, for
the period commencing on the date of such Term B Loan until such Term B Loan
shall be paid in full, at the rates per annum and on the dates provided in the
Credit Agreement.
[This Note and the Loans evidenced hereby may be transferred in whole
or in part only by registration of such transfer on the register maintained for
such purpose by or on behalf of the Borrowers as provided in Section 11.06(g) of
the Credit Agreement.]
The date, amount, Type, interest rate and duration of Interest Period
(if applicable) of each Term B Loan made by the Lender to the Borrowers, and
each payment made on account of the principal thereof, shall be recorded by the
Lender on its books and, prior to any transfer of this Note, endorsed by the
Lender on the schedule attached hereto or any continuation thereof, provided
--------
that the failure of the Lender to make any such recordation or endorsement shall
not affect the obligations of the Borrowers to make a payment when due of any
amount owing under the Credit Agreement or hereunder in respect of the Term B
Loans made by the Lender.
- ---------------------
/3/ Bracketed language to be inserted into Registered Notes.
-2-
This Note is one of the Term B Notes [(constituting a Registered
Note)] referred to in the Second Amended and Restated Credit Agreement dated as
of June 24, 1997 (as modified and supplemented and in effect from time to time,
the "Credit Agreement") between the Borrowers, the lenders party thereto
----------------
(including the Lender), The Chase Manhattan Bank, as Administrative Agent, and
First Union National Bank, as Documentation Agent, and evidences Term B Loans
made by the Lender thereunder. Terms used but not defined in this Note have the
respective meanings assigned to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of Term B
Loans upon the terms and conditions specified therein.
Except as permitted by Section 11.06 of the Credit Agreement, this
Note may not be assigned by the Lender to any other Person.
This Note shall be governed by, and construed in accordance with, the
law of the State of New York.
MEDIACOM CALIFORNIA LLC
By MEDIACOM LLC, a Member
By
-------------------------
Title:
MEDIACOM DELAWARE LLC
By MEDIACOM LLC, a Member
By
-------------------------
Title:
MEDIACOM ARIZONA LLC
By MEDIACOM LLC, a Member
By
-------------------------
Title:
-3-
SCHEDULE OF TERM B LOANS
This Note evidences Term B Loans made, Continued or Converted under
the within-described Credit Agreement to the Borrowers, on the dates, in the
principal amounts, of the Types, bearing interest at the rates and having
Interest Periods (if applicable) of the durations set forth below, subject to
the payments, Continuations, Conversions and prepayments of principal set forth
below:
Amount
Date Prin- Paid,
Made, cipal Duration Prepaid, Unpaid
Continued Amount Type of Continued Prin-
or of of Interest Interest or cipal Notation
Converted Loan Loan Rate Period Converted Amount Made by
- --------- ------ ---- -------- -------- --------- ------ --------
EXHIBIT B
[Form of Quarterly Officer's Report]
MEDIACOM CALIFORNIA LLC
MEDIACOM DELAWARE LLC
MEDIACOM ARIZONA LLC
Fiscal quarter ended: ______________, 19__
This Report is delivered pursuant to Section 8.01(f) of the Second
Amended and Restated Credit Agreement (the "Credit Agreement") dated as of June
----------------
24, 1997, between Mediacom California LLC ("Mediacom California"), Mediacom
-------------------
Delaware LLC ("Mediacom Delaware"), Mediacom Arizona LLC ("Mediacom Arizona"
----------------- ----------------
and, together with Mediacom California and Mediacom Delaware, the "Borrowers"),
---------
the lenders party thereto, The Chase Manhattan Bank, as Administrative Agent,
and First Union National Bank, as Documentation Agent, providing for loans to be
made by said lenders to the Borrowers in an aggregate principal amount not
exceeding $100,000,000. Terms defined in the Credit Agreement are used herein
as defined therein.
This Report is delivered in respect of the cable television systems of
the Borrowers and their Subsidiaries as at the end of the fiscal quarter
referred to above:
Homes passed at end of quarter:
--------------------
Basic Subscribers at beginning of quarter:
Basic Subscribers at end of quarter: --------------------
--------------------
Pay TV Units at beginning of quarter:
Pay TV Units at end of quarter: --------------------
--------------------
Revenue per Subscriber per Month for
the quarter:
--------------------
-----------------------------------
Senior Officer
Dated: ____________, 19__
EXHIBIT C
[Form of Security Agreement]
SECOND AMENDED AND RESTATED SECURITY AGREEMENT
SECOND AMENDED AND RESTATED SECURITY AGREEMENT dated as of June 24,
1997 between: MEDIACOM CALIFORNIA LLC, a limited liability company duly
organized and validly existing under the laws of the State of Delaware
("Mediacom California"); MEDIACOM DELAWARE LLC, a limited liability company duly
--------------------
organized and validly existing under the laws of the State of Delaware
("Mediacom Delaware"), MEDIACOM ARIZONA LLC, a limited liability company duly
------------------
organized and validly existing under the laws of the State of Delaware
("Mediacom Arizona" and, together with Mediacom California and Mediacom
-----------------
Delaware, the "Borrowers"); each of the additional parties, if any, that becomes
---------
a "Securing Party" hereunder as contemplated by Section 6.11 hereof (each a
"Subsidiary Guarantor" and together with the Borrowers, the "Securing Parties");
-------------------- ----------------
and THE CHASE MANHATTAN BANK, as administrative agent for the lenders or other
financial institutions or entities party, as lenders, to the Credit Agreement
referred to below (in such capacity, together with its successors in such
capacity, the "Administrative Agent").
--------------------
Mediacom California and Mediacom Arizona and the Administrative Agent
are parties to a Security Agreement dated as of December 27, 1996 (the "Existing
--------
Security Agreement"), pursuant to which Mediacom California and Mediacom Arizona
- ------------------
pledged and granted a security interest in the Collateral (as so defined) as
security for the Secured Obligations (as so defined) including, inter alia,
----- ----
obligations of Mediacom California and Mediacom Arizona under an Amended and
Restated Credit Agreement dated as of December 27, 1996 (the "Existing Credit
---------------
Agreement") between Mediacom California, Mediacom Arizona, certain lenders and
- ---------
the Administrative Agent. Concurrently with the execution and delivery of this
Agreement, the parties to the Existing Credit Agreement are amending and
restating the Existing Credit Agreement to increase the amount of credit
available thereunder, to add the New Lenders (as defined therein), to add
Mediacom Delaware as an additional borrower thereunder and to amend certain of
the other provisions thereof pursuant to a Second Amended and Restated Credit
Agreement dated as of June 24, 1997 (as modified and supplemented and in effect
from time to time, the "Credit Agreement"). In addition, the Borrowers may from
----------------
time to time be obligated to various of said lenders in respect of Interest Rate
Protection Agreements permitted under Section 8.08(e) of the Credit Agreement
(such indebtedness being herein referred to as the "Hedging Indebtedness").
--------------------
To induce said lenders to amend and restate the Existing Credit
Agreement pursuant to the Credit Agreement and to extend credit thereunder and
to extend credit to the Borrowers
- 2 -
that would constitute Hedging Indebtedness, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Securing Parties have agreed to pledge and grant a security interest in the
Collateral (as hereinafter defined) as security for the Secured Obligations (as
so defined), and to confirm the prior pledge and grant of a security interest in
the Collateral pursuant to the Existing Security Agreement and, in that
connection to amend and restate in its entirety the Existing Security Agreement.
Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are
-----------
used herein as defined therein. In addition, as used herein:
"Accounts" shall have the meaning ascribed thereto in Section 3(d)
--------
hereof.
"Collateral" shall have the meaning ascribed thereto in Section 3
----------
hereof.
"Collateral Account" shall have the meaning ascribed thereto in
------------------
Section 4.01 hereof.
"Documents" shall have the meaning ascribed thereto in Section 3(j)
---------
hereof.
"Equipment" shall have the meaning ascribed thereto in Section 3(h)
---------
hereof.
"Instruments" shall have the meaning ascribed thereto in Section 3(e)
-----------
hereof.
"Inventory" shall have the meaning ascribed thereto in Section 3(f)
---------
hereof.
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and
--------------
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"Pledged Stock" shall have the meaning ascribed thereto in Section
-------------
3(a) hereof.
"Secured Obligations" shall mean, collectively, (a) in the case of the
-------------------
Borrowers, the principal of and interest on the Loans made by the Lenders
to, and the Note(s) held by each Lender of, the Borrowers and all other
amounts from time to time owing to the Lenders or the
- 3 -
Administrative Agent by the Borrowers under the Loan Documents (including,
without limitation, all Hedging Indebtedness of the Borrowers), and all
obligations of the Borrowers to the Lenders and the Administrative Agent
hereunder and (b) in the case of each Subsidiary Guarantor, all Guaranteed
Obligations of such Subsidiary Guarantor under and as defined in the
Subsidiary Guarantee Agreement executed by such Subsidiary Guarantor
pursuant to Section 6.11 hereof, and all other obligations of such
Subsidiary Guarantor to the Administrative Agent and the Lenders hereunder.
"Stock Collateral" shall mean, collectively, the Collateral described
----------------
in clauses (a) through (c) of Section 3 hereof and the proceeds of and to
any such property and, to the extent related to any such property or such
proceeds, all books, correspondence, credit files, records, invoices and
other papers.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. Representations and Warranties. Each Securing Party
------------------------------
represents and warrants to the Lenders and the Administrative Agent that such
Securing Party is the sole beneficial owner of the Collateral which it purports
to grant a security interest pursuant to Section 3 hereof, and no Lien exists or
will exist upon such Collateral at any time (and no right or option to acquire
the same exists in favor of any other Person), except for Liens permitted under
Section 8.06 of the Credit Agreement and except for the pledge and security
interest in favor of the Administrative Agent for the benefit of the Lenders
created or provided for herein, which pledge and security interest will
constitute a first priority perfected pledge and security interest as soon as,
with respect to the Collateral as to which the Uniform Commercial Code requires
the filing of financing statements to perfect a security interest, all such
financing statements are so filed.
Section 3. Collateral. As collateral security for the prompt payment
----------
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, each Securing Party hereby pledges and grants to the
Administrative Agent (and hereby confirms the prior pledge and grant to the
Administrative Agent pursuant to the Existing Security Agreement), for the
benefit of the Lenders as hereinafter
- 4 -
provided, a security interest in all of such Securing Party's right, title and
interest in the following property, whether now owned by such Securing Party or
hereafter acquired and whether now existing or hereafter coming into existence
(all being collectively referred to herein as "Collateral"):
----------
(a) all shares of capital stock or other ownership interests of any
Borrower or any Subsidiary of a Borrower now or hereafter owned by such
Securing Party, in each case together with the certificates (if any)
evidencing the same and all right, title and interest in, to and under any
Operating Agreement (including without limitation all of the right, title
and interest (if any) as a member to participate in the operation or
management of the respective Borrower and all of its ownership interests
under such Operating Agreement), and all present and future rights of such
Securing Party to receive payment of money or other distribution of
payments arising out of or in connection with its ownership interests and
its rights under such Operating Agreement, now or hereafter owned by such
Securing Party, in each case together with any certificates evidencing the
same (collectively, the "Pledged Stock");
-------------
(b) all shares, securities, moneys or property representing a
dividend on any of the Pledged Stock, or representing a distribution or
return of capital upon or in respect of the Pledged Stock, or resulting
from a split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of the Borrowers under any
provision prohibiting such action hereunder or under the Credit Agreement,
in the event of any consolidation or merger in which any issuer of any
Pledge Stock is not the surviving corporation, all shares of each class of
the capital stock of the successor corporation formed by or resulting from
such consolidation or merger (the Pledged Stock, together with all other
certificates, shares, securities, properties or moneys as may from time to
time be pledged hereunder pursuant to clause (a) or (b) above and this
clause (c) being herein collectively called the "Stock Collateral");
----------------
(d) all accounts and general intangibles (each as defined in the
Uniform Commercial Code) of such Securing Party constituting any right to
the payment of money,
- 5 -
including (but not limited to) all moneys due and to become due to such
Securing Party in respect of any loans or advances or for Inventory or
Equipment or other goods sold or leased or for services rendered, all
moneys due and to become due to such Securing Party under any guarantee
(including a letter of credit) of the purchase price of Inventory or
Equipment sold by such Securing Party and all tax refunds (such accounts,
general intangibles and moneys due and to become due being herein called
collectively "Accounts");
--------
(e) all instruments, chattel paper or letters of credit (each as
defined in the Uniform Commercial Code) of such Securing Party evidencing,
representing, arising from or existing in respect of, relating to, securing
or otherwise supporting the payment of, any of the Accounts, including (but
not limited to) promissory notes, drafts, bills of exchange and trade
acceptances (herein collectively called "Instruments");
-----------
(f) all inventory (as defined in the Uniform Commercial Code) of such
Securing Party, including Motor Vehicles held by such Securing Party for
lease, fuel, tires and other spare parts, all goods obtained by such
Securing Party in exchange for such inventory, and any products made or
processed from such inventory including all substances, if any, commingled
therewith or added thereto (herein collectively called "Inventory");
---------
(g) all other accounts or general intangibles of such Securing Party
not constituting Accounts, including, without limitation, all right, title
and interest of any Securing Party in, to and under the Acquisition
Agreements, the Escrow Agreements under and as defined therein, and any
other document or instrument executed in connection with the Acquisition
Agreements;
(h) all equipment (as defined in the Uniform Commercial Code) of such
Securing Party, including all Motor Vehicles, all cables, receivers,
amplifiers, test equipment, descramblers, satellite dishes and mounts,
modulators, head-end equipment, towers, taps, traps, pedestals, conduits,
converters, spare parts and tools (herein collectively called "Equipment");
---------
(i) each contract and other agreement of such Securing Party relating
to the sale or other disposition of Inventory or Equipment;
- 6 -
(j) all documents of title (as defined in the Uniform Commercial
Code) or other receipts of such Securing Party covering, evidencing or
representing Inventory or Equipment (herein collectively called
"Documents");
---------
(k) all rights, claims and benefits of such Securing Party against
any Person arising out of, relating to or in connection with Inventory or
Equipment purchased by such Securing Party, including, without limitation,
any such rights, claims or benefits against any Person storing or
transporting such Inventory or Equipment;
(l) all Franchises and all pole attachment agreements, licenses,
railroad or highway crossing agreements, property access agreements,
private cable agreements and permits and all other contracts, agreements
and permits used in connection with or relating to the CATV Systems of the
Securing Parties (except that any such Franchise, agreement or other
contract or permit that would by its terms or under applicable law become
void, voidable, terminable or revocable by being subjected to the lien of
this Agreement or in which a Lien is not permitted to be granted is hereby
excluded from such Lien to the extent necessary so as to avoid such
voidness, avoidability, terminability or revocability);
(m) all of such Securing Party's rights under or relating to any
licenses issued by the FCC and the proceeds of any such licenses, provided
--------
that such security interest does not include at any time any such licenses
to the extent (but only to the extent) that at such time the Administrative
Agent may not validly possess a security interest therein pursuant to the
Communications Act of 1934, as amended, and the regulations promulgated
thereunder, as in effect at such time, but such security interest does
include, to the maximum extent permitted by law, all rights incident or
appurtenant to such licenses and the right to receive all proceeds derived
from or in connection with the sale, assignment or transfer of such
licenses; and
(n) the balance from time to time in the Collateral Account; and
(o) all other tangible and intangible personal property and fixtures
of such Securing Party, including, without limitation, all proceeds,
products, offspring, accessions, rents, profits, income, benefits,
substitutions and replacements of and to any of the property of such
Securing Party described in the preceding clauses of this
- 7 -
Section 3 (including, without limitation, any proceeds of insurance thereon
and all causes of action, claims and warranties now or hereafter held by
such Securing Party in respect of any of the items listed above) and, to
the extent related to any property described in said clauses or such
proceeds, products and accessions, all books, correspondence, credit files,
records, invoices and other papers, including without limitation all tapes,
cards, computer runs and other papers and documents in the possession or
under the control of such Securing Party or any computer bureau or service
company from time to time acting for such Securing Party.
Section 4. Cash Proceeds of Collateral.
---------------------------
4.01 Collateral Account. There is hereby established with the
------------------
Administrative Agent a cash collateral account (the "Collateral Account") in the
------------------
name and under the control of the Administrative Agent into which there shall be
deposited from time to time the cash proceeds of any of the Collateral
(including proceeds of insurance thereon) required to be delivered to the
Administrative Agent pursuant hereto and into which any Securing Party may from
time to time deposit any additional amounts that it wishes to pledge to the
Administrative Agent for the benefit of the Lenders as additional collateral
security hereunder. The balance from time to time in the Collateral Account
shall constitute part of the Collateral hereunder and shall not constitute
payment of the Secured Obligations until applied as hereinafter provided. Except
as expressly provided in the next sentence, the Administrative Agent shall remit
the collected balance outstanding to the credit of the Collateral Account to or
upon the order of any Securing Party as such Securing Party through Mediacom
California shall from time to time instruct. However, at any time following the
occurrence and during the continuance of an Event of Default, the Administrative
Agent may (and, if instructed by the Majority Lenders as specified in Section
10.03 of the Credit Agreement, shall) in its (or their) discretion apply or
cause to be applied (subject to collection) the balance from time to time
outstanding to the credit of the Collateral Account to the payment of the
Secured Obligations in the manner specified in Section 5.09 hereof. The balance
from time to time in the Collateral Account shall be subject to withdrawal only
as provided herein.
4.02 Investment of Balance in Collateral Account. Amounts on deposit
-------------------------------------------
in the Collateral Account shall be invested from time to time in such Permitted
Investments as the Borrowers (or, after the occurrence and during the
continuance of a
- 8 -
Default, the Administrative Agent) shall determine, which Permitted Investments
shall be held in the name and be under the control of the Administrative Agent
and the Borrowers may at any time and from time to time (so long as no Event of
Default shall have occurred and be continuing) instruct the Administrative to
liquidate any such Permitted Investment and reinvest or withdraw the proceeds
thereof as they shall in their discretion determine. Notwithstanding the
forgoing, at any time after the occurrence and during the continuance of an
Event of Default, the Administrative Agent may (and, if instructed by the
Lenders as specified in Section 10.03 of the Credit Agreement, shall) in its (or
their) discretion at any time and from time to time elect to liquidate any such
Permitted Investments and to apply or cause to be applied the proceeds thereof
to the payment of the Secured Obligations in the manner specified in Section
5.09 hereof. All interest, dividends and other earnings in respect of
Investments in the Collateral Account and, all proceeds of such Investments
shall be retained in the Collateral Account or (so long as no Event of Default
shall have occurred and be continuing) be withdrawn by the Borrowers as they
shall in their discretion determine.
Section 5. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 3 hereof, the Securing
Parties hereby jointly and severally agree with each Lender and the
Administrative Agent as follows:
5.01 Delivery and Other Perfection. Each Securing Party shall:
-----------------------------
(a) if any of the shares, securities, moneys or property required to
be pledged by such Securing Party under clauses (a), (b) and (c) of Section
3 hereof are received by such Securing Party, forthwith either (x) transfer
and deliver to the Administrative Agent such shares or securities or other
ownership interests so received by such Securing Party (together with the
certificates for any such shares and securities or other ownership
interests duly endorsed in blank or accompanied by undated stock powers or
other powers duly executed in blank), all of which thereafter shall be held
by the Administrative Agent, pursuant to the terms of this Agreement, as
part of the Collateral or (y) take such other action as the Administrative
Agent shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, other ownership interests, moneys or
property in said clauses (a), (b) and (c);
- 9 -
(b) deliver and pledge to the Administrative Agent any and all
Instruments, endorsed and/or accompanied by such instruments of assignment
and transfer in such form and substance as the Administrative Agent may
request; provided, that so long as no Default shall have occurred and be
--------
continuing, such Securing Party may retain for collection in the ordinary
course any Instruments received by it in the ordinary course of business
and the Administrative Agent shall, promptly upon request of such Securing
Party, make appropriate arrangements for making any Instrument pledged by
it available to such Securing Party for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent
deemed appropriate by the Administrative Agent, against trust receipt or
like document);
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Administrative Agent) to
create, preserve, perfect or validate the security interest granted
pursuant hereto or to enable the Administrative Agent to exercise and
enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, causing any or all of the Stock
Collateral to be transferred of record into the name of the Administrative
Agent or its nominee (and the Administrative Agent agrees that if any Stock
Collateral is transferred into its name or the name of its nominee, the
Administrative Agent will thereafter promptly give to the respective
Securing Party copies of any notices and communications received by it with
respect to the Stock Collateral pledged by such Security Party hereunder),
provided that notices to account debtors in respect of any Accounts or
--------
Instruments shall be subject to the provisions of clause (g) below;
(d) upon the request of the Administrative Agent, cause the
Administrative Agent to be listed as the lienholder on any certificate of
title covering any Motor Vehicle owned by such Securing Party and within
120 days of the acquisition thereof deliver evidence of the same to the
Administrative Agent;
(e) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
- 10 -
(f) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect and
make abstracts from its books and records pertaining to the Collateral, and
permit representatives of the Administrative Agent to be present at such
Securing Party's place of business to receive copies of all communications
and remittances relating to the Collateral, and forward copies of any
notices or communications received by such Securing Party with respect to
the Collateral, all in such manner as the Administrative Agent may require;
and
(g) upon the occurrence and during the continuance of any Default,
upon request of the Administrative Agent, promptly notify (and each
Securing Party hereby authorizes the Administrative Agent so to notify)
each account debtor in respect of any Accounts or Instruments that such
Collateral has been assigned to the Administrative Agent hereunder, and
that any payments due or to become due in respect of such Collateral are to
be made directly to the Administrative Agent.
5.02 Other Financing Statements and Liens. Except as otherwise
------------------------------------
permitted under Section 8.06 of the Credit Agreement, without the prior written
consent of the Administrative Agent (granted with the authorization of the
Lenders as specified in Section 10.09 of the Credit Agreement), the Securing
Parties shall not file or suffer to be on file, or authorize or permit to be
filed or to be on file, in any jurisdiction, any financing statement or like
instrument with respect to the Collateral in which the Administrative Agent is
not named as the sole secured party for the benefit of the Lenders.
5.03 Preservation of Rights. The Administrative Agent shall not be
----------------------
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.
5.04 Special Provisions Relating to Stock Collateral.
-----------------------------------------------
(a) The Securing Parties will cause the Stock Collateral to
constitute at all times 100% of the total number of shares of each class of
capital stock of each Subsidiary of the Borrowers then outstanding.
(b) So long as no Event of Default shall have occurred and be
continuing, the Securing Parties shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Stock Collateral for
all purposes not inconsistent with the terms of this Agreement, the Credit
-11-
Agreement, the Notes or any other instrument or agreement referred to herein or
therein, provided that the Securing Parties jointly and severally agree that
--------
they will not vote the Stock Collateral in any manner that is inconsistent with
the terms of this Agreement, the Credit Agreement, the Notes or any such other
instrument or agreement; and the Administrative Agent shall execute and deliver
to the Securing Parties or cause to be executed and delivered to the Securing
Parties all such proxies, powers of attorney, dividend and other orders, and all
such instruments, without recourse, as the Securing Parties may reasonably
request for the purpose of enabling the Securing Parties to exercise the rights
and powers that they are entitled to exercise pursuant to this Section 5.04(b).
(c) Unless and until an Event of Default has occurred and is
continuing, the Securing Parties shall be entitled to receive and retain any
dividends on the Stock Collateral paid in cash out of earned surplus.
(d) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Administrative Agent or
any Lender exercises any available right to declare any Secured Obligation due
and payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement, the Credit Agreement, the Notes or any
other agreement relating to such Secured Obligation, all dividends and other
distributions on the Stock Collateral shall be paid directly to the
Administrative Agent and retained by it in the Collateral Account as part of the
Stock Collateral, subject to the terms of this Agreement, and, if the
Administrative Agent shall so request in writing, each Securing Party agrees to
execute and deliver to the Administrative Agent appropriate additional dividend,
distribution and other orders and documents to that end, provided that if such
--------
Event of Default is cured, any such dividend or distribution theretofore paid to
the Administrative Agent shall, upon request of the Securing Parties (except to
the extent theretofore applied to the Secured Obligations), be returned by the
Administrative Agent to the Securing Parties.
5.05 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:
(a) each Securing Party shall, at the request of the Administrative
Agent, assemble the Collateral owned by it at such place or places,
reasonably convenient to both the Administrative Agent and such Securing
Party, designated in its request;
-12-
(b) the Administrative Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, any of the Collateral;
(c) the Administrative Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to the
maximum extent permitted by law, to exercise all voting, consensual and
other powers of ownership pertaining to the Collateral as if the
Administrative Agent were the sole and absolute owner thereof (and each
Securing Party agrees to take all such action as may be appropriate to give
effect to such right);
(d) the Administrative Agent in its discretion may, in its name or in
the name of the Securing Parties or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on account
of or in exchange for any of the Collateral, but shall be under no
obligation to do so; and
(e) the Administrative Agent may, upon ten business days' prior
written notice to the Securing Parties of the time and place, with respect
to the Collateral or any part thereof that shall then be or shall
thereafter come into the possession, custody or control of the
Administrative Agent, the Lenders or any of their respective agents, sell,
lease, assign or otherwise dispose of all or any part of such Collateral,
at such place or places as the Administrative Agent deems best, and for
cash or for credit or for future delivery (without thereby assuming any
credit risk), at public or private sale, without demand of performance or
notice of intention to effect any such disposition or of the time or place
thereof (except such notice as is required above or by applicable statute
and cannot be waived), and the Administrative Agent or any Lender or anyone
else may be the purchaser, lessee, assignee or recipient of any or all of
the Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of the Securing
-13-
Parties, any such demand, notice and right or equity being hereby expressly
waived and released. The Administrative Agent may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
the sale, and such sale may be made at any time or place to which the sale
may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05 shall be applied in accordance with Section 5.09 hereof.
The Securing Parties recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Administrative Agent may be compelled, with respect to any
sale of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Securing Parties acknowledge that any such private sales may be at prices and on
terms less favorable to the Administrative Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agree that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Administrative Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective issuer
thereof to register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Securing Parties shall remain jointly
and severally liable for any deficiency.
5.07 Removals, Etc. Without at least 30 days' prior written notice
-------------
to the Administrative Agent, no Securing Party shall (i) maintain any of its
books and records with respect to the Collateral at any office or maintain its
principal place of business at any place, or permit any Inventory or Equipment
to be located anywhere, other than at the address indicated beneath the
signature of such Securing Party to the Credit Agreement or at one of the
locations identified in Annex 1 hereto (including as supplemented pursuant to
any Subsidiary Guarantee Agreement) or in transit from one of such locations to
another or (ii) change its name, or the name under which it does business, from
the name
-14-
shown on the signature pages hereto (or, as the case may be, on the
respective Subsidiary Guarantee Agreement pursuant to which such Securing Party
became a party hereto).
5.08 Private Sale. The Administrative Agent and the Lenders shall
------------
incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 5.05 hereof conducted in a
commercially reasonable manner. Each Securing Party hereby waives any claims
against the Administrative Agent or any Lender arising by reason of the fact
that the price at which the Collateral may have been sold at such a private sale
was less than the price that might have been obtained at a public sale or was
less than the aggregate amount of the Secured Obligations, even if the
Administrative Agent accepts the first offer received and does not offer the
Collateral to more than one offeree.
5.09 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided, the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto, and any other cash at the time held
by the Administrative Agent under Section 4 hereof or this Section 5, shall be
applied by the Administrative Agent:
First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Administrative Agent and the fees and expenses of its
agents and counsel, and all expenses incurred and advances made by the
Administrative Agent in connection therewith;
Next, to the payment in full of the Secured Obligations, in each case
----
equally and ratably in accordance with the respective amounts thereof then
due and owing or as the Lenders holding the same may otherwise agree; and
Finally, after payment in full of the Secured Obligations, to the
-------
payment to the respective Securing Parties, or their successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this Section 5, "proceeds" of Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Securing Parties or any issuer of or
obligor on any of the Collateral.
-15-
5.10 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to the Administrative Agent while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default the Administrative Agent is hereby appointed the attorney-
in-fact of each Securing Party for the purpose of carrying out the provisions of
this Section 5 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Administrative Agent shall be entitled under this Section 5 to make collections
in respect of the Collateral, the Administrative Agent shall have the right and
power to receive, endorse and collect all checks made payable to the order of
any Securing Party representing any dividend, payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge for the
same.
5.11 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, each Securing Party shall (i) file such financing
statements and other documents in such offices as the Administrative Agent may
request to perfect the security interests granted by Section 3 of this Agreement
and (ii) deliver to the Administrative Agent any certificates representing any
of the Pledged Stock, in each case accompanied by undated stock powers duly
executed in blank.
5.12 Termination. When all Secured Obligations shall have been paid
-----------
in full and the Commitments of the Lenders under the Credit Agreement shall have
expired or been terminated, this Agreement shall terminate, and the
Administrative Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect thereof,
including without limitation, the balance (including any Investments) in the
Collateral Account, to or on the order of the respective Securing Parties. The
Administrative Agent shall also execute and deliver to the respective Securing
Parties upon such termination such Uniform Commercial Code termination
statements, certificates for terminating the Liens on the Motor Vehicles and
such other documentation as shall be reasonably requested by the Securing
Parties to effect the termination and release of the Liens on the Collateral.
5.13 Further Assurances. The Securing Parties jointly and severally
------------------
agree that, from time to time upon the written request of the Administrative
Agent, they will execute and
-16-
deliver such further documents and do such other acts and things as the
Administrative Agent may reasonably request in order fully to effect the
purposes of this Agreement.
5.14 Release of Motor Vehicles. So long as no Default shall have
-------------------------
occurred and be continuing, upon the request of the Securing Parties, the
Administrative Agent shall execute and deliver to the Securing Parties such
instruments as the Securing Parties shall reasonably request to remove the
notation of the Administrative Agent as lienholder on any certificate of title
for any Motor Vehicle; provided that any such instruments shall be delivered,
--------
and the release effective only upon receipt by the Administrative Agent of a
certificate from the respective Securing Party stating that the Motor Vehicle
the lien on which is to be released is to be sold or has suffered a casualty
loss.
Section 6. Miscellaneous.
-------------
6.01 No Waiver. No failure on the part of the Administrative Agent
---------
or any Lender to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any Lender of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
6.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at its
"Address for Notices" specified pursuant to Section 11.02 of the Credit
Agreement and shall be deemed to have been given at the times specified in said
Section 11.02, it being understood that any such notice to a Subsidiary
Guarantor shall be given to Mediacom California in accordance with said Section
11.02.
6.03 Expenses. The Securing Parties jointly and severally agree to
--------
reimburse each of the Lenders and the Administrative Agent for all reasonable
costs and expenses of the Lenders and the Administrative Agent (including,
without limitation, the reasonable fees and expenses of legal counsel) in
connection with (i) any Default and any enforcement or collection proceeding
resulting therefrom, including, without limitation, all manner of participation
in or other involvement with (w) performance by the Administrative Agent of any
obligations of the Securing Parties in respect of the Collateral that the
Securing Parties have failed or refused to perform, (x) bankruptcy,
-17-
insolvency, receivership, foreclosure, winding up or liquidation proceedings, or
any actual or attempted sale, or any exchange, enforcement, collection,
compromise or settlement in respect of any of the Collateral, and for the care
of the Collateral and defending or asserting rights and claims of the
Administrative Agent in respect thereof, by litigation or otherwise, including
expenses of insurance, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 6.03, and all such costs and expenses shall be
Secured Obligations entitled to the benefits of the collateral security provided
pursuant to Section 3 hereof.
6.04 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by each
Securing Party and the Administrative Agent (with the consent of the Lenders as
specified in Section 10.09 of the Credit Agreement). Any such amendment or
waiver shall be binding upon the Administrative Agent and each Lender, each
holder of any of the Secured Obligations and each Securing Party.
6.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective successors and assigns of the
Securing Parties, the Administrative Agent, the Lenders and each holder of any
of the Secured Obligations (provided, however, that no Securing Party shall
--------
assign or transfer its rights hereunder without the prior written consent of the
Administrative Agent).
6.06 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
6.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.08 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the law of the State of New York.
6.09 Certain Regulatory Requirements. Any provision contained herein
-------------------------------
to the contrary notwithstanding, no action shall be taken hereunder by the
Administrative Agent or any Lender with respect to any item of Collateral unless
and until all applicable
-18-
requirements (if any) of the FCC under the Federal Communications Act of 1934,
as amended, and the respective rules and regulations thereunder and thereof, as
well as any other federal, state or local laws, rules and regulations of other
regulatory or governmental bodies (including, without limitation, any
municipality that has issued any Franchise to a Securing Party or any of its
Subsidiaries) applicable to or having jurisdiction over such Securing Party (or
any entity under the control of such Securing Party), have been satisfied with
respect to such action and there have been obtained such consents, approvals and
authorizations (if any) as may be required to be obtained from the FCC, any
operating municipality and any other governmental authority under the terms of
any Franchise, any license or similar operating right held by such Securing
Party (or any entity under the control of such Securing Party). It is the
intention of the parties hereto that the Liens in favor of the Administrative
Agent on the Collateral shall in all relevant aspects be subject to and governed
by said statutes, rules and regulations and the Franchise(s) and that nothing in
this Agreement shall be construed to diminish the control exercised by any
Securing Party except in accordance with the provisions of such statutory
requirements, rules and regulations and the Franchises. Each Secured Party
agrees that upon request from time to time by the Administrative Agent it will
use its best efforts to obtain any governmental, regulatory or third party
consents, approvals or authorizations referred to in this Section 6.09.
6.10 Agents and Attorneys-in-Fact. The Administrative Agent may
----------------------------
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or attorneys-in-
fact selected by it in good faith.
6.11. Additional Securing Parties. As contemplated by Section 8.18(a)
---------------------------
of the Credit Agreement, new Subsidiaries of the Borrowers formed by the
Borrowers after the date hereof may become a "Subsidiary Guarantor" under a
Subsidiary Guarantee Agreement and a "Securing Party" under this Agreement, by
executing and delivering to the Administrative Agent a Subsidiary Guarantee
Agreement in the form of Exhibit E to the Credit Agreement. Accordingly, upon
the execution and delivery of any such Subsidiary Guarantee Agreement by any
such new Subsidiary, such new Subsidiary shall automatically and immediately,
and without any further action on the part of any Person, become a "Securing
Party" for all purposes of this Agreement, and Annex 1 hereto shall be deemed to
be supplemented in the manner specified in said Subsidiary Guarantee Agreement.
-19-
6.12 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
-20-
IN WITNESS WHEREOF, the parties hereto have caused this Second Amended
and Restated Security Agreement to be duly executed and delivered as of the day
and year first above written.
MEDIACOM CALIFORNIA LLC
By MEDIACOM LLC, a Member
By
--------------------------
Title:
MEDIACOM DELAWARE LLC
By MEDIACOM LLC, a Member
By
--------------------------
Title:
MEDIACOM ARIZONA LLC
By MEDIACOM LLC, a Member
By
--------------------------
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By
-------------------------------
Title:
ANNEX 1
LIST OF LOCATIONS
[See Section 5.07]
Mediacom California LLC
- -----------------------
543 Inyokern Road
Ridgecrest, California 93555
388 Pasture Drive
Carson City, Nevada 89701
8 Tobias, Bin C
Kernville, California 93238
29235 Valley Center Road
Suite E
Valley Center, California 92082
139 Balsam Avenue
Ridgecrest, California 93555
Mediacom Delaware LLC
- ---------------------
Country Village Square
Route 113
Dagsboro, DE 19939
Old Ocean City Road
Road 346
Willards, MD 21874
Mediacom Arizona LLC
- --------------------
248 Elm Street
Nogales, Arizona 85621
EXHIBIT D
[Form of Guarantee and Pledge Agreement]
SECOND AMENDED AND RESTATED GUARANTEE AND PLEDGE AGREEMENT
SECOND AMENDED AND RESTATED GUARANTEE AND PLEDGE AGREEMENT dated as of
June 24, 1997 between MEDIACOM LLC, a limited liability company duly organized
and validly existing under the laws of New York, and MEDIACOM MANAGEMENT
CORPORATION, a corporation duly organized and validly existing under the laws of
Delaware (each, individually, a "Parent Guarantor" and, collectively, the
----------------
"Parent Guarantors"); and THE CHASE MANHATTAN BANK, as administrative agent for
- ------------------
the lenders or other financial institutions or entities party, as lenders, to
the Credit Agreement referred to below (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
--------------------
The Parent Guarantors and the Administrative Agent are parties to an
Amended and Restated Guarantee and Pledge Agreement dated as of December 27,
1996 (the "Existing Guarantee and Pledge Agreement"), pursuant to which the
---------------------------------------
Parent Guarantors have agreed to guarantee the Guaranteed Obligations (as
defined therein) and have pledged and granted a security interest in the
Collateral (as so defined) as security for the Secured Obligations (as so
defined) including, inter alia, obligations of Mediacom California LLC
----- ----
("Mediacom California") and Mediacom Arizona LLC ("Mediacom Arizona") under an
- --------------------- ----------------
Amended and Restated Credit Agreement dated as of December 27, 1996 (the
"Existing Credit Agreement") between Mediacom California, Mediacom Arizona,
- --------------------------
certain lenders and the Administrative Agent. Concurrently with the execution
and delivery of this Agreement, the parties to the Existing Credit Agreement are
amending and restating the Existing Credit Agreement to increase the amount of
credit available thereunder, to add the New Lenders (as defined therein) as
parties thereto, to add Mediacom Delaware LLC ("Mediacom Delaware" and, together
-----------------
with Mediacom California and Mediacom Arizona, the "Borrowers") as an additional
---------
borrower thereunder and to amend certain of the other provisions thereof
pursuant to a Second Amended and Restated Credit Agreement dated as of June 24,
1997 (as modified and supplemented and in effect from time to time, the "Credit
------
Agreement"). In addition, the Borrowers may from time to time be obligated to
- ---------
various of said lenders in respect of Interest Rate Protection Agreements
permitted under Section 8.08(e) of the Credit Agreement (such indebtedness being
herein referred to as the "Hedging Indebtedness").
--------------------
To induce said lenders to amend and restate the Existing Credit
Agreement pursuant to the Credit Agreement and to extend credit thereunder and
to extend credit to the Borrowers that would constitute Hedging Indebtedness,
and for other good
-2-
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, each Parent Guarantor has agreed to guarantee the Guaranteed
Obligations (as hereinafter defined), and to pledge and grant a security
interest in the Collateral (as so defined) as security for the Secured
Obligations (as so defined), and to confirm the prior pledge and grant of a
security interest in the Collateral pursuant to the Existing Guarantee and
Pledge Agreement and, in that connection to amend and restate in its entirety
the Existing Guarantee and Pledge Agreement. Accordingly, the parties hereto
agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are
-----------
used herein as defined therein. In addition, as used herein:
"Collateral" shall have the meaning ascribed thereto in Section 4
----------
hereof.
"Guaranteed Obligations" shall have the meaning ascribed thereto in
----------------------
Section 2.01 hereof.
"Pledged LLC Interest" shall have the meaning ascribed thereto in
--------------------
Section 4(a) hereof.
"Secured Obligations" shall mean, collectively, (a) all obligations of
-------------------
the Parent Guarantors in respect of their Guarantee under Section 2 hereof
and (b) all other obligations of the Parent Guarantors to the Lenders and
the Administrative Agent hereunder.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. The Guarantee.
-------------
2.01 The Guarantee. Subject to Section 7.13 hereof, the Parent
-------------
Guarantors hereby jointly and severally guarantee to each Lender and the
Administrative Agent and their respective successors and assigns the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the principal of and interest on the Loans made by the Lenders to,
and the Note(s) held by each Lender of, the Borrowers and all other amounts from
time to time owing to the Lenders or the Administrative Agent by the Borrowers
under the Credit Agreement and under the Notes, and all Hedging Indebtedness of
the
-3-
Borrowers, in each case strictly in accordance with the terms thereof (such
obligations being herein collectively called the "Guaranteed Obligations").
----------------------
Subject to Section 7.13 hereof, the Parent Guarantors hereby further jointly and
severally agree that if the Borrowers shall fail to pay in full when due
(whether at stated maturity, by acceleration or otherwise) any of the Guaranteed
Obligations, the Parent Guarantors will promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
2.02 Obligations Unconditional. Subject to Section 7.13 hereof, the
-------------------------
obligations of the Parent Guarantors under Section 2.01 hereof are absolute and
unconditional, joint and several, irrespective of the value, genuineness,
validity, regularity or enforceability of the Credit Agreement, the Notes or any
other agreement or instrument referred to herein or therein, or any
substitution, release or exchange of any other guarantee of or security for any
of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 2.02 that the obligations of the
Parent Guarantors hereunder shall be absolute and unconditional, joint and
several, under any and all circumstances. Without limiting the generality of
the foregoing, it is agreed that the occurrence of any one or more of the
following shall not alter or impair the liability of the Parent Guarantors
hereunder which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Parent Guarantors, the time for any performance of or compliance with any
of the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of the
Credit Agreement or the Notes or any other agreement or instrument referred
to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement or the
-4-
Notes or any other agreement or instrument referred to herein or therein
shall be waived or any other guarantee of any of the Guaranteed Obligations
or any security therefor shall be released or exchanged in whole or in part
or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of,
the Administrative Agent or any Lender or Lenders as security for any of
the Guaranteed Obligations shall fail to be perfected.
The Parent Guarantors hereby expressly waive diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that the
Administrative Agent or any Lender exhaust any right, power or remedy or proceed
against the Borrowers under the Credit Agreement or the Notes or any other
agreement or instrument referred to herein or therein, or against any other
Person under any other guarantee of, or security for, any of the Guaranteed
Obligations.
2.03 Reinstatement. The obligations of the Parent Guarantors under
-------------
this Section 2 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of the Borrowers in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Parent Guarantors jointly and
severally agree that they will indemnify the Administrative Agent and each
Lender on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Administrative Agent or such Lender
in connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
2.04 Subrogation. Each Parent Guarantor hereby waives all rights of
-----------
subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Federal
Bankruptcy Code) or otherwise by reason of any payment by it pursuant to the
provisions of this Section 2 and further agrees with each Borrower for the
benefit of each of its creditors (including, without limitation, each Lender and
the Administrative Agent) that any such payment by it shall constitute a
contribution of capital by such Parent Guarantor to such Borrower (or an
-5-
investment in the equity capital of such Borrower by such Parent Guarantor).
2.05 Remedies. The Parent Guarantors jointly and severally agree
--------
that, as between the Parent Guarantors and the Lenders, the obligations of the
Borrowers under the Credit Agreement and the Notes may be declared to be
forthwith due and payable as provided in Section 9 of the Credit Agreement (and
shall be deemed to have become automatically due and payable in the
circumstances provided in said Section 9) for purposes of Section 2.01 hereof
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable) as
against the Borrowers and that, in the event of such declaration (or such
obligations being deemed to have become automatically due and payable), such
obligations (whether or not due and payable by the Borrowers) shall forthwith
become due and payable by the Parent Guarantors for purposes of said Section
2.01.
2.06 Instrument for the Payment of Money. Each Parent Guarantor
-----------------------------------
hereby acknowledges that the guarantee in this Section 2 constitutes an
instrument for the payment of money, and consents and agrees that any Lender or
the Administrative Agent, at its sole option, in the event of a dispute by such
Parent Guarantor in the payment of any moneys due hereunder, shall have the
right to bring motion-action under New York CPLR Section 3213.
2.07 Continuing Guarantee. The guarantee in this Section 2 is a
--------------------
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
Section 3. Representations and Warranties. Each Parent Guarantor
------------------------------
represents and warrants to the Lenders and the Administrative Agent that:
3.01 Corporate Existence. Each Parent Guarantor (a) is a
-------------------
corporation, partnership, limited liability company or other entity duly
organized and validly existing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate, partnership, limited liability
company or other power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted; and (c) is qualified
to do business in all jurisdictions in which the nature of the business
conducted by it makes such qualification
-6-
necessary and where failure so to qualify could (either individually or in the
aggregate) have a Material Adverse Effect.
3.02 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the charter or by-laws, the
partnership agreement, the limited liability company agreement or other
organizational instrument of such Parent Guarantor, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which such
Parent Guarantor or any of its Subsidiaries is a party or by which any of them
is bound or to which any of them is subject, or constitute a default under any
such agreement or instrument, or (except for the Liens created pursuant hereto)
result in the creation or imposition of any Lien upon any of the revenues or
assets of such Parent Guarantor or any of its Subsidiaries pursuant to the terms
of any such agreement or instrument.
3.03 Action. Such Parent Guarantor has all necessary corporate,
------
partnership, limited liability company or other power and authority to execute,
deliver and perform its obligations under this Agreement; the execution,
delivery and performance by such Parent Guarantor of this Agreement have been
duly authorized by all necessary corporate or other action on its part; and this
Agreement has been duly and validly executed and delivered by such Parent
Guarantor and constitutes its legal, valid and binding obligation, enforceable
against such Parent Guarantor in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws or general applicability affecting the
enforcement of creditors' rights and (b) the application of general principles
of equity (regardless of whether considered in a proceeding in equity or at
law).
3.04 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange are necessary for the execution, delivery or
performance by such Parent Guarantor of this Agreement or for the validity or
enforceability hereof except for the filings and recordings in respect of the
Liens created hereby, except for (i) filings and recordings in respect of the
Liens created pursuant hereto and (ii) the exercise of remedies hereunder the
Security Documents may require the prior approval of the FCC or the issuing
municipalities or States under one or more of the Franchises.
-7-
3.05 Pledged LLC Interest.
--------------------
(a) Such Parent Guarantor has all right, title and interest in, to
and under, and is the record owner of, the Collateral in which it purports to
grant a security interest pursuant to Section 4 hereof, and no Lien exists or
will exist upon such Collateral at any time (and no right or option to acquire
the same exists in favor of any other Person), except for the pledge and
security interest in favor of the Administrative Agent for the benefit of the
Lenders created or provided for herein, which pledge and security interest
constitute a first priority perfected pledge and security interest in and to all
of such Collateral.
(b) The Pledged LLC Interest, and all other Pledged LLC Interest in
which such Parent Guarantor shall hereafter grant a security interest pursuant
to Section 4 hereof will be, duly authorized, validly existing, fully paid and
non-assessable and none of such Pledged LLC Interest is or will be subject to
any contractual restriction, upon the transfer of such Pledged LLC Interest
(except for any such restriction contained herein or under any of the Operating
Agreements).
(c) The Pledged LLC Interest constitutes all of the ownership
interests of the Borrowers beneficially owned by such Parent Guarantor on the
date hereof (whether or not registered in the name of such Parent Guarantor),
and such Parent Guarantor is the registered owner of all such ownership
interests.
3.06 Investment Company Act. Such Parent Guarantor is not an
----------------------
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
3.07 Public Utility Holding Company Act. Such Parent Guarantor is
----------------------------------
not a "holding company", or an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 4. The Pledge. As collateral security for the prompt payment
----------
in full when due (whether at stated maturity, by acceleration or otherwise) of
the Secured Obligations, each Parent Guarantor hereby pledges and grants to the
Administrative Agent (and hereby confirms the prior pledge and grant to the
Administrative Agent pursuant to the Existing Guarantee and
-8-
Pledge Agreement), for the benefit of the Lenders as hereinafter provided, a
security interest in all of such Parent Guarantor's right, title and interest in
the following property, whether now owned by such Parent Guarantor or hereafter
acquired and whether now existing or hereafter coming into existence (all being
collectively referred to herein as "Collateral"):
----------
(a) all the ownership interests of such Parent Guarantor in any
Borrower, all certificates, (if any) representing or evidencing such
ownership interests and all right, title and interest in, to and under any
Operating Agreement (including without limitation all of the right, title
and interest (if any) as a member to participate in the operation or
management of the respective Borrower and all of its ownership interests
under such Operating Agreement), and all present and future rights of such
Parent Guarantor to receive payment of money or other distribution of
payments arising out of or in connection with its ownership interests and
its rights under such Operating Agreement, now or hereafter owned by such
Parent Guarantor, in each case together with any certificates evidencing
the same (collectively, the "Pledged LLC Interest"); and
--------------------
(b) all proceeds of and to any of the foregoing (including, without
limitation, all causes of action, claims and warranties now or hereafter
held by either Parent Guarantor in respect of any of the items listed
above) and, to the extent related to any property described in said clauses
or such proceeds, all books, correspondence, credit files, records,
invoices and other papers.
Section 5. Covenants. Mediacom agrees that, until the payment and
---------
satisfaction in full of the Secured Obligations and the expiration or
termination of the Commitments of the Lenders under the Credit Agreement:
5.01 Financial Statements Etc.
-------------------------
Mediacom shall deliver to each of the Lenders:
(a) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that Mediacom
shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities
exchange;
(b) promptly upon the mailing thereof to the members of Mediacom
generally, or to holders of any debt securities
-9-
of Mediacom, copies of all financial statements, reports and proxy
statements so mailed; and
(c) from time to time such other information regarding the financial
condition, operations, business or prospects of Mediacom or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Administrative Agent may reasonably request.
5.02 Covenant Restrictions. Mediacom will not enter into, after the
---------------------
date of this Agreement, any indenture, agreement, instrument or other
arrangement that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon the Borrowers or any of their Subsidiaries with respect to (i) the
incurrence or payment of Indebtedness, (ii) the granting of Liens, (iii) the
declaration or payment of dividends, (iv) the making of loans, advances or
Investments or (v) the sale, assignment, transfer or other disposition of
Property.
5.03 Indebtedness. Mediacom will not create, incur or suffer to
------------
exist any Indebtedness other than (i) Indebtedness hereunder, (ii) unsecured
Indebtedness in respect of debt instruments issued by Mediacom under one or more
effective registration statements under the Securities Act of 1933, as amended,
so long as none of the Subsidiaries of Mediacom are directly or indirectly
obligated in respect of such Indebtedness and (iii) the Guarantee by Mediacom of
Indebtedness incurred by any Subsidiary of Mediacom, so long as (x) the
obligations of Mediacom in respect of such Guarantee is limited in recourse in a
manner consistent with the provisions of Section 7.13 hereof (i.e. limited in
recourse to a pledge by Mediacom of its equity interests in such Subsidiary as
provided herein) and (y) such Indebtedness shall not be entitled, directly or
indirectly, to the benefits of mandatory payment, prepayment or redemption
provisions based upon the issuance or incurrence by Mediacom of additional
Indebtedness or equity securities.
5.04 Modifications of Certain Documents. Mediacom will not consent
----------------------------------
to any modification, supplement or waiver of any of the provisions of the
Acquisition Agreements without the prior consent of the Administrative Agent
(with the approval of the Majority Lenders).
5.05 Allocation of Intercompany Expenses. Mediacom will allocate to
-----------------------------------
its Subsidiaries any expenses or other items
-10-
incurred by it on behalf of more than one of its Subsidiaries (such as data
processing, accounting, legal and other corporate overhead items) for any period
ratably in accordance with the gross operating revenue (excluding extraordinary
and unusual items and all non-cash items) of its Subsidiaries for such period.
Section 6. Further Assurances; Remedies. In furtherance of the grant
----------------------------
of the pledge and security interest pursuant to Section 4 hereof, the Parent
Guarantors hereby jointly and severally agree with each Lender and the
Administrative Agent as follows:
6.01 Delivery and Other Perfection. Each Parent Guarantor shall:
-----------------------------
(a) with respect to the ownership interests in any Borrower held by
such Parent Guarantor, execute and deliver written instructions to such
Borrower to register the Lien created hereunder in such ownership interests
in the registration books maintained by such Borrower for such purpose and
cause such Parent Guarantor to execute and deliver to the Administrative
Agent a written confirmation to the effect that the Lien created hereunder
in such ownership interests has been duly registered in such registration
books;
(b) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that may
be necessary or desirable (in the judgment of the Administrative Agent) to
create, preserve, perfect or validate the security interest granted
pursuant hereto or to enable the Administrative Agent to exercise and
enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, causing any or all of the
Collateral to be transferred of record into the name of the Administrative
Agent or its nominee (and the Administrative Agent agrees that if any
Collateral is transferred into its name or the name of its nominee, the
Administrative Agent will thereafter promptly give to the respective Parent
Guarantor copies of any notices and communications received by it with
respect to the Collateral pledged by such Parent Guarantor hereunder);
(c) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may
-11-
reasonably require in order to reflect the security interests granted by
this Agreement; and
(d) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect and
make abstracts from its books and records pertaining to the Collateral, and
permit representatives of the Administrative Agent to be present at such
Parent Guarantor's place of business to receive copies of all
communications and remittances relating to the Collateral, and forward
copies of any notices or communications received by such Parent Guarantor
with respect to the Collateral, all in such manner as the Administrative
Agent may require.
6.02 Other Financing Statements and Liens. Without the prior written
------------------------------------
consent of the Administrative Agent (granted with the authorization of the
Lenders as specified in Section 10.09 of the Credit Agreement), neither Parent
Guarantor shall file or suffer to be on file, or authorize or permit to be filed
or to be on file, in any jurisdiction, any financing statement or like
instrument with respect to the Collateral in which the Administrative Agent is
not named as the sole secured party for the benefit of the Lenders.
6.03 Preservation of Rights. The Administrative Agent shall not be
----------------------
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.
6.04 Collateral.
----------
(a) The Parent Guarantors will cause the Collateral (together with
any "Pledged Stock" under the Security Agreement constituting ownership
interests of the Borrowers) to constitute at all times 100% of the aggregate
ownership interests of the Borrowers then outstanding.
(b) So long as no Event of Default shall have occurred and be
continuing, the Parent Guarantors shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral for all
purposes not inconsistent with the terms of this Agreement, the Credit
Agreement, the Notes or any other instrument or agreement referred to herein or
therein, provided that the Parent Guarantors jointly and severally agree that
--------
they will not vote the Collateral in any manner that is inconsistent with the
terms of this Agreement, the Credit Agreement, the Notes or any such other
instrument or agreement; and the Administrative Agent shall execute and deliver
-12-
to the Parent Guarantors or cause to be executed and delivered to the Parent
Guarantors all such proxies, powers of attorney, dividend and other orders, and
all such instruments, without recourse, as the Parent Guarantors may reasonably
request for the purpose of enabling the Parent Guarantors to exercise the rights
and powers that they are entitled to exercise pursuant to this Section 6.04(b).
(c) Unless and until an Event of Default has occurred and is
continuing, the Parent Guarantors shall be entitled to receive and retain any
dividends on the Collateral paid in cash out of earned surplus.
(d) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Administrative Agent or
any Lender exercises any available right to declare any Secured Obligation due
and payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement, the Credit Agreement, the Notes or any
other agreement relating to such Secured Obligation, all dividends and other
distributions on the Collateral shall be paid directly to the Administrative
Agent and retained by it in the Collateral Account as part of the Collateral,
subject to the terms of this Agreement, and, if the Administrative Agent shall
so request in writing, the Parent Guarantors jointly and severally agree to
execute and deliver to the Administrative Agent appropriate additional dividend,
distribution and other orders and documents to that end, provided that if such
--------
Event of Default is cured, any such dividend or distribution theretofore paid to
the Administrative Agent shall, upon request of the Parent Guarantors (except to
the extent theretofore applied to the Secured Obligations), be returned by the
Administrative Agent to the Parent Guarantors.
6.05 Events of Default, Etc. During the period during which an Event
----------------------
of Default shall have occurred and be continuing:
(a) the Administrative Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to the
maximum extent permitted by law, to exercise all voting, consensual and
other powers of ownership pertaining to the Collateral as if the
-13-
Administrative Agent were the sole and absolute owner thereof (and each
Parent Guarantor agrees to take all such action as may be appropriate to
give effect to such right);
(b) the Administrative Agent in its discretion may, in its name or in
the name of the Parent Guarantors or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on account
of or in exchange for any of the Collateral, but shall be under no
obligation to do so; and
(c) the Administrative Agent may, upon ten business days' prior
written notice to the Parent Guarantors of the time and place, with respect
to the Collateral or any part thereof that shall then be or shall
thereafter come into the possession, custody or control of the
Administrative Agent, the Lenders or any of their respective agents, sell,
lease, assign or otherwise dispose of all or any part of such Collateral,
at such place or places as the Administrative Agent deems best, and for
cash or for credit or for future delivery (without thereby assuming any
credit risk), at public or private sale, without demand of performance or
notice of intention to effect any such disposition or of the time or place
thereof (except such notice as is required above or by applicable statute
and cannot be waived), and the Administrative Agent or any Lender or anyone
else may be the purchaser, lessee, assignee or recipient of any or all of
the Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any
right or equity of redemption (statutory or otherwise), of the Parent
Guarantors, any such demand, notice and right or equity being hereby
expressly waived and released. The Administrative Agent may, without
notice or publication, adjourn any public or private sale or cause the same
to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which
the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
6.05 shall be applied in accordance with Section 6.09 hereof.
The Parent Guarantors recognize that, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and applicable
state securities laws, the Administrative Agent may be compelled, with respect
to any sale of all or any
-14-
part of the Collateral, to limit purchasers to those who will agree, among other
things, to acquire the Collateral for their own account, for investment and not
with a view to the distribution or resale thereof. The Parent Guarantors
acknowledge that any such private sales may be at prices and on terms less
favorable to the Administrative Agent than those obtainable through a public
sale without such restrictions, and, notwithstanding such circumstances, agree
that any such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Administrative Agent shall have no obligation to
engage in public sales and no obligation to delay the sale of any Collateral for
the period of time necessary to permit the Borrowers or issuer thereof to
register it for public sale.
6.06 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 6.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Parent Guarantors shall remain liable
for any deficiency.
6.07 Removals, Etc. Without at least 30 days' prior written notice
-------------
to the Administrative Agent, neither Parent Guarantor shall (i) maintain any of
its books and records with respect to the Collateral at any office or maintain
its principal place of business at any place other than at the address indicated
beneath its signature hereto or (ii) change its corporate name, or the name
under which it does business, from the name shown on the signature pages hereto.
6.08 Private Sale. The Administrative Agent and the Lenders shall
------------
incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 6.05 hereof conducted in a
commercially reasonable manner. Each Parent Guarantor hereby waives any claims
against the Administrative Agent or any Lender arising by reason of the fact
that the price at which the Collateral may have been sold at such a private sale
was less than the price that might have been obtained at a public sale or was
less than the aggregate amount of the Secured Obligations, even if the
Administrative Agent accepts the first offer received and does not offer the
Collateral to more than one offeree.
6.09 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided, the proceeds of any collection, sale or other realization of all or
any part of the Collateral pursuant hereto, and any other cash at the time held
by the
-15-
Administrative Agent under this Section 6, shall be applied by the
Administrative Agent:
First, to the payment of the costs and expenses of such collection,
-----
sale or other realization, including reasonable out-of-pocket costs and
expenses of the Administrative Agent and the fees and expenses of its
agents and counsel, and all expenses incurred and advances made by the
Administrative Agent in connection therewith;
Next, to the payment in full of the Secured Obligations, in each case
----
equally and ratably in accordance with the respective amounts thereof then
due and owing or as the Lenders holding the same may otherwise agree; and
Finally, to the payment to the respective Parent Guarantor, or their
-------
respective successors or assigns, or as a court of competent jurisdiction
may direct, of any surplus then remaining.
As used in this Section 6, "proceeds" of Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Parent Guarantors or any issuer of or
obligor on any of the Collateral.
6.10 Attorney-in-Fact. Without limiting any rights or powers granted
----------------
by this Agreement to the Administrative Agent while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default the Administrative Agent is hereby appointed the attorney-
in-fact of each Parent Guarantor for the purpose of carrying out the provisions
of this Section 6 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Administrative Agent shall be entitled under this Section 6 to make collections
in respect of the Collateral, the Administrative Agent shall have the right and
power to receive, endorse and collect all checks made payable to the order of
either Parent Guarantor representing any dividend, payment or other distribution
in respect of the Collateral or any part thereof and to give full discharge for
the same.
6.11 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, each Parent Guarantor
-16-
shall (i) file such financing statements and other documents in such offices as
the Administrative Agent may request to perfect the security interests granted
in Section 3 of this Agreement, (ii) register the pledge of its ownership
interests in the Borrowers hereunder for purposes of Article 8 of the Uniform
Commercial Code and (iii) deliver to the Administrative Agent any certificates
representing the Pledged LLC Interest, accompanied by undated stock powers duly
executed in blank.
6.12 Termination. When all Secured Obligations shall have been paid
-----------
in full and the Commitments of the Lenders under the Credit Agreement shall have
expired or been terminated, this Agreement shall terminate, and the
Administrative Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect thereof, to
or on the order of the respective Parent Guarantor.
6.13 Further Assurances. Each Parent Guarantor agrees that, from
------------------
time to time upon the written request of the Administrative Agent, such Parent
Guarantor will execute and deliver such further documents and do such other acts
and things as the Administrative Agent may reasonably request in order fully to
effect the purposes of this Agreement.
Section 7. Miscellaneous.
-------------
7.01 No Waiver. No failure on the part of the Administrative Agent
---------
or any Lender to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any Lender of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
7.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at the
"Address for Notices" specified beneath its name on the signature pages hereof
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or
-17-
personally delivered or, in the case of a mailed notice, upon receipt, in each
case given or addressed as aforesaid.
7.03 Expenses. The Parent Guarantors jointly and severally agree to
--------
reimburse each of the Lenders and the Administrative Agent for all reasonable
costs and expenses of the Lenders and the Administrative Agent (including,
without limitation, the reasonable fees and expenses of legal counsel) in
connection with (i) any Default and any enforcement or collection proceeding
resulting therefrom, including, without limitation, all manner of participation
in or other involvement with (w) performance by the Administrative Agent of any
obligations of the Parent Guarantors in respect of the Collateral that the
Parent Guarantors have failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Administrative
Agent in respect thereof, by litigation or otherwise, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or proceedings
(whether or not the workout, restructuring or transaction contemplated thereby
is consummated) and (ii) the enforcement of this Section 7.03, and all such
costs and expenses shall be Secured Obligations entitled to the benefits of the
collateral security provided pursuant to Section 3 hereof.
7.04 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by each Parent
Guarantor and the Administrative Agent (with the consent of the Lenders as
specified in Section 10.09 of the Credit Agreement). Any such amendment or
waiver shall be binding upon the Administrative Agent and each Lender, each
holder of any of the Secured Obligations and each Parent Guarantor.
-18-
7.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective successors and assigns of each Parent
Guarantor, the Administrative Agent, the Lenders and each holder of any of the
Secured Obligations (provided, however, that neither Parent Guarantor shall
--------
assign or transfer its rights hereunder without the prior written consent of the
Administrative Agent).
7.06 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
7.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
7.08 Governing Law; Submission to Jurisdiction. This Agreement
-----------------------------------------
shall be governed by, and construed in accordance with, the law of the State of
New York. Each Parent Guarantor hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
the Supreme Court of the State of New York sitting in New York County (including
its Appellate Division), and of any other appellate court in the State of New
York, for the purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. Each Parent Guarantor
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any objection that it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
7.09 Waiver of Jury Trial. EACH OF THE PARENT GUARANTORS AND THE
--------------------
ADMINISTRATIVE AGENT (FOR ITSELF AND ON BEHALF OF THE LENDERS) HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
7.10 Certain Regulatory Requirements. Any provision contained herein
-------------------------------
to the contrary notwithstanding, no action shall be taken hereunder by the
Administrative Agent or any Lender with
-19-
respect to any item of Collateral unless and until all applicable requirements
(if any) of the FCC under the Federal Communications Act of 1934, as amended,
and the respective rules and regulations thereunder and thereof, as well as any
other federal, state or local laws, rules and regulations of other regulatory or
governmental bodies (including, without limitation, any municipality that has
issued any Franchise to the Borrowers or any of their Subsidiaries) applicable
to or having jurisdiction over the Parent Guarantors (or any entity under the
control of the Parent Guarantors), have been satisfied with respect to such
action and there have been obtained such consents, approvals and authorizations
(if any) as may be required to be obtained from the FCC, any operating
municipality and any other governmental authority under the terms of any
Franchise, any license or similar operating right held by the Parent Guarantors
(or any entity under the control of the Parent Guarantors). It is the intention
of the parties hereto that the Liens in favor of the Administrative Agent on the
Collateral shall in all relevant aspects be subject to and governed by said
statutes, rules and regulations and the Franchise(s) and that nothing in this
Agreement shall be construed to diminish the control exercised by the Parent
Guarantors except in accordance with the provisions of such statutory
requirements, rules and regulations and the Franchises. Each Parent Guarantor
agrees that upon request from time to time by the Administrative Agent it will
use its best efforts to obtain any governmental, regulatory or third party
consents, approvals or authorizations referred to in this Section 7.10.
7.11 Agents and Attorneys-in-Fact. The Administrative Agent may
----------------------------
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or attorneys-in-
fact selected by it in good faith.
7.12 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
-20-
7.13 Limitation of Liability. It is understood that, except for the
-----------------------
representations and warranties made by the Parent Guarantors herein, the sole
recourse of the Administrative Agent and the Lenders in respect of the
obligations of the Parent Guarantors hereunder shall be to the Collateral
hereunder and that nothing contained herein shall create any obligation of or
right to look to either Parent Guarantor or its assets individually for the
satisfaction of such obligations.
-21-
IN WITNESS WHEREOF, the parties hereto have caused this Second Amended
and Restated Guarantee and Pledge Agreement to be duly executed and delivered as
of the day and year first above written.
MEDIACOM LLC
By _______________________________
Title:
Address for Notices:
Mediacom LLC
90 Crystal Run Road
Suite 406A
Middletown, New York 10940
MEDIACOM MANAGEMENT CORPORATION
By _________________________________
Title:
Address for Notices:
Mediacom Management Corporation
90 Crystal Run Road
Suite 406A
Middletown, New York 10940
-22-
THE CHASE MANHATTAN BANK,
as Administrative Agent
By ______________________________
Title:
Address for Notices:
The Chase Manhattan Bank, as
Administrative Agent
Agent Bank Services
1 Chase Manhattan Plaza
New York, New York 10081
with a copy to:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Ann B. Kerns
Vice President
EXHIBIT E
[Form of Subsidiary Guarantee Agreement]
SUBSIDIARY GUARANTEE AGREEMENT
SUBSIDIARY GUARANTEE AGREEMENT dated as of ____________, 199__ by
[NAME OF SUBSIDIARY GUARANTOR], a ___________ corporation (the "Subsidiary
----------
Guarantor") in favor of THE CHASE MANHATTAN BANK, as administrative agent for
- ---------
the banks or other financial institutions or entities party, as lenders, to the
Credit Agreement referred to below (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
--------------------
Mediacom California LLC, a Delaware limited liability company
("Mediacom California"), Mediacom Delaware LLC, a Delaware limited liability
- ---------------------
company ("Mediacom Delaware"), Mediacom Arizona LLC, a Delaware limited
-----------------
liability company ("Mediacom Arizona" and, together with Mediacom California and
----------------
Mediacom Delaware, the "Borrowers"), certain lenders, the Administrative Agent
---------
and First Union National Bank, as Documentation Agent, are parties to a Second
Amended and Restated Credit Agreement dated as of June 24, 1997 (as modified and
supplemented and in effect from time to time, the "Credit Agreement"),
----------------
providing, subject to the terms and conditions thereof, for loans to be made by
said lenders to the Borrowers in an aggregate principal amount not exceeding
$100,000,000. In addition, the Borrowers may from time to time be obligated to
various of said lenders in respect of Interest Rate Protection Agreements
permitted under Section 8.08(e) of the Credit Agreement (such indebtedness being
herein referred to as the "Hedging Indebtedness").
--------------------
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder and to extend credit to the Borrowers that would
constitute Hedging Indebtedness, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Subsidiary
Guarantor has agreed to guarantee the Guaranteed Obligations (as hereinafter
defined) and to become a Securing Party under the Security Agreement (as so
defined) and to pledge and grant a security interest in the Collateral (as so
defined) as security for the Secured Obligations (as so defined). Accordingly,
the parties hereto agree as follows:
-2-
Section 1. Definitions. Terms defined in the Credit Agreement are
-----------
used herein as defined therein. In addition, the terms "Collateral" and
"Securing Party" shall have the respective meanings assigned to such terms in
the Security Agreement.
Section 2. The Guarantee.
-------------
2.01 The Guarantee. The Subsidiary Guarantor hereby guarantees to
-------------
each Lender and the Administrative Agent and their respective successors and
assigns the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the principal of and interest on the Loans made by
the Lenders to, and the Note(s) held by each Lender of, the Borrowers and all
other amounts from time to time owing to the Lenders or the Administrative Agent
by the Borrowers under the Credit Agreement and under the Notes, and all Hedging
Indebtedness of the Borrowers, in each case strictly in accordance with the
terms thereof (such obligations being herein collectively called the "Guaranteed
----------
Obligations"). The Subsidiary Guarantor hereby further agrees that if the
- -----------
Borrowers shall fail to pay in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration or otherwise) any of the Guaranteed
Obligations, the Subsidiary Guarantor will promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
2.02 Obligations Unconditional. The obligations of the Subsidiary
-------------------------
Guarantor under Section 2.01 hereof are absolute and unconditional irrespective
of the value, genuineness, validity, regularity or enforceability of the Credit
Agreement, the Notes or any other agreement or instrument referred to herein or
therein, or any substitution, release or exchange of any other guarantee of or
security for any of the Guaranteed Obligations, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this Section 2.02 that the
obligations of the Subsidiary Guarantor hereunder shall be absolute and
unconditional under any and all circumstances. Without limiting the generality
of the foregoing, it is agreed that the occurrence of any one or more of the
following shall not alter or impair the liability of the Subsidiary Guarantor
-3-
hereunder which shall remain absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Subsidiary Guarantor, the time for any performance of or compliance with
any of the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of the
Credit Agreement or the Notes or any other agreement or instrument referred
to herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of,
the Administrative Agent or any Lender or Lenders as security for any of
the Guaranteed Obligations shall fail to be perfected.
The Subsidiary Guarantor hereby expressly waives diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that the
Administrative Agent or any Lender exhaust any right, power or remedy or proceed
against the Borrowers under the Credit Agreement or the Notes or any other
agreement or instrument referred to herein or therein, or against any other
Person under any other guarantee of, or security for, any of the Guaranteed
Obligations.
2.03 Reinstatement. The obligations of the Subsidiary Guarantor
-------------
under this Section 2 shall be automatically reinstated if and to the extent that
for any reason any payment by or on behalf of the Borrowers in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Subsidiary Guarantor agrees
that it will indemnify the
-4-
Administrative Agent and each Lender on demand for all reasonable costs and
expenses (including, without limitation, fees of counsel) incurred by the
Administrative Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
2.04 Subrogation. The Subsidiary Guarantor hereby waives all rights
-----------
of subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Federal
Bankruptcy Code) or otherwise by reason of any payment by it pursuant to the
provisions of this Section 2 and further agrees with each Borrower for the
benefit of each of its creditors (including, without limitation, each Lender and
the Administrative Agent) that any such payment by it shall constitute a
contribution of capital by the Subsidiary Guarantor to such Borrower (or an
investment in the equity capital of such Borrower by the Subsidiary Guarantor).
2.05 Remedies. The Subsidiary Guarantor agrees that, as between the
--------
Subsidiary Guarantor and the Lenders, the obligations of the Borrowers under the
Credit Agreement and the Notes may be declared to be forthwith due and payable
as provided in Section 9 of the Credit Agreement (and shall be deemed to have
become automatically due and payable in the circumstances provided in said
Section 9) for purposes of Section 2.01 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration (or such obligations
from becoming automatically due and payable) as against the Borrowers and that,
in the event of such declaration (or such obligations being deemed to have
become automatically due and payable), such obligations (whether or not due and
payable by the Borrowers) shall forthwith become due and payable by the
Subsidiary Guarantor for purposes of said Section 2.01.
2.06 Instrument for the Payment of Money. The Subsidiary Guarantor
-----------------------------------
hereby acknowledges that the guarantee in this Section 2 constitutes an
instrument for the payment of money, and consents and agrees that any Lender or
the Administrative Agent, at its sole option, in the event of a dispute by the
Subsidiary Guarantor in the payment of any moneys due hereunder, shall have the
right to bring motion-action under New York CPLR Section 3213.
-5-
2.07 Continuing Guarantee. The guarantee in this Section 2 is a
--------------------
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
2.08 General Limitation on Guarantee Obligations. In any action or
-------------------------------------------
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of the Subsidiary Guarantor under
Section 2.01 hereof would otherwise be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under said Section 2.01, then, notwithstanding
any other provision hereof to the contrary, the amount of such liability shall,
without any further action by the Subsidiary Guarantor, the Administrative
Agent, the Lenders or any other Person, be automatically limited and reduced to
the highest amount that is valid and enforceable and not subordinated to the
claims of other creditors as determined in such action or proceeding.
2.09 Obligations Joint and Several. The obligations of the
-----------------------------
Subsidiary Guarantor hereunder shall be joint and several with the obligations
of each other Securing Party under each other Subsidiary Guarantee Agreement or
under the Credit Agreement, as the case may be.
Section 3. Grant of Security. The Subsidiary Guarantor hereby agrees
-----------------
to become a "Securing Party" under and for all purposes of the Security
Agreement and hereby undertakes all of the obligations of a Securing Party
thereunder as if it had been an original signatory thereto. Without limiting
the foregoing, the Subsidiary Guarantor hereby pledges and grants to the
Administrative Agent, for the benefit of the Lenders as provided in the Security
Agreement, a security interest in all of the Subsidiary Guarantor's right, title
and interest in all Collateral, whether now owned by the Subsidiary Guarantor or
hereafter acquired and whether now existing or hereafter coming into existence,
and wherever located. In addition, (x) the Subsidiary Guarantor hereby makes
the representations and warranties set forth in Section 2 of the Security
Agreement and (y) Annex 1 to the Security Agreement shall be deemed to be
supplemented in respect of the Subsidiary Guarantor as specified in Appendix A
hereto.
-6-
Section 4. Representations and Warranties. The Subsidiary Guarantor
------------------------------
represents and warrants to the Lenders and the Administrative Agent that:
4.01 Corporate Existence. The Subsidiary Guarantor: (a) is a
-------------------
corporation, partnership, limited liability company or other entity duly
organized and validly existing under the laws of its jurisdiction of
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary and
where failure so to qualify would (either individually or in the aggregate) have
a Material Adverse Effect.
4.02 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the charter, by-laws or other
organizational instrument of the Subsidiary Guarantor, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which the
Subsidiary Guarantor is a party or by which it is bound or to which it is
subject, or constitute a default under any such agreement or instrument, or
result in the creation or imposition of any Lien upon any of the revenues or
assets of the Subsidiary Guarantor pursuant to the terms of any such agreement
or instrument.
4.03 Action. The Subsidiary Guarantor has all necessary corporate or
------
other power and authority to execute, deliver and perform its obligations under
this Agreement; the execution, delivery and performance by the Subsidiary
Guarantor of this Agreement have been duly authorized by all necessary corporate
or other action on its part; and this Agreement has been duly and validly
executed and delivered by the Subsidiary Guarantor and constitutes its legal,
valid and binding obligation, enforceable against the Subsidiary Guarantor in
accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws or
general applicability affecting the enforcement of creditors' rights and (b) the
application of
-7-
general principles of equity (regardless of whether considered in a proceeding
in equity or at law).
4.04 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange are necessary for the execution, delivery or
performance by the Subsidiary Guarantor of this Agreement or for the validity or
enforceability hereof, except for filings and recordings in respect of the Liens
created pursuant to the Security Agreement (as supplemented hereby), and except
that the exercise of remedies under the Security Agreement (and the creation of
a valid security interest in the Franchises as described to Section 8.19 of the
Credit Agreement) may require the prior approval of the FCC, or of the issuing
municipalities or States under one or more of the Franchises.
Section 5. Miscellaneous.
-------------
5.01 No Waiver. No failure on the part of the Administrative Agent
---------
or any Lender to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any Lender of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
5.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the Subsidiary Guarantor at
the "Address for Notices" specified for Mediacom California pursuant to the
Credit Agreement and, to the Administrative Agent, at its "Address for Notices"
specified pursuant to the Credit Agreement or, as to either party, at such other
address as shall be designated by such party in a notice to the other party.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
5.03 Expenses. The Subsidiary Guarantor agrees to reimburse each of
--------
the Lenders and the Administrative Agent for all reasonable costs and expenses
of the Lenders and the
-8-
Administrative Agent (including, without limitation, the reasonable fees and
expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceeding resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (x)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 5.03.
5.04 Amendments, Etc. The terms of this Agreement may be waived,
----------------
altered or amended only by an instrument in writing duly executed by the
Subsidiary Guarantor and the Administrative Agent (with the consent of the
Lenders as specified in Section 10.09 of the Credit Agreement). Any such
amendment or waiver shall be binding upon the Administrative Agent and each
Lender, each holder of any of the Guaranteed Obligations and the Subsidiary
Guarantor.
5.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the respective successors and assigns of the
Subsidiary Guarantor, the Administrative Agent, the Lenders and each holder of
any of the Guaranteed Obligations (provided, however, that the Subsidiary
--------
Guarantor shall not assign or transfer its rights hereunder without the prior
written consent of the Administrative Agent).
5.06 Captions. The captions and section headings appearing herein
--------
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
5.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
5.08 Governing Law; Submission to Jurisdiction. This Agreement
-----------------------------------------
shall be governed by, and construed in accordance with, the law of the State of
New York. The Subsidiary Guarantor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of the Supreme Court of the State of New York sitting in New York
-9-
County (including its Appellate Division), and of any other appellate court in
the State of New York, for the purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby. The
Subsidiary Guarantor hereby irrevocably waives, to the fullest extent permitted
by applicable law, any objection that it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.
5.09 Waiver of Jury Trial. EACH OF THE SUBSIDIARY GUARANTOR AND THE
--------------------
ADMINISTRATIVE AGENT (FOR ITSELF AND ON BEHALF OF THE LENDERS) HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
5.10. Opinion of Counsel. The Subsidiary Guarantor hereby instructs
------------------
its counsel to deliver the opinions referred to in Section 8.18(a)(iii) of the
Credit Agreement to the Lenders and the Administrative Agent.
5.11 Agents and Attorneys-in-Fact. The Administrative Agent may
----------------------------
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or attorneys-in-
fact selected by it in good faith.
5.12 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
-10-
IN WITNESS WHEREOF, the Subsidiary Guarantor has caused this
Subsidiary Guarantee Agreement to be duly executed and delivered as of the day
and year first above written.
[NAME OF SUBSIDIARY GUARANTOR]
By ________________________
Title:
Accepted and agreed:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By ________________________
Title:
Appendix A
to
Subsidiary Guarantee
Agreement
Supplement to Annex 1:
[to be completed]
EXHIBIT F
[Form of Management Fee Subordination Agreement]
SECOND AMENDED AND RESTATED MANAGEMENT FEE
SUBORDINATION AGREEMENT
SECOND AMENDED AND RESTATED MANAGEMENT FEE SUBORDINATION AGREEMENT dated as of
June 24, 1997, between:
(i) MEDIACOM MANAGEMENT CORPORATION, a corporation duly
organized and validly existing under the laws of the State of Delaware
("Manager Entity");
----------------
(ii) MEDIACOM CALIFORNIA LLC, a limited liability company duly
organized and validly existing under the laws of the State of Delaware
("Mediacom California");
---------------------
(iii) MEDIACOM DELAWARE LLC, a limited liability company duly
organized and validly existing under the laws of the State of Delaware
("Mediacom Delaware");
-------------------
(iv) MEDIACOM ARIZONA LLC, a limited liability company duly
organized and validly existing under the laws of the State of Delaware
("Mediacom Arizona" and, together with Mediacom California and Mediacom
------------------
Delaware, the "Borrowers"); and
---------
(v) THE CHASE MANHATTAN BANK, a New York banking corporation, as
administrative agent for the lenders or other financial institutions or
entities party, as lenders, to the Credit Agreement referred to below (in
such capacity, together with its successors in such capacity, the
"Administrative Agent").
---------------------
The Manager Entity, Mediacom California, Mediacom Arizona and the
Administrative Agent are parties to an Amended and Restated Management Fee
Subordination Agreement dated as of December 27, 1996 (the "Existing Management
-------------------
Subordination Agreement"), pursuant to which the Manager Entity has agreed to
- -----------------------
subordinate the Subordinated Debt (as defined therein) to the Senior Debt (as
defined therein) including, inter alia, obligations of Mediacom California and
----- ----
Mediacom Arizona under an Amended and Restated Credit Agreement dated as of
December 27, 1996 (the "Existing Credit Agreement") between Mediacom California,
-------------------------
Mediacom Arizona, certain lenders and the Administrative Agent. Concurrently
with the execution and delivery of this Agreement, the parties to the Existing
Credit
-2-
Agreement are amending and restating the Existing Credit Agreement to
increase the amount of credit available thereunder, to add the New Lenders (as
defined therein) as parties thereto, to add Mediacom Delaware as an additional
borrower thereunder and to amend certain of the other provisions thereof
pursuant to a Second Amended and Restated Credit Agreement dated as of June 24,
1997 (as modified and supplemented and in effect from time to time, the "Credit
------
Agreement"). In addition, the Borrowers may from time to time be obligated to
- ---------
various of said lenders in respect of Interest Rate Protection Agreements
permitted under Section 8.08(e) of the Credit Agreement (such indebtedness being
herein referred to as the "Hedging Indebtedness").
--------------------
To induce said lenders to amend and restate the Existing Credit Agreement
pursuant to the Credit Agreement and to extend credit thereunder and to extend
credit to the Borrowers that would constitute Hedging Indebtedness, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Manager Entity has agreed to subordinate the
Subordinated Debt (as hereinafter defined) to the Senior Debt (as so defined)
all in the manner and to the extent hereinafter provided, and to confirm its
prior subordination of the Subordinated Debt to the Senior Debt pursuant to the
Existing Management Subordination Agreement and, in that connection to amend and
restate in its entirety the Existing Management Subordination Agreement.
Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are used
-----------
herein as defined therein. In addition, as used herein:
"Obligor Entity" shall mean, collectively, the Borrowers and, effective upon
--------------
execution and delivery of any Subsidiary Guarantee Agreement, any Subsidiary of
a Borrower so executing and delivering such Subsidiary Guarantee Agreement.
"Senior Debt" shall mean, collectively, the following indebtedness and
-----------
obligations:
(a) all indebtedness or other obligations of the Borrowers under the
Credit Agreement and the other Loan Documents, including all interest,
expenses, indemnities and penalties and all commitment and agency fees
payable from
-3-
time to time under the Credit Agreement and the other Loan Documents;
(b) all Hedging Indebtedness;
(c) all obligations of any Subsidiary of a Borrower in respect of any
Subsidiary Guarantee Agreement executed and delivered by such Subsidiary;
and
(d) any deferrals, renewals, extensions or refinancings of any of the
foregoing.
The term "Senior Debt" shall include any interest, and any expenses of the type
described in Section 11.03 of the Credit Agreement (or comparable provisions of
any other Loan Document), accruing or arising after the date of any filing by
any Obligor Entity of any petition in bankruptcy or the commencing of any
bankruptcy, insolvency or similar proceedings with respect to any Obligor
Entity, whether or not such interest or expenses are allowable as a claim in any
such proceeding.
"Subordinated Debt" shall mean all obligations of the Borrowers or their
-----------------
Subsidiaries with respect to any Management Fee payable by the Borrowers or any
of their Subsidiaries to the Manager Entity.
Section 2. Subordination.
-------------
2.01 Subordination of Subordinated Debt. The Manager Entity, on its own
----------------------------------
behalf and on behalf of each subsequent holder of Subordinated Debt, hereby
covenants and agrees, that, to the extent and in the manner set forth in this
Agreement, the Subordinated Debt, and the payment from whatever source of the
Subordinated Debt, are hereby expressly made subordinate and subject in right of
payment to the prior payment in full in cash of all Senior Debt and in that
connection hereby agrees that, except and to the extent permitted under Section
2.03 hereof, (a) no payment on account of the Subordinated Debt or any judgment
with respect thereto shall be made by or on behalf of the Obligor Entities and
(b) the Manager Entity shall not (i) ask, demand, sue for, take or receive from
the Obligor Entities, by set-off or in any other manner, or (ii) seek any other
remedy allowed at law or in equity against the Obligor Entities for
-4-
breach of any Obligor Entity's obligations under the instruments representing
such Subordinated Debt.
In the event that, notwithstanding the foregoing provisions of this Section
2.01, the Manager Entity shall have received any payment not permitted by the
provisions of Section 2.03 hereof, including, without limitation, any such
payment arising out of the exercise by the Manager Entity of a right of set-off
or counterclaim and any such payment received by reason of other indebtedness of
any Obligor Entity being subordinated to the Subordinated Debt, then, and in any
such event, such payment shall be held in trust for the benefit of, and shall be
immediately paid over or delivered to, the Administrative Agent, to be paid to
the Lenders, ratably according to the aggregate amounts remaining unpaid on
account of the principal of, and interest and premium (if any) on, the Senior
Debt held or represented by each Lender, for application to such Senior Debt
remaining unpaid, whether or not then due and payable.
2.02 Payment of Proceeds Upon Dissolution. Without limiting the generality
------------------------------------
of the provisions of Section 2.01 hereof, in the event of (a) any insolvency or
bankruptcy case or proceeding, or any receivership, liquidation, reorganization
or other similar case or proceeding in connection therewith, relative to any
Obligor Entity or to its creditors, as such, or to its assets, or (b) any
liquidation, dissolution or other winding up of any Obligor Entity, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
or (c) any assignment for the benefit of creditors or any other marshalling of
assets and liabilities of any Obligor Entity, then and in any such event:
(1) the Lenders shall be entitled to receive payment in full in cash of
all amounts due or to become due on or in respect of all Senior Debt, or
provision shall be made for such payment, before the Manager Entity shall
be entitled to receive any payment on account of the Subordinated Debt;
(2) any payment or distribution of assets of any Obligor Entity of any
kind or character, whether in cash, property or securities, by set-off or
otherwise, to which the Manager Entity would be entitled but for the
provisions of this Agreement, including any such payment or distribution
that may be payable or deliverable by reason of
-5-
the payment of any other indebtedness of any Obligor Entity being
subordinated to the payment of the Subordinated Debt, shall be paid by the
liquidating trustee or agent or other Person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating
trustee or otherwise, directly to the Administrative Agent, to be paid to
the Lenders, ratably according to the aggregate amounts remaining unpaid on
account of the principal of, and interest and premium (if any) on, the
Senior Debt held or represented by each Lender, to the extent necessary to
make payment in full in cash of all Senior Debt remaining unpaid, after
giving effect to any concurrent payment or distribution to the Lenders;
(3) in the event that, notwithstanding the foregoing provisions of
this Section 2.02, the Manager Entity shall have received, before all
Senior Debt is paid in full in cash or payment thereof provided for, any
such payment or distribution of assets of any Obligor Entity of any kind or
character, whether in cash, property or securities, including any such
payment or distribution arising out of the exercise by the Manager Entity
of a right of set-off or counterclaim and any such payment or distribution
received by reason of any other indebtedness of any Obligor Entity being
subordinated to the Subordinated Debt, then, and in such event, such
payment or distribution shall be held in trust for the benefit of, and
shall be immediately paid over or delivered to, the Administrative Agent,
to be paid to the Lenders, ratably according to the aggregate amounts
remaining unpaid on account of the principal of, and interest and premium
(if any) on, the Senior Debt held or represented by each Lender, to the
extent necessary to make payment in full in cash of all Senior Debt
remaining unpaid, after giving effect to any concurrent payment or
distribution to the Lenders; and
(4) if the Manager Entity shall have failed to file claims or proofs
of claim with respect to the Subordinated Debt earlier than 30 days prior
to the deadline for any such filing, the Manager Entity shall execute and
deliver to the Administrative Agent such powers of attorney, assignments or
other instruments as the Administrative Agent may reasonably request to
file such claims or proofs of claim.
-6-
2.03 Certain Payments Permitted. Notwithstanding the foregoing, the Manager
--------------------------
Entity shall be entitled to receive and retain any payment of Management Fees
either (i) permitted under Section 8.11 of the Credit Agreement or (ii) made
after all Senior Debt shall have been paid in full and the Commitments of the
Lenders under the Credit Agreement shall have expired or been terminated.
2.04 Subrogation. Subject to the payment in full in cash of all Senior Debt,
-----------
the Manager Entity shall be subrogated (equally and ratably with the holders of
all indebtedness of the Obligor Entities that by its express terms is
subordinated to Senior Debt of the Obligor Entities to the same extent as the
Subordinated Debt is subordinated and that is entitled to like rights of
subrogation) to the rights of the Lenders to receive payments and distributions
of cash, property and securities applicable to the Senior Debt until the
Subordinated Debt shall be paid in full in cash. For purposes of such
subrogation, no payments or distributions to the Lenders of any cash, property
or securities to which the Manager Entity would be entitled except for the
provisions of this Section 2, and no payments over pursuant to the provisions of
this Section 2 to the Lenders by the Manager Entity, shall, as between the
Obligor Entities, their creditors other than the Lenders, and the Manager
Entity, be deemed to be a payment or distribution by the Obligor Entities to or
on account of the Senior Debt.
2.05 Provisions Solely to Define Relative Rights. The provisions of this
-------------------------------------------
Section 2 are and are intended solely for the purpose of defining the relative
rights of the Manager Entity on the one hand and the Lenders on the other hand.
Nothing contained in this Section 2 or elsewhere in this Agreement is intended
to or shall:
(a) impair, as among the Obligor Entities, their creditors other than
the Lenders and the Manager Entity, the obligation of the Obligor Entities
to pay to the Manager Entity the Subordinated Debt as and when the same
shall become due and payable in accordance with its terms; or
(b) affect the relative rights against the Obligor Entities of the
Manager Entity and creditors of the Obligor Entities other than the
Lenders.
-7-
2.06 No Waiver of Subordination Provisions. No right of the Administrative
-------------------------------------
Agent or any Lender to enforce subordination as herein provided shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of the Obligor Entities or by any act or failure to act, in good faith, by
the Administrative Agent or any Lender, or by any non-compliance by any Obligor
Entity with the terms, provisions and covenants of this Agreement, regardless of
any knowledge thereof the Administrative Agent or any Lender may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph, the
Lenders may, at any time and from time to time, without the consent of or notice
to the Manager Entity, without incurring responsibility to the Manager Entity
and without impairing or releasing the subordination provided in this Section 2
or the obligations hereunder of the Manager Entity to the holders of Senior
Debt, do any one or more of the following: (a) change the time, manner or place
of payment of Senior Debt, or otherwise modify or supplement in any respect any
of the provisions of the Credit Agreement or any other instrument evidencing or
relating to any of the Senior Debt; (b) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior Debt; (c)
release any Person liable in any manner for the collection of Senior Debt; and
(d) exercise or refrain from exercising any rights against the Obligor Entities
and any other Person.
Section 3. Representations and Warranties. The Manager Entity represents and
------------------------------
warrants to the Administrative Agent and each Lender that:
3.01 Existence. The Manager Entity is a corporation duly organized and
---------
validly existing under the laws of the State of Delaware.
3.02 No Breach. None of the execution and delivery of this Agreement, the
---------
consummation of the transactions herein contemplated or compliance with the
terms and provisions hereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws or other organizational
instrument of the Manager Entity, any applicable law or regulation, or any
order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which the Manager Entity is a party or
by which the Manager Entity is bound or to which the Manager Entity is subject,
or constitute a default under any such agreement or
-8-
instrument, or result in the creation or imposition of any Lien upon any of the
revenues or assets of the Manager Entity pursuant to the terms of any such
agreement or instrument.
3.03 Action. The Manager Entity has all necessary corporate or other power,
------
authority and legal right to execute, deliver and perform its obligations under
this Agreement; the execution, delivery and performance by the Manager Entity of
this Agreement have been duly authorized by all necessary corporate or other
action on its part; and this Agreement has been duly and validly executed and
delivered by the Manager Entity and constitutes the legal, valid and binding
obligation of the Manager Entity, enforceable in accordance with its terms,
except as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and (b) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3.04 Approvals. No authorizations, approvals or consents of, and no filings
---------
or registrations with, any governmental or regulatory authority or agency are
necessary for the execution, delivery or performance by the Manager Entity of
this Agreement or for the validity or enforceability hereof.
Section 4. Miscellaneous.
-------------
4.01 No Waiver. No failure on the part of the Administrative Agent or any
---------
Lender to exercise, and no course of dealing with respect to, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Administrative Agent or
any Lender of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided by
law.
4.02 Notices. All notices, requests, consents and demands hereunder shall be
-------
in writing and telecopied or delivered to the intended recipient at the "Address
for Notices" specified
-9-
beneath its name on the signature pages hereof or, as to either party, at such
other address as shall be designated by such party in a notice to the other
party. Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when transmitted by telecopier or
personally delivered or, in the case of a mailed notice, upon receipt, in each
case given or addressed as aforesaid.
4.03 Amendments, Etc. The terms of this Agreement may be waived, altered or
---------------
amended only by an instrument in writing duly executed by the Manager Entity and
(as to the Administrative Agent and the Lenders) by the Administrative Agent
with the consent of the Lenders as specified in Section 10.09 of the Credit
Agreement. Any such amendment or waiver shall be binding upon the
Administrative Agent and each Lender (and each other holder of Senior Debt) and
the Manager Entity.
4.04 Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the respective successors and assigns of the Manager Entity
and the Administrative Agent and each Lender (and each other holder of Senior
Debt).
4.05 Captions. The captions and section headings appearing herein are
--------
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
4.06 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
4.07 Governing Law; Submission to Jurisdiction. This Agreement shall be
-----------------------------------------
governed by, and construed in accordance with, the law of the State of New York.
The Manager Entity hereby submits to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of the Supreme
Court of the State of New York sitting in New York County (including its
Appellate Division), and of any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Manager Entity hereby
irrevocably waives, to the fullest extent permitted by applicable
- 10 -
law, any objection that it may now or hereafter have to the laying of the venue
of any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
4.08 Waiver of Jury Trial. EACH OF THE MANAGER ENTITY AND THE ADMINISTRATIVE
--------------------
AGENT (FOR ITSELF AND ON BEHALF OF THE LENDERS) HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
-11-
IN WITNESS WHEREOF, the parties hereto have caused this Second Amended and
Restated Management Fee Subordination Agreement to be duly executed and
delivered as of the day and year first above written.
MEDIACOM MANAGEMENT CORPORATION
By _______________________________
Title:
Address for Notices:
Mediacom Management Corporation
90 Crystal Road
Suite 406A
Middletown, New York 10940
Attention: Rocco B. Commisso
Telecopier No.: (914) 695-2699
Telephone No.: (914) 692-2600
-12-
MEDIACOM CALIFORNIA LLC
By MEDIACOM LLC, a Member
By____________________________
Title:
Address for Notices:
Mediacom California LLC
c/o Mediacom LLC
90 Crystal Road
Suite 406A
Middletown, New York 10940
Attention: Rocco B. Commisso
Telecopier No.: (914) 695-2699
Telephone No.: (914) 696-2600
MEDIACOM DELAWARE LLC
By MEDIACOM LLC, a Member
By____________________________
Title:
Address for Notices:
Mediacom Delaware LLC
c/o Mediacom LLC
90 Crystal Road
Suite 406A
Middletown, New York 10940
Attention: Rocco B. Commisso
Telecopier No.: (914) 695-2699
Telephone No.: (914) 695-2600
-13-
MEDIACOM ARIZONA LLC
By MEDIACOM LLC, a Member
By____________________________
Title:
Address for Notices:
Mediacom Arizona LLC
c/o Mediacom LLC
90 Crystal Road
Suite 406A
Middletown, New York 10940
Attention: Rocco B. Commisso
Telecopier No.: (914) 695-2699
Telephone No.: (914) 695-2600
-14-
THE CHASE MANHATTAN BANK,
as Administrative Agent
By _____________________________
Title:
Address for Notices:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Ann B. Kerns
Vice President
Telecopier No.: (212) 270-9320
Telephone No.: (212) 270-4584
EXHIBIT G
[Form of Opinion of Counsel to the Obligors]
_______, 1997
To the Lenders party to the
Credit Agreement referred to
below and The Chase Manhattan
Bank, as Administrative Agent
Ladies and Gentlemen:
We have acted as counsel to Mediacom California LLC ("Mediacom California"),
-------------------
Mediacom Delaware LLC ("Mediacom Delaware"), Mediacom Arizona LLC ("Mediacom
----------------- --------
Arizona" and, together with Mediacom California and Mediacom Delaware, the
- -------
"Borrowers") Mediacom LLC ("Mediacom") and Mediacom Management Corporation (the
- ---------- --------
"Manager Entity") in connection with (i) the Second Amended and Restated Credit
--------------
Agreement (the "Credit Agreement") dated as of June 24, 1997, between the
----------------
Borrowers, the lenders party thereto, The Chase Manhattan Bank, as
Administrative Agent, and First Union National Bank, as Documentation Agent,
providing for loans to be made by said lenders to the Borrowers in an aggregate
principal amount not exceeding $100,000,000 and (ii) the various other
agreements, instruments and other documents referred to in the next following
paragraph. Except as otherwise expressly provided herein, terms defined in the
Credit Agreement are used herein as defined therein. This opinion letter is
being delivered pursuant to Section 6.01(c) of the Credit Agreement.
In rendering the opinions expressed below, we have examined the following
agreements, instruments and other documents:
(a) the Credit Agreement;
(b) the Notes;
(c) the Security Agreement;
(d) the Guarantee and Pledge Agreement;
(e) the Management Fee Subordination Agreement executed and
delivered by the Manager Entity;
-2-
(f) financing statements being executed and delivered pursuant to
Section 6.01 of the Credit Agreement concurrently with the
delivery of this opinion (collectively, the "Financing
---------
Statements"); and
(g) such records of the Borrowers and such other documents as we have
deemed necessary as a basis for the opinions expressed below.
The agreements, instruments and other documents referred to in the foregoing
lettered clauses (other than clauses (f) and (g) above) are collectively
referred to as the "Credit Documents"; the Borrowers, Mediacom and the Manager
----------------
Entity are herein collectively referred to as the "Relevant Parties".
----------------
We have also examined originals, or copies certified to our satisfaction, of
such corporate records, certificates of public officials of pertinent states,
certificates of corporate officers of the Relevant Parties and such other
instruments or documents as we have deemed necessary as a basis for the opinions
hereinafter set forth. As to questions of fact, we have, to the extent that
such facts were not independently established by us, relied upon such
certificates and we have assumed that any such certificates or other evidence
which was given or dated earlier than the date of this letter has remained
accurate, as far as relevant to the opinions contained herein, from such earlier
date through and including the date of this letter. In rendering the opinions
hereinafter set forth as to factual matters, we have also relied upon, and
assumed the accuracy of, the representations and warranties made in the Credit
Documents by the Relevant Parties. Whenever any statement herein is qualified
by our knowledge, it is intended to indicate that, during the course of our
representation of the Relevant Parties no information that would give us actual
knowledge of the inaccuracy of such statement has come to the attention of the
attorneys presently in this firm and who are actively engaged in the
representation of the Relevant Parties.
In our examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
with authentic original documents of all documents submitted to us as copies.
In rendering the opinions expressed below, we have assumed, with respect to
all of the documents referred to in this
-3-
opinion letter, that (except, to the extent set forth in the opinions expressed
below, as to the Relevant Parties):
(i) such documents have been duly authorized by, have been duly
executed and delivered by, and constitute legal, valid, binding
and enforceable obligations of, all of the parties to such
documents;
(ii) all signatories to such documents have been duly authorized; and
(iii) all of the parties to such documents are duly organized and
validly existing and have the power and authority (corporate,
limited liability company, partnership or other) to execute,
deliver and perform such documents.
We have further assumed for purposes of paragraph 10 below, that the Financing
Statements will be filed in the appropriate office(s) no later than 10 days
after the initial Loans under the Credit Agreement.
Based upon and subject to the foregoing and subject also to the comments and
qualifications set forth below, and having considered such questions of law as
we have deemed necessary as a basis for the opinions expressed below, we are of
the opinion that:
1. Each Borrower is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Mediacom is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of New York. The Manager
Entity is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware.
2. Each Relevant Party has all requisite power to execute and deliver,
and to perform its obligations under, the Credit Documents to which it is a
party. Each Borrower has all requisite power to borrow under the Credit
Agreement.
-4-
3. The execution, delivery and performance by each Relevant Party of
each Credit Document to which it is a party, and the borrowings by each
Borrower under the Credit Agreement, have been duly authorized by all
necessary corporate or other action (as the case may be) on the part of
such Relevant Party.
4. Each Credit Document has been duly executed and delivered by each
Relevant Party party thereto.
5. Each of the Credit Documents constitutes the legal, valid and
binding obligation of each Relevant Party party thereto, enforceable
against such Relevant Party in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and except as the enforceability of the Credit
Documents is subject to the application of general principles of equity
(regardless of whether considered in a proceeding in equity or at law),
including, without limitation, (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy and (b)
concepts of materiality, reasonableness, good faith and fair dealing.
6. No authorization, approval or consent of, and no filing or
registration with, any governmental or regulatory authority or agency of
the United States of America or the State of New York is required on the
part of any Relevant Party for the execution, delivery or performance by
any Relevant Party of any of the Credit Documents or for the borrowings by
each of the Borrowers under the Credit Agreement, except for (i) filings
and recordings in respect of the Liens created pursuant to the Security
Documents, (ii) the authorizations, approvals, consents, filings and
registrations contemplated by the Acquisition Agreements (each of which has
been made or obtained on or before the date hereof to the extent required
under the Acquisition Agreements to be obtained before the date hereof) and
(iii) the exercise of remedies under the Security Documents (and the
creation of a valid security interest in Franchises and the other
Collateral as described in Sections 6.01(f) and 8.18 of the Credit
Agreement) may require the prior approval of the FCC or the issuing
municipalities or States under one or more of the Franchises.
-5-
7. The execution, delivery and performance by each Relevant Party,
and the consummation by each Relevant Party of the transactions
contemplated by, the Credit Documents to which such Relevant Party is a
party do not and will not (a) violate any provision of the limited
liability company agreement, articles of organization, certificate of
formation or the charter or by-laws or other organizational instrument of
any Relevant Party, (b) violate any applicable law, rule or regulation, (c)
violate any order, writ, injunction or decree of any court or governmental
authority or agency or any arbitral award applicable to the Relevant
Parties of which we have knowledge (after due inquiry) or (d) result in a
breach of, constitute a default under, require any consent under, or result
in the acceleration or required prepayment of any indebtedness pursuant to
the terms of, any agreement or instrument of which we have knowledge to
which any Relevant Party is a party or by which any of them is bound or to
which any of them is subject, or (except for the Liens created pursuant to
the Security Documents) result in the creation or imposition of any Lien
upon any Property of any Relevant Party pursuant to, the terms of any such
agreement or instrument.
8. We have no knowledge of any legal or arbitral proceedings, or any
proceedings by or before any governmental or regulatory authority or
agency, pending or threatened against or affecting the Relevant Parties or
any of their respective Properties that, if adversely determined, could
have a Material Adverse Effect.
9. The Security Agreement and the Guarantee and Pledge Agreement
(collectively, the "Collateral Documents") are each effective to create, in
--------------------
favor of the Administrative Agent for the benefit of the Administrative
Agent and the Lenders, a valid security interest under the Uniform
Commercial Code as in effect in the State of New York (the "Uniform
-------
Commercial Code"), but only to the extent the Uniform Commercial Code is
---------------
applicable thereto, in all of the right, title and interest of each Obligor
in, to and under the Collateral (as defined in each Collateral Document)
owned by such Obligor as collateral security for the payment of the Secured
Obligations (as defined in each Collateral Document) of such Obligor,
except that (a) such security interest will continue in Collateral after
its sale,
-6-
exchange or other disposition only to the extent provided in
Sections 9-306 and 9-307 of the Uniform Commercial Code, (b) the security
interest in Collateral in which an Obligor acquires rights after the
commencement of a case under the Bankruptcy Code in respect of such Obligor
may be limited by Section 552 of the Bankruptcy Code, and (c) the creation
of a security interest in any Pledged Stock (as defined in the Security
Agreement) or Pledged LLC Interest (as defined in the Guarantee and Pledge
Agreement) constituting a "security" (as defined in Section 8-102(1)(c) of
the Uniform Commercial Code) requires the transfer of said Pledged Stock to
the Administrative Agent pursuant to Section 8-313(1) of the Uniform
Commercial Code, which transfer in the case of a "certificated security"
(as defined in Section 8-102(1)(a) of the Uniform Commercial Code) may be
effected in the manner contemplated by paragraph 10(a) below and which
transfer, in the case of an "uncertificated security" (as defined in
Section 8-102(1)(b) of the Uniform Commercial Code) may be effected in the
manner contemplated by paragraph 10(b)(ii) below.
10. The security interests referred to in paragraph 9 above in the
types of Collateral described below will be perfected as described below:
(a) such security interest in that portion of the Collateral
consisting of a certificated security (including the Pledged Stock
under and as defined in the Security Agreement) will, upon the
creation of such security interest, be perfected by the Administrative
Agent taking and thereafter retaining possession thereof (or any
certificates representing any such certificated security) in the State
of New York, except (i) in the case of the issuance of additional
shares or other distributions in respect of the Pledged Stock or
Pledged LLC Interest consisting of certificated securities, the
security interest of the Administrative Agent therein will be
perfected only if possession thereof is obtained in accordance with
the provisions of the Uniform Commercial Code and (ii) in the case of
the proceeds, continuation of the perfection of the security interest
of the Administrative Agent therein is limited to the extent set forth
in Section 9-306 of the Uniform Commercial Code; and
-7-
(b) such security interest in that portion of the Collateral
consisting of an ownership interest in a limited liability company
will, upon the creation of such security interest, be perfected (i) to
the extent constituting a general intangible under the Uniform
Commercial Code, by filing the Financing Statements in the appropriate
filing offices and (ii) to the extent constituting an uncertificated
security under the Uniform Commercial Code, by registration of such
security interest in the books of the respective issuing limited
liability company (which registration has, in the case of the pledge
pursuant to the Security Agreement and the Guarantee and Pledge
Agreement of Mediacom California's, Mediacom's and the Manager
Entity's ownership interests in the Borrowers, been duly effected).
The foregoing opinions are subject to the following comments and
qualifications:
(A) The enforceability of Section 11.03 of the Credit Agreement
(and any similar provisions in any of the other Credit Documents) may be
limited by (i) laws rendering unenforceable indemnification contrary to
Federal or state securities laws and the public policy underlying such laws
and (ii) laws limiting the enforceability of provisions exculpating or
exempting a party, or requiring indemnification of a party for, liability
for its own action or inaction, to the extent the action or inaction
involves gross negligence, recklessness, willful misconduct or unlawful
conduct.
(B) The enforceability of provisions in the Credit Documents to the
effect that terms may not be waived or modified except in writing may be
limited under certain circumstances.
(C) Clause (iii) of the second sentence of Section 2.02 of the
Guarantee and Pledge Agreement (and any similar provisions in any of the
other Credit Documents) may not be enforceable to the extent that the
Guaranteed Obligations under and as defined therein are materially
modified.
-8-
(D) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Lender is located (other than the State of New
York) that limit the interest, fees or other charges such Lender may
impose, (ii) Section 4.07(c) of the Credit Agreement, (iii) the second
sentence of Section 11.10 of the Credit Agreement (and any similar
provisions in any of the other Credit Documents), insofar as such sentence
relates to the subject matter jurisdiction of the United States District
Court for the Southern District of New York to adjudicate any controversy
related to any of the Credit Documents and (iv) the applicability to the
obligations of the Subsidiary Guarantors (or the enforceability of such
obligations) of Section 548 of the Bankruptcy Code, Article 10 of the New
York Debtor Creditor Law, or any provision of law relating to fraudulent
conveyances, transfers or obligations.
(E) We wish to point out that the obligations of the Obligors, and
the rights and remedies of the Administrative Agent and the Lenders, under
the Collateral Documents may be subject to possible limitations upon the
exercise of remedial or procedural provisions contained in the Collateral
Documents, provided that such limitations do not, in our opinion (but
subject to the other comments and qualifications set forth in this opinion
letter), make the remedies and procedures that will be afforded to the
Administrative Agent and the Lenders inadequate for the practical
realization of the substantive benefits purported to be provided to the
Administrative Agent and the Lenders by the Collateral Documents.
(F) With respect to our opinion in paragraphs 9 or 10 above, we
express no opinion as to the creation, perfection or priority of any
security interest in (or other lien on) any Collateral (as defined in each
Collateral Document) (i) to the extent that, pursuant to Section 9-104 of
the Uniform Commercial Code, Article 9 of the Uniform Commercial Code does
not apply thereto, (ii) consisting of uncertificated securities (as defined
in Section 8-102(b) of the Uniform Commercial Code), except for the
ownership interests in any limited liability company referred to in
paragraphs 9 and 10 above, (iii) consisting of fixtures, timber to be cut
or minerals (including oil and gas) or (iv) covered by a certificate of
title.
-9-
(G) We wish to point out that the acquisition by an Obligor after
the initial Loan under the Credit Agreement of an interest in Property that
becomes subject to the Lien of any Collateral Document may constitute a
voidable preference under Section 547 of the Bankruptcy Code.
(H) We express no opinion as to the existence of, or the right,
title or interest of the Obligors in, to or under, any of the Collateral
(as defined in each Collateral Document).
(I) Except as expressly provided in paragraphs 9 and 10 above, we
express no opinion as to the creation, perfection or priority of any
security interest in, or other Lien on, the Collateral (as defined in each
Collateral Document).
We express no opinion (a) as to the, and the effect of, compliance or non-
compliance by the Lenders or the Administrative Agent with any law, rule or
regulation applicable because of the legal or regulatory status or the specific
nature of the business of such Lender or Administrative Agent and (b) regarding
any law, rule or regulation to which any of the Relevant Parties may be subject,
or any approval which any of the Relevant Parties may be required to obtain,
because of the legal or regulatory status of the Lenders or the Administrative
Agent or because of any facts specifically pertaining to the Lenders or the
Administrative Agent.
Our opinions are limited to the specific issues addressed and are limited in
all respects to laws and facts existing on the date hereof. By rendering our
opinions, we do not undertake to advise you of any changes in such laws or facts
which may occur after the date hereof.
The foregoing opinions are limited to matters involving the Federal laws of
the United States, the Delaware General Corporation Law, the Delaware Limited
Liability Company Act and the law of the State of New York, and we do not
express any opinion as to the laws of any other jurisdiction (nor do we express
any opinion as to the applicability to, or the effect upon, the transactions
contemplated by the Credit Documents of the Federal Communications Act of 1934,
as amended, and the rules and regulations promulgated thereunder or the policies
of the FCC).
-10-
At the request of our clients, this opinion letter is, pursuant to Section
6.01(c) of the Credit Agreement, provided to you by us in our capacity as
counsel to the Relevant Parties and may not be relied upon by any Person for any
purpose other than in connection with the transactions contemplated by the
Credit Agreement without, in each instance, our prior written consent.
Very truly yours,
EXHIBIT H
[Form of Opinion of Special New York Counsel to Chase]
_______, 1997
To the Lenders party to the
Credit Agreement referred to
below and The Chase Manhattan
Bank, as Administrative Agent
Ladies and Gentlemen:
We have acted as special New York counsel to The Chase Manhattan Bank
("Chase") in connection with (i) the Second Amended and Restated Credit
-----
Agreement dated as of June 24, 1997 (the "Credit Agreement") between Mediacom
----------------
California LLC ("Mediacom California"), Mediacom Delaware LLC ("Mediacom
------------------- --------
Delaware"), Mediacom Arizona LLC ("Mediacom Arizona" and, together with Mediacom
- -------- ----------------
California and Mediacom Delaware, the "Borrowers"), the lenders party thereto,
---------
Chase, as Administrative Agent, and First Union National Bank, as Documentation
Agent, providing for loans to be made by said lenders to the Borrowers in an
aggregate principal amount not exceeding $100,000,000 and (ii) the various other
agreements, instruments and other documents referred to in the next following
paragraph. Terms defined in the Credit Agreement are used herein as defined
therein. This opinion letter is being delivered pursuant to Section 6.01(d) of
the Credit Agreement.
In rendering the opinions expressed below, we have examined the following
agreements, instruments and other documents:
(a) the Credit Agreement;
(b) the Notes being executed and delivered to the Lenders on the date
hereof (herein, the "Notes);
-----
(c) the Security Agreement;
(d) the Guarantee and Pledge Agreement; and
(e) the Management Fee Subordination Agreement executed and delivered
by Mediacom Management Corporation (the "Manager Entity").
--------------
-2-
The agreements, instruments and other documents referred to in the foregoing
lettered clauses are collectively referred to as the "Credit Documents"; the
----------------
Borrowers, the Parent Guarantors and the Manager Entity are herein collectively
referred to as the "Relevant Parties".
----------------
In our examination, we have assumed the authenticity of all documents
submitted to us as originals and the conformity with authentic original
documents of all documents submitted to us as copies. When relevant facts were
not independently established, we have relied upon representations made in or
pursuant to the Credit Documents.
In rendering the opinions expressed below, we have assumed, with respect to the
Credit Documents, that:
(i) the Credit Documents have been duly authorized by, have been duly
executed and delivered by, and (except to the extent set forth in
the opinions below as to the Relevant Parties) constitute legal,
valid, binding and enforceable obligations of, all of the parties
thereto;
(ii) all signatories to the Credit Documents have been duly
authorized; and
(iii) all of the parties to the Credit Documents are duly organized
and validly existing and have the power and authority (corporate,
limited liability company, partnership or other) to execute,
deliver and perform the Credit Documents.
In addition, we have assumed that:
(i) all Lenders party to the Existing Credit Agreement on the
Effective Date are party to the Credit Agreement; and
(ii) upon delivery of this legal opinion, all of the conditions
precedent set forth in Section 6.01 of the Credit Agreement to
the effectiveness of the Credit Agreement shall have been
satisfied.
Based upon and subject to the foregoing and subject also to the comments and
qualifications set forth below, and
-3-
having considered such questions of law as we have deemed necessary as a basis
for the opinions expressed below, we are of the opinion that:
1. Each of the Credit Documents constitutes the legal, valid and
binding obligation of each Relevant Party party thereto, enforceable
against such Relevant Party in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and except as the enforceability of the Credit
Documents is subject to the application of general principles of equity
(regardless of whether considered in a proceeding in equity or at law),
including, without limitation, (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy and (b)
concepts of materiality, reasonableness, good faith and fair dealing.
2. The Security Agreement and the Guarantee and Pledge Agreement
(collectively, the "Collateral Documents") are each effective to create, in
--------------------
favor of the Administrative Agent for the benefit of the Administrative
Agent and the Lenders, a valid security interest under the Uniform
Commercial Code as in effect in the State of New York (the "Uniform
-------
Commercial Code") in all of the right, title and interest of each Obligor
---------------
in, to and under the Collateral (as defined in each Collateral Document) as
collateral security for the payment of the Secured Obligations (as defined
in each Collateral Document) of such Obligor, except that (a) such security
interest will continue in Collateral after its sale, exchange or other
disposition only to the extent provided in Sections 9-306 and 9-307 of the
Uniform Commercial Code, (b) the security interest in Collateral in which
an Obligor acquires rights after the commencement of a case under the
Bankruptcy Code in respect of such Obligor may be limited by Section 552 of
the Bankruptcy Code, and (c) the creation of a security interest in any
Pledged Stock (as defined in the Security Agreement) or Pledged LLC
Interest (as defined in the Guarantee and Pledge Agreement) constituting a
"security" (as defined in Section 8-102(1)(c) of the Uniform Commercial
Code) requires the transfer of said Pledged Stock or Pledged LLC Interest,
as the case may be, to the Administrative Agent pursuant to Section 8-
313(1) of the Uniform Commercial Code, which transfer in the case
-4-
of a "certificated security" (as defined in Section 8-102(1)(a) of the
Uniform Commercial Code) may be effected in the manner contemplated by
paragraph 3 below.
3. The security interest referred to in paragraph 2 above in that
portion of the Collateral consisting of a certificated security (including
the Pledged Stock under and as defined in the Security Agreement) will,
upon the creation of such security interest, be perfected by the
Administrative Agent taking and thereafter retaining possession thereof (or
any certificates representing any such certificated security) in the State
of New York.
The foregoing opinions are subject to the following comments and
qualifications:
(A) The enforceability of Section 11.03 of the Credit Agreement
(and any similar provisions in any of the other Credit Documents) may be
limited by (i) laws rendering unenforceable indemnification contrary to
Federal or state securities laws and the public policy underlying such laws
and (ii) laws limiting the enforceability of provisions exculpating or
exempting a party, or requiring indemnification of a party for, liability
for its own action or inaction, to the extent the action or inaction
involves gross negligence, recklessness, willful misconduct or unlawful
conduct.
(B) The enforceability of provisions in the Credit Documents to the
effect that terms may not be waived or modified except in writing may be
limited under certain circumstances.
(C) Clause (iii) of the second sentence of Section 2.02 of the
Guarantee and Pledge Agreement may not be enforceable to the extent that
the Guaranteed Obligations under and as defined therein are materially
modified.
(D) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Lender is located (other than the State of New
York) that limit the interest, fees or other charges such Lender may
impose, (ii) Section 4.07(c) of the Credit Agreement and (iii) the second
sentence of Section 11.10 of the Credit Agreement (and any similar
provisions in any of the other Credit Documents),
-5-
insofar as such sentence relates to the subject matter jurisdiction of the
United States District Court for the Southern District of New York to
adjudicate any controversy related to any of the Credit Documents.
(E) We wish to point out that the obligations of the Obligors, and
the rights and remedies of the Administrative Agent and the Lenders, under
the Collateral Documents may be subject to possible limitations upon the
exercise of remedial or procedural provisions contained in the Collateral
Documents, provided that such limitations do not, in our opinion (but
subject to the other comments and qualifications set forth in this opinion
letter), make the remedies and procedures that will be afforded to the
Administrative Agent and the Lenders inadequate for the practical
realization of the substantive benefits purported to be provided to the
Administrative Agent and the Lenders by the Collateral Documents.
(F) With respect to our opinion in paragraphs 2 and 3 above, we
express no opinion as to the creation, perfection or priority of any
security interest in (or other lien on) any Collateral (as defined in each
Collateral Document) (i) to the extent that, pursuant to Section 9-104 of
the Uniform Commercial Code, Article 9 of the Uniform Commercial Code does
not apply thereto or (ii) consisting of uncertificated securities (as
defined in Section 8-102(b) of the Uniform Commercial Code).
(G) We wish to point out that the acquisition by an Obligor after the
initial Loan under the Credit Agreement of an interest in Property that
becomes subject to the Lien of any Collateral Document may constitute a
voidable preference under Section 547 of the Bankruptcy Code.
(H) We express no opinion as to the existence of, or the right, title
or interest of the Obligors in, to or under, any of the Collateral (as
defined in each Collateral Document).
(I) Except as expressly provided in paragraphs 2 and 3 above, we
express no opinion as to the creation, perfection or priority of any
security interest in, or other Lien on, the Collateral (as defined in each
Collateral Document).
-6-
The foregoing opinions are limited to matters involving the Federal laws of
the United States and the law of the State of New York, and we do not express
any opinion as to the laws of any other jurisdiction (nor do we express any
opinion as to the applicability to, or the effect upon, the transactions
contemplated by the Credit Documents of the Federal Communications Act of 1934,
as amended, the rules and regulations promulgated thereunder or the policies of
the FCC).
At the request of our client, this opinion letter is, pursuant to Section
6.01(d) of the Credit Agreement, provided to you by us in our capacity as
special New York counsel to Chase and may not be relied upon by any Person for
any purpose other than in connection with the transactions contemplated by the
Credit Agreement without, in each instance, our prior written consent.
Very truly yours,
EXHIBIT I
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Second Amended and Restated Credit Agreement dated as of June
24, 1997 (the "Credit Agreement"), between Mediacom California
----------------
LLC ("Mediacom California"), Mediacom Delaware LLC ("Mediacom
------------------- --------
Delaware"),Mediacom Arizona LLC ("Mediacom Arizona" and, together
-------- ----------------
with Mediacom California and Mediacom California, the
"Borrowers"), the lenders party thereto, The Chase Manhattan
---------
Bank, as Administrative Agent, and First Union National Bank, as
Documentation Agent.
Dear Ladies and Gentlemen:
As a Lender party to the Credit Agreement, we have agreed with the Borrowers
pursuant to Section 11.12 of the Credit Agreement to use reasonable precautions
to keep confidential, except as otherwise provided therein, all non-public
information identified by the Borrowers as being confidential at the time the
same is delivered to us pursuant to the Credit Agreement.
As provided in said Section 11.12, we are permitted to provide you, as a
prospective [holder of a participation in the Loans (as defined in the Credit
Agreement)] [assignee Lender], with certain of such non-public information
subject to the execution and delivery by you, prior to receiving such non-public
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf of
yourself and each of your affiliates, directors, officers, employees and
representatives and for the benefit of us and the Borrowers) that (A) such
information will
-2-
not be used by you except in connection with the proposed [participation]
[assignment] mentioned above and (B) you shall use reasonable precautions, in
accordance with your customary procedures for handling confidential information
and in accordance with safe and sound banking practices, to keep such
information confidential, provided that nothing herein shall limit the
--------
disclosure of any such information (i) after such information shall have become
public (other than through a violation of Section 11.12 of the Credit
Agreement), (ii) to the extent required by statute, rule, regulation or judicial
process, (iii) to your counsel or to counsel for any of the Lenders or the
Administrative Agent, (iv) to bank examiners (or any other regulatory authority
having jurisdiction over any Lender or the Administrative Agent), or to auditors
or accountants, (v) to the Administrative Agent or any other Lender (or to Chase
Securities Inc.), (vi) in connection with any litigation to which you or any one
or more of the Lenders or the Administrative Agent are a party, or in connection
with the enforcement of rights or remedies under the Credit Agreement or under
any other Loan Document, (vii) to a subsidiary or affiliate of yours as provided
in Section 11.12(a) of the Credit Agreement or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to you a Confidentiality Agreement substantially in the form hereof; provided,
--------
further, that in no event shall you be obligated to return any materials
- -------
furnished to you pursuant to this Confidentiality Agreement.
If you are a prospective assignee, your obligations under this Confidentiality
Agreement shall be superseded by Section 11.12 of the Credit Agreement on the
date upon which you become a Lender under the Credit Agreement pursuant to
Section 11.06(b) thereof.
-3-
Please indicate your agreement to the foregoing by signing as provided below
the enclosed copy of this Confidentiality Agreement and returning the same to
us.
Very truly yours,
[INSERT NAME OF LENDER]
By_________________________
The foregoing is agreed to
as of the date of this letter.
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By_________________________]
EXHIBIT J
[Form of Assignment and Acceptance]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Second Amended and Restated Credit Agreement, dated
as of June 24, 1997 (as modified and supplemented and in effect from time to
time, the "Credit Agreement"), between Mediacom California LLC, a Delaware
----------------
limited liability company, Mediacom Delaware LLC, a Delaware limited liability
company, Mediacom Arizona LLC, a Delaware limited liability company, the lenders
named therein, and The Chase Manhattan Bank, as administrative agent for such
lenders. Terms defined in the Credit Agreement are used herein as defined
therein.
____________________ (the "Assignor") and ____________________ (the "Assignee")
-------- --------
agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee without
recourse to the Assignor, and the Assignee hereby irrevocably purchases and
assumes from the Assignor without recourse to the Assignor, as of the Effective
Date as set forth in Schedule 1 hereto (the "Effective Date"), an interest (the
--------------
"Assigned Interest") in and to the Assignor's rights and obligations under the
-----------------
Credit Agreement with respect to those credit facilities contained in the Credit
Agreement as are set forth on Schedule 1 (individually, an "Assigned Facility";
-----------------
collectively, the "Assigned Facilities"), in a principal amount and percentage
-------------------
for each Assigned Facility as set forth on Schedule 1.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, any other Loan Document or
any other instrument or document furnished pursuant thereto, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement, any other Loan Document or any other instrument or document
furnished pursuant thereto, other than that it has not created any adverse claim
upon the interest being assigned by it hereunder and that such interest is free
and clear of any such adverse claim; (ii) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrowers, any of their Subsidiaries or any
-2-
other obligation or the performance or observance by the Borrowers, any of their
Subsidiaries or any other obligor of any of their respective obligations under
the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; and (iii) attaches the Note(s)
held by it evidencing the Assigned Facilities and requests that the
Administrative Agent exchange such Note(s) for a new Note or Notes payable to
the Assignor (if the Assignor has retained any interest in the Assigned
Facility) and a new Note or Notes payable to the Assignee in the respective
amounts which reflect the assignment being made hereby (and after giving effect
to any other assignments which have become effective on the Effective Date).
3. The Assignee (i) represents and warrants that it is legally authorized to
enter into this Assignment and Acceptance; (ii) confirms that it has received a
copy of the Credit Agreement, together with copies of the financial statements
referred to in Section 7.02 thereof, the financial statements delivered pursuant
to Section 8.01 thereof, if any, and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Acceptance; (iii) agrees that it will, independently
and without reliance upon the Assignor, the Administrative Agent or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto; (iv) appoints and
authorizes the Administrative Agent to take such action as administrative agent
on its behalf and to exercise such powers and discretion under the Credit
Agreement, the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto as are delegated to the Administrative
Agent by the terms thereof, together with such powers as are incidental thereto;
and (v) agrees that it will be bound by the provisions of the Credit Agreement
and will perform in accordance with its terms all the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Lender
including, if it is organized under the laws of a jurisdiction outside the
United States of America, its obligation pursuant to Section 5.06 of the Credit
Agreement to deliver the forms prescribed by the Internal Revenue Service of the
United States certifying as to the Assignee's exemption from United States
withholding taxes with respect to all payments to be made to the Assignee under
the Credit Agreement, or such other documents as are necessary to
-3-
indicate that all such payments are subject to such tax at a rate reduced by an
applicable tax treaty.
4. Upon delivery of this Assignment and Acceptance to the Administrative
Agent (and consent hereto by the Borrowers and the Administrative Agent to the
extent required pursuant to Section 11.06(b)), from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignee which accrue subsequent to the Effective Date.
5. From and after the Effective Date, (i) the Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement except as provided in Section 11.07 of the Credit Agreement.
6. This Assignment and Acceptance shall be governed by and construed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
Schedule 1 to
Assignment and Acceptance
relating to the Second Amended and
Restated Credit Agreement,
dated as of June 24, 1997,
between Mediacom California LLC ("Mediacom California"),
-------------------
Mediacom Delaware ("Mediacom Delaware"),
-----------------
Mediacom Arizona ("Mediacom Arizona" and, together with
----------------
Mediacom California and Mediacom Delaware, the "Borrowers"),
---------
the lenders named therein and
The Chase Manhattan Bank, as administrative agent
for the Lenders (in such capacity,
the "Administrative Agent")
--------------------
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Credit Principal Percentage
Facility Assigned Amount Assigned Assigned
----------------- --------------- --------
[ASSIGNEE] [ASSIGNOR]
By:___________________________ By:__________________________
Title: Title:
Consented to and Accepted:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By:__________________________
Title:
-2-
Consented to:
MEDIACOM CALIFORNIA LLC
By MEDIACOM LLC, a Member
By____________________________
Title:
MEDIACOM DELAWARE LLC
By MEDIACOM LLC, a Member
By____________________________
Title:
MEDIACOM ARIZONA LLC
By MEDIACOM LLC, a Member
By____________________________
Title:
EXHIBIT 10.6(a)
[EXECUTION COUNTERPART]
************************************************************
MEDIACOM SOUTHEAST LLC
_____________________________
CREDIT AGREEMENT
Dated as of January 23, 1998
______________________________
THE CHASE MANHATTAN BANK,
as Administrative Agent
************************************************************
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience of reference only.
Page
Section 1. Definitions and Accounting Matters.............. 1
1.01 Certain Defined Terms............................ 1
1.02 Accounting Terms and Determinations.............. 26
1.03 Classes and Types of Loans....................... 27
1.04 Subsidiaries..................................... 28
Section 2. Commitments, Loans and Prepayments.............. 28
2.01 Loans............................................ 28
2.02 Borrowings....................................... 30
2.03 Letters of Credit................................ 30
2.04 Changes of Commitments........................... 35
2.05 Commitment Fee................................... 37
2.06 Lending Offices.................................. 37
2.07 Several Obligations; Remedies Independent........ 37
2.08 Loan Accounts; Promissory Notes.................. 38
2.09 Optional Prepayments and Conversions or
Continuations of Loans............................ 38
2.10 Mandatory Prepayments and Reductions of
Commitments....................................... 39
Section 3. Payments of Principal and Interest.............. 43
3.01 Repayment of Loans............................... 43
3.02 Interest......................................... 44
3.03 Determination of Applicable Margin............... 45
Section 4. Payments; Pro Rata Treatment; Computations; Etc. 46
4.01 Payments......................................... 46
4.02 Pro Rata Treatment............................... 47
4.03 Computations..................................... 47
4.04 Minimum Amounts.................................. 48
4.05 Certain Notices.................................. 48
4.06 Non-Receipt of Funds by the Administrative Agent. 49
4.07 Sharing of Payments, Etc......................... 50
(i)
Page
----
Section 5. Yield Protection, Etc........................... 52
5.01 Additional Costs................................. 52
5.02 Limitation on Types of Loans..................... 54
5.03 Illegality....................................... 54
5.04 Treatment of Affected Loans...................... 54
5.05 Compensation..................................... 55
5.06 Additional Costs in Respect of Letters of Credit. 56
5.07 U.S. Taxes....................................... 56
5.08 Replacement of Lenders........................... 57
Section 6. Conditions Precedent............................ 58
6.01 Initial Extension of Credit...................... 58
6.02 Initial and Subsequent Extensions of Credit...... 61
Section 7. Representations and Warranties.................. 62
7.01 Corporate Existence.............................. 62
7.02 Financial Condition.............................. 62
7.03 Litigation....................................... 63
7.04 No Breach........................................ 63
7.05 Action........................................... 64
7.06 Approvals........................................ 64
7.07 ERISA............................................ 64
7.08 Taxes............................................ 65
7.09 Investment Company Act........................... 65
7.10 Public Utility Holding Company Act............... 65
7.11 Material Agreements and Liens.................... 65
7.12 Environmental Matters............................ 66
7.13 Capitalization................................... 66
7.14 Subsidiaries, Etc................................ 67
7.15 True and Complete Disclosure..................... 67
7.16 Franchises....................................... 68
7.17 The CATV Systems................................. 68
7.18 Rate Regulation.................................. 70
7.19 Acquisition Agreement............................ 71
Section 8. Covenants of the Borrower....................... 71
8.01 Financial Statements Etc......................... 71
8.02 Litigation....................................... 74
8.03 Existence, Etc................................... 75
8.04 Insurance........................................ 75
8.05 Prohibition of Fundamental Changes............... 76
8.06 Limitation on Liens.............................. 80
(ii)
Page
----
8.07 Indebtedness..................................... 81
8.08 Investments...................................... 81
8.09 Restricted Payments.............................. 82
8.10 Certain Financial Covenants...................... 84
8.11 Management Fees.................................. 86
8.12 Capital Expenditures............................. 87
8.13 Interest Rate Protection Agreements.............. 88
8.14 Affiliate Subordinated Indebtedness.............. 88
8.15 Lines of Business................................ 89
8.16 Transactions with Affiliates..................... 89
8.17 Use of Proceeds.................................. 90
8.18 Certain Obligations Respecting Subsidiaries...... 90
8.19 Modifications of Certain Documents............... 91
Section 9. Events of Default............................... 92
9.01 Events of Default................................ 92
9.02 Certain Cure Rights.............................. 96
Section 10. The Administrative Agent....................... 97
10.01 Appointment, Powers and Immunities.............. 97
10.02 Reliance by Administrative Agent................ 98
10.03 Defaults........................................ 99
10.04 Rights as a Lender.............................. 99
10.05 Indemnification................................. 99
10.06 Non-Reliance on Administrative Agent and Other
Lenders......................................... 100
10.07 Failure to Act.................................. 100
10.08 Resignation or Removal of Administrative Agent.. 100
10.09 Consents under Other Loan Documents............. 101
Section 11. Miscellaneous.................................. 101
11.01 Waiver.......................................... 101
11.02 Notices......................................... 102
11.03 Expenses, Etc................................... 102
11.04 Amendments, Etc................................. 103
11.05 Successors and Assigns.......................... 104
11.06 Assignments and Participations.................. 104
11.07 Survival........................................ 107
11.08 Captions........................................ 107
11.09 Counterparts.................................... 107
11.10 Governing Law; Submission to Jurisdiction....... 107
11.11 Waiver of Jury Trial............................ 108
11.12 Treatment of Certain Information;
Confidentiality................................. 108
(iii)
SCHEDULE I -- Commitments
SCHEDULE II -- Material Agreements and Liens
SCHEDULE III -- Investments
SCHEDULE IV -- Franchises
SCHEDULE V -- Certain Matters Related to CATV Systems
SCHEDULE VI -- Certain Adjustments to Operating Cash Flow and System
Cash Flow
SCHEDULE VII -- Regions
EXHIBIT A -- Form of Assignment and Acceptance
EXHIBIT B -- Form of Quarterly Officer's Report
EXHIBIT C -- Form of Security Agreement
EXHIBIT D -- Form of Guarantee and Pledge Agreement
EXHIBIT E -- Form of Subsidiary Guarantee Agreement
EXHIBIT F -- Form of Management Fee Subordination Agreement
EXHIBIT G -- Form of Opinion of Counsel to the Obligors
EXHIBIT H -- Form of Opinion of Special New York Counsel to Chase
EXHIBIT I -- Form of Confidentiality Agreement
EXHIBIT J -- Form of Affiliate Subordinated Indebtedness
Subordination Agreement
(iv)
CREDIT AGREEMENT dated as of January 23, 1998, between: MEDIACOM SOUTHEAST
LLC, a limited liability company duly organized and validly existing under the
laws of the State of Delaware (the "Borrower"); each of the lenders that is a
--------
signatory hereto identified under the caption "Lenders" on the signature pages
hereto and each lender that becomes a "Lender" after the date hereof pursuant to
Section 11.06(b) hereof (individually, a "Lender" and, collectively, the
------
"Lenders"); and THE CHASE MANHATTAN BANK, a New York banking corporation, as
- --------
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
--------------------
The Borrower has requested that the Lenders extend credit to it (by making
loans and issuing letters of credit) in an aggregate principal or face amount
not exceeding $225,000,000 (which may, in the circumstances herein provided, be
increased to $275,000,000) at any one time outstanding and the Lenders are
prepared to extend such credit upon the terms and conditions hereof.
Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms shall have
---------------------
the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
---- -----
"Acquisition Agreements" shall mean, collectively, the Cablevision Acquisition
----------------------
Agreement and any Subsequent Acquisition Agreements.
"Acquisitions" shall mean, collectively, the Cablevision Acquisition and any
------------
Subsequent Acquisitions.
"Adjusted Operating Cash Flow" shall mean, for any period during which the
----------------------------
Borrower shall have consummated an Acquisition, the sum, for the Borrower and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following, in each case determined under the
assumption that such Acquisition had been consummated on the first day of such
period: (i) Operating Cash Flow minus (ii) without duplication of the
-----
Management Fees actually paid during such period, the additional Management Fees
that would have been paid during such period at a rate equal to 4.5% of the
gross operating revenue of the Borrower and its Subsidiaries for such period
(determined, as specified above, under the assumption that such Acquisition had
been consummated on the first day of such period).
"Adjusted System Cash Flow" shall mean, for any period during which the
-------------------------
Borrower shall have consummated an Acquisition, the sum, for the Borrower and
its Subsidiaries
Credit Agreement
----------------
-2-
(determined on a consolidated basis without duplication in
accordance with GAAP), of the following, in each case determined under the
assumption that such Acquisition had been consummated on the first day of such
period: (i) System Cash Flow for such period plus (ii) the sum of (x) non-
----
recurring expenses incurred by the relevant sellers prior to the actual closing
of such Acquisition (to the extent such items were included as operating
expenses in the determination of System Cash Flow for such period) and (y) in
the case of the Cablevision Acquisition, the amounts set forth in Schedule VI
hereto for such period, or, in the case of any Subsequent Acquisition, the
amounts set forth in a statement of adjustments to System Cash Flow provided by
the Borrower in connection with such Subsequent Acquisition and acceptable to
the Admininistrative Agent and Majority Lenders (in each case representing
certain cost savings and programming cost increases in respect of the CATV
Systems being acquired in such Acquisition).
"Administrative Questionnaire" shall mean an Administrative Questionnaire in a
----------------------------
form supplied by the Administrative Agent.
"Affiliate" shall mean any Person that directly or indirectly controls, or is
---------
under common control with, or is controlled by, the Borrower and, if such Person
is an individual, any member of the immediate family (including parents, spouse,
children and siblings) of such individual and any trust whose principal
beneficiary is such individual or one or more members of such immediate family
and any Person who is controlled by any such member or trust. As used in this
definition, "control" (including, with its correlative meanings, "controlled by"
------- -------------
and "under common control with") shall mean possession, directly or indirectly,
-------------------------
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise), provided that, in any event, any Person that owns
--------
directly or indirectly securities having 5% or more of the voting power for the
election of directors or other governing body of a corporation or 5% or more of
the partnership or other ownership interests of any other Person (other than as
a limited partner of such other Person) will be deemed to control such
corporation or other Person. Notwithstanding the foregoing, (a) no individual
shall be an Affiliate solely by reason of his or her being a director, officer
or employee of the Borrower or any of its Subsidiaries and (b) none of the
Wholly Owned Subsidiaries of the Borrower shall be Affiliates.
"Affiliate Subordinated Indebtedness" shall mean Indebtedness to an Affiliate
-----------------------------------
(i) for which the Borrower is directly and primarily liable, (ii) in respect of
which none of its Subsidiaries is contingently or otherwise obligated, (iii)
that is subordinated to the obligations of the Borrower to pay principal of and
interest on the Loans, Reimbursement Obligations, fees and other amounts payable
hereunder pursuant to an Affiliate Subordinated Indebtedness Subordination
Agreement, (iv) that does not mature prior to June 30, 2007, and that is issued
pursuant to documentation containing terms (including interest, covenants and
events of default) in form and substance satisfactory to the Majority Lenders
and (v) that states by its terms that
Credit Agreement
----------------
-3-
principal and interest in respect thereof shall only be payable to the extent
permitted under Section 8.09 hereof.
"Affiliate Subordinated Indebtedness Subordination Agreement" shall mean an
-----------------------------------------------------------
Affiliate Subordinated Indebtedness Subordination Agreement substantially in the
form of Exhibit J hereto between any Person to whom the Borrower or any of its
Subsidiaries may be obligated to pay Affiliate Subordinated Indebtedness, the
Borrower and the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Applicable Lending Office" shall mean, for each Lender and for each Type of
-------------------------
Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender)
designated for such Type of Loan in the Administrative Questionnaire submitted
by such Lender or such other office of such Lender (or of an affiliate of such
Lender) as such Lender may from time to time specify to the Administrative Agent
and the Borrower as the office by which its Loans of such Type are to be made
and maintained.
"Applicable Margin" shall mean, with respect to Loans of any Type, the
-----------------
respective rates indicated below for Loans of such Type opposite the then-
current Rate Ratio (determined pursuant to Section 3.03 hereof) indicated below
(except that anything in this Agreement to the contrary notwithstanding, the
Applicable Margin with respect to any Loans shall be the highest rates provided
for below (i.e., 1.25% with respect to Base Rate Loans and 2.25% with respect to
Eurodollar Loans) during any period when an Event of Default shall have occurred
and be continuing):
Credit Agreement
----------------
-4-
Range Applicable Margin (% p.a.)
-------------------------
of
Rate Ratio Base Rate Loans Eurodollar Loans
---------- --------------- ----------------
Greater than 5.50 to 1 1.250% 2.250%
Greater than or equal to
5.00 to 1 but less than
or equal to 5.50 to 1 1.000% 2.000%
Greater than or equal to
4.50 to 1 but less than
5.00 to 1 0.750% 1.750%
Greater than or equal to
3.50 but less than
4.50 to 1 0.500% 1.500%
Less than 3.50 to 1 0.250% 1.250%
"Assignment and Acceptance" means an assignment and acceptance entered into by
-------------------------
a Lender and an assignee (with the consent of any party whose consent is
required by Section 11.05 hereof), and accepted by the Administrative Agent, in
the form of Exhibit A or any other form approved by the Administrative Agent.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as amended
---------------
from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the higher of
---------
(a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the Prime Rate
for such day. Each change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based upon the
---------------
Base Rate.
"Basic Documents" shall mean, collectively, this Agreement, the other Loan
---------------
Documents, the Acquisition Agreements and each Retained Franchise Management
Agreement.
"Basic Subscribers" shall mean, as at any date, (a) Subscribers who subscribe
-----------------
to a CATV System at the regular basic monthly subscription rate for such CATV
System to a single
Credit Agreement
----------------
-5-
household Subscriber (exclusive of "secondary outlets", as such term is commonly
understood in the cable television industry), plus (b) the number of Subscribers
----
determined by dividing the aggregate dollar monthly amount billed for basic
service to bulk Subscribers (hotels, motels, apartment buildings, hospitals and
the like) located in each Region by the weighted average of the regular basic
monthly subscription rates for basic service charged by the CATV Systems in such
Region.
"Basle Accord" shall mean the proposals for risk-based capital framework
------------
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as amended, modified and
supplemented and in effect from time to time or any replacement thereof.
"Business Day" shall mean any day (a) on which commercial banks are not
------------
authorized or required to close in New York City and (b) if such day relates to
a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by the Borrower with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, that is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Cablevision" means Cablevision Systems Corporation, a Delaware corporation.
-----------
"Cablevision Acquisition Agreement" shall mean the Asset Purchase Agreement
---------------------------------
dated as of August 29, 1997 by and among the Sellers, Cablevision and Mediacom,
as the same shall, subject to Section 8.19 hereof, be modified and supplemented
and in effect from time to time.
"Cablevision Acquisition" shall mean the acquisition by the Borrower (as the
-----------------------
assignee of Mediacom under the Cablevision Acquisition Agreement) of CATV
Systems from the Sellers, pursuant to the Cablevision Acquisition Agreement.
"Capital Expenditures" shall mean, for any period, expenditures made by the
--------------------
Borrower or any of its Subsidiaries to acquire or construct fixed assets, plant
and equipment (including renewals, improvements and replacements, but excluding
repairs and the Acquisitions) during such period computed in accordance with
GAAP.
"Capital Lease Obligations" shall mean, for any Person, all obligations of
-------------------------
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this
Credit Agreement
----------------
-6-
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Casualty Event" shall mean, with respect to any Property of any Person, any
--------------
loss of or damage to, or any condemnation or other taking of, such Property for
which such Person or any of its Subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.
"CATV System" shall mean any cable distribution system that receives broadcast
-----------
signals by antennae, microwave transmission, satellite transmission or any other
form of transmission and that amplifies such signals and distributes them to
Persons who pay to receive such signals, but shall exclude wireless cable.
"Chase" shall mean The Chase Manhattan Bank.
-----
"Class" shall have the meaning assigned to such term in Section 1.03 hereof.
-----
"Closing Date" shall mean the date on which the initial extension of credit
------------
hereunder is made.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral Account" shall have the meaning assigned to such term in the
------------------
Security Agreement.
"Commisso Entity" shall mean, collectively, (i) Rocco Commisso, (ii) any
---------------
entity controlled by Rocco Commisso and owned by Rocco Commisso, (iii) members
of the immediate family of Rocco Commisso or (iv) trusts established for the
benefit of Rocco Commisso or members of the immediate family of Rocco Commisso.
"Commitments" shall mean, collectively, the Revolving Credit Commitments, the
-----------
Term Loan Commitments and the Incremental Facility Commitments (if any).
"Continue", "Continuation" and "Continued" shall refer to the continuation
-------- ------------ ---------
pursuant to Section 2.09 hereof of a Eurodollar Loan from one Interest Period to
the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a conversion pursuant
------- ---------- ---------
to Section 2.09 hereof of one Type of Loans into another Type of Loans, which
may be
Credit Agreement
----------------
-7-
accompanied by the transfer by a Lender (at its sole discretion) of a
Loan from one Applicable Lending Office to another.
"Cure Monies" shall mean proceeds of Affiliate Subordinated Indebtedness
-----------
and/or equity contributions received by the Borrower after the date hereof that,
at the time the same are received by the Borrower are identified by the
Borrower, in a certificate of a Senior Officer delivered by the Borrower to the
Administrative Agent within one Business Day of such receipt, as constituting
"Cure Monies" for purposes of Section 9.02 hereof.
"Debt Issuance" shall mean any issuance or sale by the Borrower or any of its
-------------
Subsidiaries after the Closing Date of any debt securities, excluding, however,
any Indebtedness incurred pursuant to Section 8.07(c) or 8.07(e) hereof.
"Debt Service" shall mean, for any period, the sum, for the Borrower and its
------------
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) in the case of Revolving Credit
Loans under this Agreement, the aggregate amount of payments of principal of
such Loans that, giving effect to Commitment reductions or terminations
scheduled to be made during such period pursuant to Section 2.04(a) hereof, were
required to be made pursuant to Section 3.01(a) hereof during such period plus
----
(b) in the case of Term Loans and Incremental Facility Loans under this
Agreement and all other Indebtedness (other than Revolving Credit Loans), all
regularly scheduled payments or regularly scheduled prepayments of principal of
such Indebtedness (including, without limitation, the principal component of any
payments in respect of Capital Lease Obligations) made or payable during such
period (other than the principal component of any payments in respect of
Affiliate Subordinated Indebtedness) plus (c) all Interest Expense for such
----
period.
"Default" shall mean an Event of Default or an event that with notice or lapse
-------
of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other disposition
-----------
of any Property (whether now owned or hereafter acquired) by the Borrower or any
of its Subsidiaries to any other Person excluding any sale, assignment, transfer
or other disposition of any Property sold or disposed of in the ordinary course
of business and on ordinary business terms.
"Dollars" and "$" shall mean lawful money of the United States of America.
------- -
"ECC" means ECC Holding Corporation, a Delaware corporation.
---
"Environmental Claim" shall mean, with respect to any Person, any written or
-------------------
oral notice, claim, demand or other communication (collectively, a "claim") by
-----
any other Person alleging or asserting such Person's liability for investigatory
costs, cleanup costs, governmental
Credit Agreement
----------------
-8-
response costs, damages to natural resources or other Property, personal
injuries, fines or penalties arising out of, based on or resulting from (i) the
presence, or Release into the environment, of any Hazardous Material at any
location, whether or not owned by such Person, or (ii) circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law. The term
"Environmental Claim" shall include, without limitation, any claim by any
governmental authority for enforcement, cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable Environmental Law, and any
claim by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Laws" shall mean any and all present and future Federal, state,
------------------
local and foreign laws, rules or regulations, and any orders or decrees, in each
case as now or hereafter in effect, relating to the regulation or protection of
human health, safety or the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or toxic or hazardous
substances or wastes into the indoor or outdoor environment, including, without
limitation, ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or toxic or hazardous substances or wastes.
"Equity Issuance" shall mean, collectively, (a) any issuance or sale by the
---------------
Borrower after the Closing Date of (i) any of its ownership interests or of its
capital stock, (ii) any warrants or options exercisable in respect of its
capital stock or its ownership interests (other than any warrants or options
issued to directors, officers or employees of the Borrower pursuant to employee
benefit plans established in the ordinary course of business and any ownership
interests of the Borrower issued upon the exercise of such warrants or options)
or (iii) any other security or instrument representing an equity interest (or
the right to obtain any equity interest) in the Borrower or (b) the receipt by
the Borrower after the Closing Date of any equity capital contribution (whether
or not evidenced by any equity security issued by the recipient of such
contribution); provided that the issuance or sale by the Borrower of any equity
--------
interest to Mediacom, or the receipt by the Borrower of any equity capital
contribution from Mediacom, in connection with an Acquisition shall not
constitute an "Equity Issuance" hereunder.
"Equity Rights" shall mean, with respect to any Person, any subscriptions,
-------------
options, warrants, commitments, preemptive rights or agreements of any kind
(including, without limitation, any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or securities convertible
into, any additional shares of capital stock of any class or other ownership
interests of any type in, such Person.
Credit Agreement
----------------
-9-
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that is a
---------------
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which the Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which the
Borrower is a member.
"Eurodollar Base Rate" shall mean, with respect to any Eurodollar Loan for any
--------------------
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%), quoted by Chase at approximately 11:00 a.m. London
time (or as soon thereafter as practicable) on the date two Business Days prior
to the first day of such Interest Period for the offering by Chase to leading
banks in the London interbank market of Dollar deposits having a term comparable
to such Interest Period and in an amount comparable to the principal amount of
the Eurodollar Loan to be made by Chase for such Interest Period. If Chase is
not participating in any Eurodollar Loans during any Interest Period therefor,
the Eurodollar Base Rate for such Loans for such Interest Period shall be
determined by reference to the amount of such Loans that Chase would have made
or had outstanding had it been participating in such Loan during such Interest
Period.
"Eurodollar Loans" shall mean Loans that bear interest at rates based on rates
----------------
referred to in the definition of "Eurodollar Base Rate" in this Section 1.01.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest Period
---------------
therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) determined by the Administrative Agent to be equal to the Eurodollar Base
Rate for such Loan for such Interest Period divided by 1 minus the Reserve
Requirement (if any) for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in Section 9
----------------
hereof.
"Excess Cash Flow" shall mean, for any period, the excess of (a) Operating
----------------
Cash Flow for such period over (b) the sum of (i) Capital Expenditures made
during such period plus (ii) the aggregate amount of Debt Service for such
----
period plus (iii) the Tax Payment Amount for such period plus (iv) any decreases
---- ----
(or minus any increases) in Working Capital from the first day to the last day
-----
of such period.
Credit Agreement
----------------
-10-
"Executive Compensation" shall mean, for any period, the aggregate amount of
----------------------
compensation (including, without limitation, salaries, withholding taxes,
unemployment insurance contributions, pension, health and other benefits) of the
Manager's executive management personnel during such period. For purposes
hereof, "executive management personnel" shall not include any individual (such
as a system manager) who is employed solely in connection with the day-to-day
operations of a CATV System.
"FCC" shall mean the Federal Communications Commission or any governmental
---
authority substituted therefor.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
------------------
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided that (a) if the day for which such rate is to be determined is not
--------
a Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day and (b) if such rate is not so published for any
Business Day, the Federal Funds Rate for such Business Day shall be the average
rate charged to Chase on such Business Day on such transactions as determined by
the Administrative Agent.
"Franchise" shall mean a franchise, license, authorization or right by
---------
contract or otherwise to construct, own, operate, promote, extend and/or
otherwise exploit any CATV System operated or to be operated by the Borrower or
any of its Subsidiaries granted by any state, county, city, town, village or
other local or state government authority or by the FCC. The term "Franchise"
shall include each of the Franchises set forth on Schedule IV hereto.
"GAAP" shall mean generally accepted accounting principles applied on a basis
----
consistent with those that, in accordance with the last sentence of Section
1.02(a) hereof, are to be used in making the calculations for purposes of
determining compliance with this Agreement.
"Guarantee" shall mean a guarantee, an endorsement, a contingent agreement to
---------
purchase or to furnish funds for the payment or maintenance of, or otherwise to
be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) Property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor's
obligations or an agreement to assure a creditor against loss, and including,
without limitation, causing a bank or other financial institution to issue a
letter of credit or other similar instrument for the benefit of another Person,
Credit Agreement
----------------
-11-
but excluding endorsements for collection or deposit in the ordinary course of
business. The terms "Guarantee" and "Guaranteed" used as a verb shall have a
--------- ----------
correlative meaning.
"Guarantee and Pledge Agreement" shall mean a Guarantee and Pledge Agreement
------------------------------
substantially in the form of Exhibit D hereto between Mediacom and the
Administrative Agent, as the same shall be modified and supplemented and in
effect from time to time.
"Hazardous Material" shall mean, collectively, (a) any petroleum or petroleum
------------------
products, flammable materials, explosives, radioactive materials, asbestos, urea
formaldehyde foam insulation, and transformers or other equipment that contain
polychlorinated biphenyls ("PCB's"), (b) any chemicals or other materials or
-----
substances that are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Law and (c) any other chemical or other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"Incremental Facility Availability Period" shall mean the period from and
----------------------------------------
including the Closing Date to but excluding December 31, 1999 (or, if such date
is not a Business Day, to but excluding the immediately preceding Business Day).
"Incremental Facility Commitment" shall mean, for each Incremental Facility
-------------------------------
Lender, and for any Series thereof, the obligation of such Incremental Facility
Lender to make Incremental Facility Loans of such Series (as the same may be
reduced from time to time pursuant to Section 2.04 or 2.10 hereof or increased
or reduced from time to time pursuant to assignments permitted under Section
11.06(b) hereof). The amount of each Lender's Incremental Facility Commitment
of any Series shall be determined in accordance with the provisions of Section
2.01(d) hereof. The aggregate amount of the Incremental Facility Commitments of
all Series shall not exceed $50,000,000.
"Incremental Facility Lenders" shall mean, in respect of any Series of
----------------------------
Incremental Facility Loans, the Lenders from time to time holding Incremental
Facility Loans and Incremental Facility Commitments of such Series after giving
effect to any assignments thereof permitted by Section 11.06(b) hereof.
"Incremental Facility Loans" shall mean the loans provided for by Section
--------------------------
2.01(c) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Indebtedness" shall mean, for any Person: (a) obligations created, issued or
------------
incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt
Credit Agreement
----------------
-12-
securities or the sale of Property to another Person subject to an understanding
or agreement, contingent or otherwise, to repurchase such Property from such
Person), including, without limitation, Affiliate Subordinated Indebtedness; (b)
obligations of such Person to pay the deferred purchase or acquisition price of
Property or services, other than trade accounts payable (other than for borrowed
money) arising, and accrued expenses incurred, in the ordinary course of
business so long as such trade accounts payable are payable within 90 days of
the date the respective goods are delivered or the respective services are
rendered; (c) Indebtedness of others secured by a Lien on the Property of such
Person, whether or not the respective indebtedness so secured has been assumed
by such Person; (d) obligations of such Person in respect of letters of credit
or similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Lease Obligations of such
Person; and (f) Indebtedness of others Guaranteed by such Person; provided that
--------
Indebtedness shall exclude (i) obligations in respect of surety and performance
bonds backing pole rental or conduit attachments and the like, or backing
obligations under Franchises, arising in the ordinary course of business of the
CATV Systems and related telecommunications services of the Borrower and its
Subsidiaries and (ii) all obligations in respect of Interest Rate Protection
Agreements.
"Information Memorandum" shall mean the Confidential Information Memorandum
----------------------
dated December 4, 1997 prepared in connection with the syndication of the credit
facilities provided for in this Agreement.
"Interest Coverage Ratio" shall mean, as at any date, the ratio of (a)
-----------------------
Operating Cash Flow for the fiscal quarter ending on, or most recently ended
prior to, such date (which, for periods prior to the Closing Date, shall be
based upon the results of operations of Cablevision) to (b) Interest Expense for
such fiscal quarter.
Notwithstanding the foregoing, the Interest Coverage Ratio for any fiscal
quarter during which an Acquisition is consummated shall be deemed to be equal
to the ratio of Adjusted Operating Cash Flow for such fiscal quarter to Interest
Expense for such fiscal quarter.
"Interest Expense" shall mean, for any period, the sum, for the Borrower and
----------------
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all interest in respect of
Indebtedness (including, without limitation, the interest component of any
payments in respect of Capital Lease Obligations) accrued or capitalized during
such period (whether or not actually paid during such period) and all commitment
fees payable hereunder, but excluding all interest in respect of Affiliate
Subordinated Indebtedness (to the extent not paid in cash during such period),
plus (b) the net amount payable (or minus the net amount receivable) under
- ---- -----
Interest Rate Protection Agreements during such period (whether or not actually
paid or received during such period) plus (c) the aggregate amount of upfront or
----
one-time fees or expenses payable in respect of Interest Rate Protection
Agreements to the extent such fees or expenses are amortized during such period
plus
- ----
Credit Agreement
----------------
-13-
(d) the aggregate amount of payments permitted pursuant to Section 8.09(d)
hereof made by the Borrower with respect to issued and outstanding Preferred
Membership Interests.
Notwithstanding the foregoing, if during any period for which Interest Expense
is being determined the Borrower or any of its Subsidiaries shall have
consummated any acquisition of any CATV System or other business, or consummated
any Disposition, then, for all purposes of this Agreement, Interest Expense
shall be determined on a pro forma basis as if such acquisition or Disposition
had been made or consummated (and any related Indebtedness incurred or repaid)
on the first day of such period.
"Interest Period" shall mean, with respect to any Eurodollar Loan, each period
---------------
commencing on the date such Eurodollar Loan is made or Converted from a Base
Rate Loan or (in the event of a Continuation) the last day of the next preceding
Interest Period for such Loan and (subject to the provisions of Section 2.01(d)
hereof) ending on the numerically corresponding day in the first, second, third
or sixth calendar month thereafter, as the Borrower may select as provided in
Section 4.05 hereof, except that each Interest Period that commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing:
(i) if any Interest Period for any Revolving Credit Loan would
otherwise end after the Revolving Credit Commitment Termination Date, such
Interest Period shall end on the Revolving Credit Commitment Termination
Date;
(ii) no Interest Period for any Revolving Credit Loan may
commence before and end after any Revolving Credit Commitment Reduction
Date unless, after giving effect thereto, the aggregate principal amount of
Revolving Credit Loans having Interest Periods that end after such
Revolving Credit Commitment Reduction Date shall be equal to or less than
the aggregate principal amount of Revolving Credit Loans scheduled to be
outstanding after giving effect to the payments of principal required to be
made on such Revolving Credit Commitment Reduction Date;
(iii) no Interest Period for any Term Loan may commence before
and end after any Principal Payment Date unless, after giving effect
thereto, the aggregate principal amount of the Term Loans having Interest
Periods that end after such Principal Payment Date shall be equal to or
less than the aggregate principal amount of the Term Loans scheduled to be
outstanding after giving effect to the payments of principal required to be
made on such Principal Payment Date;
(iv) no Interest Period for any Incremental Facility Loan of any
Series may commence before and end after any Principal Payment Date unless,
after giving effect
Credit Agreement
----------------
-14-
thereto, the aggregate principal amount of the Incremental Facility Loans
of such Series having Interest Periods that end after such Principal
Payment Date shall be equal to or less than the aggregate principal amount
of the Incremental Facility Loans of such Series scheduled to be
outstanding after giving effect to the payments of principal required to be
made on such Principal Payment Date;
(v) each Interest Period that would otherwise end on a day that
is not a Business Day shall end on the next succeeding Business Day (or, if
such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and
(vi) notwithstanding clauses (i), (ii), (iii) and (iv) above, no
Interest Period shall have a duration of less than one month and, if the
Interest Period for any Eurodollar Loan would otherwise be a shorter
period, such Loan shall not be available hereunder for such period.
"Interest Rate Protection Agreement" shall mean, for any Person, an interest
----------------------------------
rate swap, cap or collar agreement or similar arrangement between such Person
and one or more financial institutions providing for the transfer or mitigation
of interest risks either generally or under specific contingencies. For
purposes hereof, the "credit exposure" at any time of any Person under an
---------------
Interest Rate Protection Agreement to which such Person is a party shall be
determined at such time in accordance with the standard methods of calculating
credit exposure under similar arrangements as prescribed from time to time by
the Administrative Agent, taking into account potential interest rate movements
and the respective termination provisions and notional principal amount and term
of such Interest Rate Protection Agreement.
"Investment" shall mean, for any Person: (a) the acquisition (whether for
----------
cash, Property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of any other Person or any agreement to make any such acquisition (including,
without limitation, any "short sale" or any sale of any securities at a time
when such securities are not owned by the Person entering into such sale); (b)
the making of any deposit with, or advance, loan or other extension of credit
to, any other Person (including the purchase of Property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such Property to such Person), but excluding any such advance, loan or extension
of credit having a term not exceeding 90 days arising in connection with the
sale of programming or advertising time by such Person in the ordinary course of
business; (c) the entering into of any Guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person
and (without duplication) any amount committed to be advanced, lent or extended
to such Person; or (d) the entering into of any Interest Rate Protection
Agreement.
Credit Agreement
----------------
-15-
"Issuing Lender" shall mean Chase, as the issuer of Letters of Credit under
--------------
Section 2.03 hereof, together with its successors and assigns in such capacity.
"Letter of Credit" shall have the meaning assigned to such term in Section
----------------
2.03 hereof.
"Letter of Credit Documents" shall mean, with respect to any Letter of Credit,
--------------------------
collectively, any application therefor and any other agreements, instruments,
guarantees or other documents (whether general in application or applicable only
to such Letter of Credit) governing or providing for (a) the rights and
obligations of the parties concerned or at risk with respect to such Letter of
Credit or (b) any collateral security for any of such obligations, each as the
same may be modified and supplemented and in effect from time to time.
"Letter of Credit Interest" shall mean, for each Revolving Credit Lender, such
-------------------------
Lender's participation interest (or, in the case of the Issuing Lender, the
Issuing Lender's retained interest) in the Issuing Lender's liability under
Letters of Credit and such Lender's rights and interests in Reimbursement
Obligations and fees, interest and other amounts payable in connection with
Letters of Credit and Reimbursement Obligations.
"Letter of Credit Liability" shall mean, without duplication, at any time and
--------------------------
in respect of any Letter of Credit, the sum of (a) the undrawn face amount of
such Letter of Credit plus (b) the aggregate unpaid principal amount of all
----
Reimbursement Obligations of the Borrower at such time due and payable in
respect of all drawings made under such Letter of Credit. For purposes of this
Agreement, a Revolving Credit Lender (other than the Issuing Lender) shall be
deemed to hold a Letter of Credit Liability in an amount equal to its
participation interest in the related Letter of Credit under Section 2.03
hereof, and the Issuing Lender shall be deemed to hold a Letter of Credit
Liability in an amount equal to its retained interest in the related Letter of
Credit after giving effect to the acquisition by the Revolving Credit Lenders
other than the Issuing Lender of their participation interests under said
Section 2.03.
"Lien" shall mean, with respect to any Property, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Loan Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"Loan Documents" shall mean, collectively, this Agreement, the Letter of
--------------
Credit Documents, the Security Documents and each Management Fee Subordination
Agreement.
Credit Agreement
----------------
-16-
"Loans" shall mean, collectively, the Revolving Credit Loans, the Term Loans
-----
and the Incremental Facility Loans.
"Majority Incremental Facility Lenders" shall mean, with respect to any Series
-------------------------------------
of Incremental Facility Loans, Incremental Facility Lenders holding at least
66-2/3% of the aggregate outstanding principal amount of the Incremental
Facility Loans of such Series or, if the Incremental Facility Loans shall not
have been made, at least 66-2/3% of the Incremental Facility Commitments of such
Series.
"Majority Lenders" shall mean, subject to the last paragraph of Section 11.04
----------------
hereof, Lenders having at least 66-2/3% of the sum of (a) the aggregate
outstanding principal amount of the Term Loans or, if the Term Loans shall not
have been made, the aggregate outstanding principal amount of the Term Loan
Commitments plus (b) the aggregate outstanding principal amount of the
----
Incremental Facility Loans or, if the Incremental Facility Loans shall not have
been made, the aggregate outstanding principal amount of the Incremental
Facility Commitments plus (c) the sum of (i) the aggregate unused amount, if
----
any, of the Revolving Credit Commitments at such time plus (ii) the aggregate
----
outstanding principal amount of the Revolving Credit Loans at such time.
"Majority Revolving Credit Lenders" shall mean Revolving Credit Lenders having
---------------------------------
at least 66-2/3% of the aggregate amount of the Revolving Credit Commitments or,
if the Revolving Credit Commitments shall have terminated, Revolving Credit
Lenders holding at least 66-2/3% of the sum of (a) the aggregate unpaid
principal amount of the Revolving Credit Loans plus (b) the aggregate amount of
----
all Letter of Credit Liabilities.
"Majority Term Loan Lenders" shall mean Term Loan Lenders holding at least
--------------------------
66-2/3% of the aggregate outstanding principal amount of the Term Loans or, if
the Term Loans shall not have been made, at least 66-2/3% of the Term Loan
Commitments.
"Management Agreement" shall mean the Management Agreement dated January 23,
--------------------
1998 among the Borrower and Mediacom Management Corporation, as the same shall,
subject to Section 8.19 hereof, be modified and supplemented and in effect from
time to time.
"Management Fee Subordination Agreement" shall mean a Management Fee
--------------------------------------
Subordination Agreement substantially in the form of Exhibit F hereto between
the Manager (or, as contemplated by Section 8.11 hereof, any other Person to
whom the Borrower or any of its Subsidiaries may be obligated to pay Management
Fees), the Borrower and the Administrative Agent, as the same shall be modified
and supplemented and in effect from time to time.
"Management Fees" shall mean, for any period, the sum of all fees, salaries
---------------
and other compensation (including, without limitation, all Executive
Compensation) paid or incurred
Credit Agreement
----------------
-17-
by the Borrower to Affiliates (other than Affiliates that are employees of the
Borrower and its Subsidiaries) in respect of services rendered in connection
with the management or supervision of the Borrower and its Subsidiaries,
provided that Management Fees shall exclude the aggregate amount of intercompany
- --------
shared expenses payable to Mediacom that are allocated by Mediacom to the
Borrower and its Subsidiaries in accordance with Section 5.05 of the Guarantee
and Pledge Agreement (other than the allocated amount of Executive Compensation,
which Executive Compensation shall in any event constitute management fees
hereunder).
"Manager" shall mean Mediacom Management Corporation, or any successor in such
-------
capacity as manager of the Borrower.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
-----------------------
Property, business, operations, financial condition, prospects, liabilities or
capitalization of the Borrower and its Subsidiaries taken as a whole, (b) the
ability of any Obligor to perform its obligations under any of the Loan
Documents to which it is a party, (c) the validity or enforceability of any of
the Loan Documents, (d) the rights and remedies of the Lenders and the
Administrative Agent under any of the Loan Documents or (e) the timely payment
of the principal of or interest on the Loans or the Reimbursement Obligations or
other amounts payable in connection therewith.
"Mediacom" shall mean Mediacom LLC, a New York limited liability company.
--------
"Mediacom Notes" shall mean the promissory notes executed and delivered by
--------------
Mediacom to Chase on or prior to the Closing Date evidencing loans by Chase to
Mediacom in the aggregate principal amount of $20,000,000, the proceeds of which
are to be contributed by Mediacom to the Borrower as consideration for Preferred
Membership Interests to be issued to Mediacom.
"Missouri L.P." means Missouri Cable Partners, L.P., a Delaware limited
-------------
partnership.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
------------------
Section 3(37) of ERISA to which contributions have been made by the Borrower or
any ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Available Proceeds" shall mean:
----------------------
(i) in the case of any Disposition, the amount of Net Cash
Payments received in connection with such Disposition;
Credit Agreement
----------------
-18-
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Borrower and its Subsidiaries in respect of such Casualty Event net
of (A) reasonable expenses incurred by the Borrower and its Subsidiaries in
connection therewith and (B) contractually required repayments of
Indebtedness to the extent secured by a Lien on such Property and any
income and transfer taxes payable by the Borrower or any of its
Subsidiaries in respect of such Casualty Event; and
(iii) in the case of any Equity Issuance or Debt Issuance, the
aggregate amount of all cash received by the Borrower or any of its
Subsidiaries in respect of such Equity Issuance or Debt Issuance, net of
reasonable expenses incurred by the Borrower and its Subsidiaries in
connection therewith.
"Net Cash Payments" shall mean, with respect to any Disposition, the aggregate
-----------------
amount of all cash payments, and the fair market value of any non-cash
consideration, received by the Borrower and its Subsidiaries directly or
indirectly in connection with such Disposition; provided that (a) Net Cash
--------
Payments shall be net of the amount of any legal, accounting, broker, title and
recording tax expenses, commissions, finders' fees and other fees and expenses
paid by the Borrower and its Subsidiaries in connection with such Disposition
and (b) Net Cash Payments shall be net of any repayments by the Borrower and its
Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is secured
by a Lien on the Property that is the subject of such Disposition and (ii) the
transferee of (or holder of a Lien on) such Property requires that such
Indebtedness be repaid as a condition to the purchase of such Property.
"Obligors" shall mean, collectively, the Borrower, Mediacom and, effective
--------
upon execution and delivery of any Subsidiary Guarantee Agreement, each
Subsidiary of the Borrower so executing and delivering such Subsidiary Guarantee
Agreement.
"Operating Agreement" shall mean the Operating Agreement of the Borrower dated
-------------------
as of January 23, 1998, as the same shall, subject to Section 8.19 hereof, be
modified and supplemented and in effect from time to time.
"Operating Cash Flow" shall mean, for any period, the sum, for the Borrower
-------------------
and its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) System Cash Flow minus (b)
-----
Management Fees paid during such period to the extent not exceeding 4.5% of the
gross operating revenue of the Borrower and its Subsidiaries for such period.
"Pay TV Units" shall mean the aggregate number of premium or pay television
------------
services to which Subscribers subscribe.
Credit Agreement
----------------
-19-
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall mean: (a) direct obligations of the United
---------------------
States of America, or of any agency thereof, or obligations guaranteed as to
principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than 90 days from the date of
acquisition thereof; (b) certificates of deposit issued by any bank or trust
company organized under the laws of the United States of America or any state
thereof and having capital, surplus and undivided profits of at least
$500,000,000, maturing not more than 90 days from the date of acquisition
thereof; and (c) commercial paper rated A-1 or better or P-1 by Standard &
Poor's Ratings Services, a division of McGraw-Hill Companies, Inc., or Moody's
Investors Services, Inc., respectively, maturing not more than 90 days from the
date of acquisition thereof; in each case so long as the same (x) provide for
the payment of principal and interest (and not principal alone or interest
alone) and (y) are not subject to any contingency regarding the payment of
principal or interest.
"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or maintained
----
by the Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA,
other than a Multiemployer Plan.
"Post-Default Rate" shall mean a rate per annum equal to 2% plus the Base Rate
----------------- ----
as in effect from time to time plus the Applicable Margin for Base Rate Loans,
----
provided that, with respect to principal of a Eurodollar Loan that shall become
- --------
due (whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise) on a day other than the last day of the Interest Period
therefor, the "Post-Default Rate" shall be, for the period from and including
such due date to but excluding the last day of such Interest Period, 2% plus the
----
interest rate for such Loan as provided in Section 3.02(b) hereof and,
thereafter, the rate provided for above in this definition.
"Preferred Membership Interests" shall mean the equity rights provided for in
------------------------------
Section 6.2 of the Operating Agreement.
"Prime Rate" shall mean the rate of interest from time to time announced by
----------
Chase at the its principal office in New York City as its prime commercial
lending rate.
"Principal Payment Dates" shall mean (a) in the case of the Term Loans, the
-----------------------
last Business Day of March, June, September and December of each year,
commencing with March
Credit Agreement
----------------
-20-
31, 2001, through and including June 30, 2006 and (b) in the case of Incremental
Facility Loans of any Series, such dates as shall have been agreed upon between
the Borrower and the respective Incremental Facility Lenders of such Series
pursuant to Section 2.10(c) hereof at the time such Lenders become obligated to
make such Incremental Facility Loans hereunder.
"Pro Forma Debt Service Coverage Ratio" shall mean, as at any date, the ratio
-------------------------------------
of (a) the product of (x) Operating Cash Flow for the fiscal quarter ending on,
or most recently ended prior to, such date (which, for periods prior to the
Closing Date, shall be based upon the results of operations of U.S. Cable) times
-----
(y) four to (b) Debt Service (other than payments in respect of Affiliate
Subordinated Indebtedness and Preferred Membership Interests) for the period of
four consecutive fiscal quarters immediately following the last day of the most
recently ended fiscal quarter, determined under the assumptions that (1) the
rate of interest applicable to Indebtedness of the Borrower and its Subsidiaries
(other than Affiliate Subordinated Indebtedness) during such period will not
change from the weighted average rate of interest in effect on such last day and
(2) all regularly scheduled payments or regularly scheduled prepayments of
principal of such Indebtedness required to made during such period will be made
when due (including, without limitation, the principal component of any payments
in respect of Capital Lease Obligations).
Notwithstanding the foregoing, the Pro Forma Debt Service Coverage Ratio for
any fiscal quarter during which an Acquisition is consummated shall be deemed to
be equal to the ratio of (a) the product of (x) Adjusted Operating Cash Flow for
such fiscal quarter times (y) four to (b) Debt Service (other than payments in
-----
respect of Affiliate Subordinated Indebtedness and Preferred Membership
Interests) for the period of four consecutive fiscal quarters immediately
following the last day of such fiscal quarter, determined on the assumptions set
forth above.
"Property" shall mean any right or interest in or to property of any kind
--------
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Purchase Price" shall mean, without duplication, with respect to any
--------------
Subsequent Acquisition, an amount equal to the sum of (i) the aggregate
consideration, whether cash, Property or securities (including, without
limitation, any Indebtedness incurred pursuant to paragraph (e) of Section 8.07
hereof), paid or delivered by the Borrower and its Subsidiaries in connection
with such acquisition plus (ii) the aggregate amount of liabilities of the
----
acquired business (net of current assets of the acquired business) that would be
reflected on a balance sheet (if such were to be prepared) of the Borrower and
its Subsidiaries after giving effect to such acquisition.
"Quarterly Dates" shall mean the twentieth day of January, April, July and
---------------
October in each year, the first of which shall be the first such day after the
date of this
Credit Agreement
----------------
-21-
Agreement; provided that if any such day is not a Business Day, then such
Quarterly Date shall be the next succeeding Business Day.
"Quarterly Officer's Report" shall mean a quarterly report of a Senior Officer
--------------------------
with respect to Basic Subscribers, homes passed, revenues per Subscriber and Pay
TV Units, substantially in the form of Exhibit B hereto.
"Quarterly Payment Period" shall mean each successive three-month period from
------------------------
and including a Quarterly Date (or, in the case of the initial Quarterly Payment
Period, from and including the Closing Date) to but not including the next
following Quarterly Date.
"Rate Ratio" shall mean, for any Quarterly Payment Period, the daily average
----------
of the Total Leverage Ratio during the fiscal quarter ending on, or most
recently ended prior to, the first day of such Quarterly Payment Period,
provided that (a) the Rate Ratio on the Closing Date shall be the Total Leverage
- --------
Ratio on such date (after giving effect to the transactions contemplated
hereunder to occur on or prior to the Closing Date) and (b) for purposes of
determining the Rate Ratio for the period from and after the Closing Date until
such time as one complete fiscal quarter shall have elapsed subsequent to the
Closing Date, the daily average of the Total Leverage Ratio shall be determined
only for the portion of such fiscal quarter commencing on the Closing Date.
"Rate Ratio Certificate" shall mean, for any Quarterly Payment Period, a
----------------------
certificate of a Senior Officer setting forth, in reasonable detail, the
calculation (and the basis for such calculation) of the Rate Ratio for use in
determining the Applicable Margin hereunder during such Quarterly Payment
Period.
"Region" shall mean each geographic region into which the CATV Systems of the
------
Borrower and its Subsidiaries are divided for operating and management purposes.
The Regions of the Borrower and its Subsidiaries as of the Closing Date (after
giving effect to the Cablevision Acquisition) will be the Regions identified on
Schedule VII hereto.
"Register" shall have the meaning assigned to such term in Section 11.06(g)
--------
hereof.
"Regulations A, D, G, T, U and X" shall mean, respectively, Regulations A, D,
-------------------------------
G, T, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"Regulatory Change" shall mean, with respect to any Lender, any change after
-----------------
the date hereof in Federal, state or foreign law or regulations (including,
without limitation, Regulation D) or the adoption or making after such date of
any interpretation, directive or request
Credit Agreement
----------------
-22-
applying to a class of banks including such Lender of or under any Federal,
state or foreign law or regulations (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"Reimbursement Obligations" shall mean, at any time, the obligations of the
-------------------------
Borrower then outstanding, or that may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Lender in respect of any drawings under a Letter of Credit.
"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Reserve Requirement" shall mean, for any Interest Period for any Eurodollar
-------------------
Loan, the average maximum rate at which reserves (including, without limitation,
any marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion Dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loans.
"Reserved Commitment Amount" shall have the meaning assigned to such term in
--------------------------
Section 2.01(a) hereof.
"Restricted Payment" shall mean, collectively, (a) all distributions of the
------------------
Borrower (in cash, Property or obligations) on, or other payments or
distributions on account of, or the setting apart of money for a sinking or
other analogous fund for, or the purchase, redemption, retirement or other
acquisition of, any portion of any ownership interest in the Borrower or of any
warrants, options or other rights to acquire any such ownership interest (or to
make any payments to any Person, such as "phantom stock" payments, where the
amount thereof is calculated with reference to fair market or equity value of
the Borrower or any of its Subsidiaries), (b) any payments made by the Borrower
to any holders of any equity interests in the Borrower that are designed to
reimburse such holders for the payment of any taxes attributable to the
operations of the Borrower and its Subsidiaries, (c) any payments of principal
Credit Agreement
----------------
-23-
of or interest on Affiliate Subordinated Indebtedness and (d) any payments in
respect of Management Fees.
"Retained Franchises" shall mean Franchises intended to be acquired in
-------------------
connection with the Cablevision Acquisition but which have not yet been acquired
for one of the reasons specified in Section 7.07 of the Cablevision Acquisition
Agreement and, accordingly, are to be managed by the Borrower pending resolution
of the matters preventing such acquisition as contemplated by Section 9.06 of
the Cablevision Acquisition Agreement.
"Retained Franchise Management Agreement" shall mean a Management Agreement
---------------------------------------
entered into by the Borrower and the applicable Seller pursuant to Section 9.06
of the Cablevision Acquisition Agreement regarding management services to be
provided by the Borrower to the Seller with respect to Retained Franchises.
"Revolving Credit Commitment" shall mean, as to each Revolving Credit Lender,
---------------------------
the obligation of such Lender to make Revolving Credit Loans, and to issue or
participate in Letters of Credit pursuant to Section 2.03 hereof, in an
aggregate principal or face amount at any one time outstanding up to but not
exceeding the amount set forth opposite the name of such Lender on Schedule I
hereto (as the same may be reduced from time to time pursuant to Section 2.04 or
2.10 hereof or increased or reduced from time to time pursuant to assignments
permitted under Section 11.06(b) hereof). The original aggregate principal
amount of the Revolving Credit Commitments is $140,000,000.
"Revolving Credit Commitment Percentage" shall mean, with respect to any
--------------------------------------
Revolving Credit Lender, the ratio of (a) the amount of the Revolving Credit
Commitment of such Lender to (b) the aggregate amount of the Revolving Credit
Commitments of all of the Lenders.
"Revolving Credit Commitment Reduction Dates" shall mean the last Business Day
-------------------------------------------
of March, June, September and December in each year, commencing with March 31,
2001, through and including June 30, 2006.
"Revolving Credit Commitment Termination Date" shall mean the Revolving Credit
--------------------------------------------
Commitment Reduction Date falling on or nearest to June 30, 2006.
"Revolving Credit Lenders" shall mean (a) on the date hereof, the Lenders
------------------------
having Revolving Credit Commitments on Schedule I hereto and (b) thereafter, the
Lenders from time to time holding Revolving Credit Loans and Revolving Credit
Commitments after giving effect to any assignments thereof permitted by Section
11.06(b) hereof.
Credit Agreement
----------------
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"Revolving Credit Loans" shall mean the loans provided for in Section 2.01(a)
----------------------
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Security Agreement" shall mean a Security Agreement substantially in the form
------------------
of Exhibit C hereto between the Borrower, each of the additional parties, if
any, that becomes a "Securing Party" thereunder, and the Administrative Agent,
as the same shall be modified and supplemented and in effect from time to time.
"Security Documents" shall mean, collectively, the Security Agreement, the
------------------
Guarantee and Pledge Agreement and the Subsidiary Guarantee Agreements, and all
Uniform Commercial Code financing statements required by the Security Agreement,
the Guarantee and Pledge Agreement and the Subsidiary Guarantee Agreements, to
be filed with respect to the security interests created pursuant to the Security
Agreement, the Guarantee and Pledge Agreement and the Subsidiary Guarantee
Agreements.
"Sellers" means, collectively, U.S. Cable, ECC and Missouri L.P.
-------
"Senior Officer" shall mean the chairman, chief executive officer or chief
--------------
financial officer of the Manager, acting for and on behalf of the Borrower.
"Senior Notes" shall mean, collectively, senior notes in an aggregate
------------
principal amount up to $150,000,000 to be issued by Mediacom after the Closing
Date, including any any notes issued by Mediacom in exchange for such senior
notes.
"Series" has the meaning set forth in Section 2.01(c).
------
"Subscriber" shall mean a Person who subscribes to one or more of the cable
----------
television services of the Borrower and its Subsidiaries and includes both Basic
Subscribers and Persons who subscribe to Pay TV Units, but excluding each such
Person who is pending disconnection for any reason or is delinquent in payment
for such services for more than 60 days or who has not paid in full without
discount at least one monthly bill generated in the ordinary course of business.
"Subsequent Acquisition Agreements" shall mean each agreement pursuant to
---------------------------------
which a Subsequent Acquisition shall be consummated, as the same shall, subject
to Section 8.19 hereof, be modified and supplemented and in effect from time to
time.
"Subsequent Acquisitions" shall mean any acquisition permitted under
-----------------------
8.05(d)(v) hereof.
Credit Agreement
----------------
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"Subsidiary" shall mean, with respect to any Person, any corporation,
----------
partnership, limited liability company or other entity of which at least a
majority of the securities or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions of such corporation, partnership,
limited liability company or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership, limited liability company or other entity shall
have or might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly owned or controlled by such Person or one
or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person.
"Subsidiary Guarantee Agreement" shall mean a Subsidiary Guarantee Agreement
------------------------------
substantially in the form of Exhibit E hereto by a Subsidiary of the Borrower in
favor of the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Subsidiary Guarantor" shall mean any Subsidiary of the Borrower that executes
--------------------
and delivers a Subsidiary Guarantee Agreement.
"Supplemental Capital" shall mean advances made by an Affiliate to the
--------------------
Borrower constituting Affiliate Subordinated Indebtedness (excluding any Cure
Monies).
"System Cash Flow" shall mean, for any period, the sum, for the Borrower and
----------------
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) gross operating revenues for such
period minus (b) all operating expenses for such period, including, without
-----
limitation, technical, programming and selling, general and administrative
expenses, but excluding (to the extent included in operating expenses) income
taxes, Management Fees, depreciation, amortization and interest expense
(including, without limitation, all items included in Interest Expense),
provided that gross operating revenues and operating expenses for any period
- --------
shall exclude all extraordinary and unusual items and all non-cash items, plus
----
(c) all payments received by the Borrower during such period pursuant to any
Retained Franchise Management Agreement plus (d) all Capital Expenditures made
----
by the Sellers in respect of Retained Franchises during such period.
Notwithstanding the foregoing, if during any period for which System Cash Flow
is being determined the Borrower or any of its Subsidiaries shall have
consummated any acquisition of any CATV System or other business, or consummated
any Disposition, then, for all purposes of this Agreement (other than for
purposes of the definition of Excess Cash Flow), System Cash Flow shall be
determined on a pro forma basis as if such acquisition or Disposition had been
made or consummated on the first day of such period.
Credit Agreement
----------------
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"Tax Payment Amount" shall mean, for any period, an amount not exceeding in
------------------
the aggregate the amount of Federal, state and local income taxes the Borrower
would otherwise have paid in the event it were a corporation (other than an "S
corporation" within the meaning of Section 1361 of the Code) for such period and
all prior periods.
"Term Loan Commitment" shall mean, as to each Term Loan Lender, the obligation
--------------------
of such Lender to make one or more Term Loans in an aggregate principal amount
equal to the amount set opposite the name of such Lender on Schedule I hereto.
The original aggregate principal amount of the Term Loan Commitments is
$85,000,000.
"Term Loan Commitment Termination Date" shall mean January 31, 1998 (or, if
-------------------------------------
such date is not a Business Day, the immediately preceding Business Day).
"Term Loan Lenders" shall mean (a) on the date hereof, the Lenders having Term
-----------------
Loan Commitments on Schedule I hereto and (b) thereafter, the Lenders from time
to time holding Term Loans and Term Commitments after giving effect to any
assignments thereof permitted by Section 11.06(b) hereof.
"Term Loans" shall mean the loans provided for by Section 2.01(b) hereof,
----------
which may be Base Rate Loans and/or Eurodollar Loans.
"Total Leverage Ratio" shall mean, as at any date, the ratio of (a) the
--------------------
aggregate amount of all Indebtedness of the Borrower and its Subsidiaries
(including, without limitation, Capital Lease Obligations, but excluding
Affiliate Subordinated Indebtedness) as at such date to (b) the product of (x)
System Cash Flow for the fiscal quarter ending on, or most recently ended prior
to, such date times (y) four.
-----
Notwithstanding the foregoing, the Total Leverage Ratio for any fiscal quarter
during which an Acquisition is consummated shall be deemed to be equal to the
ratio of (a) the aggregate amount of all Indebtedness of the Borrower and its
Subsidiaries (including, without limitation, Capital Lease Obligations, but
excluding Affiliate Subordinated Indebtedness) as at the relevant date to (b)
the product of Adjusted System Cash Flow for such fiscal quarter times four.
-----
"Type" shall have the meaning assigned to such term in Section 1.03 hereof.
----
"U.S. Cable" shall mean U.S. Cable Television Group, L.P., a Delaware limited
----------
partnership.
"U.S. Person" shall mean a citizen or resident of the United States of
-----------
America, a corporation, partnership, limited liability company or other entity
created or organized in or
Credit Agreement
----------------
-27-
under any laws of the United States of America or any State thereof, or any
estate or trust that is subject to Federal income taxation regardless of the
source of its income.
"U.S. Taxes" shall mean any present or future tax, assessment or other charge
----------
or levy imposed by or on behalf of the United States of America or any taxing
authority thereof.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any
-----------------------
corporation, partnership, limited liability company or other entity of which all
of the equity securities or other ownership interests (other than, in the case
of a corporation, directors' qualifying shares) are directly or indirectly owned
or controlled by such Person or one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
"Working Capital" shall mean, as at such date, for the Borrower and its
---------------
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) (a) current assets (excluding cash and cash equivalents)
minus (b) current liabilities (excluding the current portion of long term debt
- -----
and of any installments of principal payable hereunder).
1.02 Accounting Terms and Determinations.
-----------------------------------
(a) Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall (unless otherwise disclosed to the Lenders in writing at the
time of delivery thereof in the manner described in paragraph (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Lenders hereunder (which, prior to the delivery of
the first financial statements under Section 8.01 hereof, shall mean the audited
financial statements as at December 31, 1996 referred to in Section 7.02
hereof). All calculations made for the purposes of determining compliance with
this Agreement shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest annual or quarterly
financial statements furnished to the Lenders pursuant to Section 8.01 hereof
(or, prior to the delivery of the first financial statements under Section 8.01
hereof, used in the preparation of the audited financial statements as at
December 31, 1996 referred to in Section 7.02 hereof) unless
(i) the Borrower shall have objected to determining such
compliance on such basis at the time of delivery of such financial
statements or
(ii) the Majority Lenders shall so object in writing within 30
days after delivery of such financial statements,
Credit Agreement
----------------
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in either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 8.01 hereof,
shall mean the unaudited financial statements referred to in Section 7.02(i)
hereof).
(b) The Borrower shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
paragraph (a) above and (ii) reasonable estimates of the difference between such
statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance with the
covenants set forth in Section 8 hereof, the Borrower will not change the last
day of its fiscal year from December 31, or the last days of the first three
fiscal quarters in each of its fiscal years from March 31, June 30 and September
30 of each year, respectively.
1.03 Classes and Types of Loans. Loans hereunder are distinguished by
--------------------------
"Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a Loan)
refers to whether such Loan is a Revolving Credit Loan, a Term Loan or an
Incremental Facility Loan, each of which constitutes a Class. The "Type" of a
Loan refers to whether such Loan is a Base Rate Loan or a Eurodollar Loan, each
of which constitutes a Type. Loans may be identified by both Class and Type.
Incremental Facility Loans and Incremental Facility Commitments shall be
classified by Series, each of which shall be considered a separate Class.
1.04 Subsidiaries. The Borrower has no Subsidiaries on the date hereof;
------------
reference in this Agreement to Subsidiaries of the Borrower shall be deemed
inapplicable until such time as the Majority Lenders shall consent to the
creation of such Subsidiaries or such Subsidiaries shall in fact come into
existence in accordance with the terms hereof.
Section 2. Commitments, Loans and Prepayments.
2.01 Loans.
-----
(a) Revolving Credit Loans. Each Revolving Credit Lender severally agrees,
----------------------
on the terms and conditions of this Agreement, to make loans to the Borrower in
Dollars during the
Credit Agreement
----------------
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period from and including the Closing Date to but not including the Revolving
Credit Commitment Termination Date in an aggregate principal amount at any one
time outstanding up to but not exceeding the amount of the Revolving Credit
Commitment of such Lender as in effect from time to time, provided that (i) in
--------
no event shall the aggregate principal amount of all Revolving Credit Loans,
together with the aggregate amount of all Letter of Credit Liabilities, exceed
the aggregate amount of the Revolving Credit Commitments as in effect from time
to time and (ii) after giving effect to the making of the initial Revolving
Credit Loans, and the issuance of the initial Letters of Credit, on the Closing
Date there shall be an aggregate of at least $10,000,000 of unutilized Revolving
Credit Commitments. Subject to the terms and conditions of this Agreement,
during such period the Borrower may borrow, repay and reborrow the amount of the
Revolving Credit Commitments by means of Base Rate Loans and Eurodollar Loans
and may Convert Revolving Credit Loans of one Type into Revolving Credit Loans
of another Type (as provided in Section 2.09 hereof) or Continue Revolving
Credit Loans of one Type as Revolving Credit Loans of the same Type (as provided
in Section 2.09 hereof). Anything herein to the contrary notwithstanding,
Revolving Credit Loans shall not be available hereunder unless the Term Loans
(in an aggregate principal amount equal to $85,000,000) are made on the Closing
Date.
Proceeds of Revolving Credit Loans shall be available for any use permitted
under Section 8.17 hereof, provided that, in the event that as contemplated by
--------
Section 2.10(d) hereof, the Borrower shall prepay Revolving Credit Loans from
the proceeds of a Disposition hereunder, then an amount of Revolving Credit
Commitments equal to the amount of such prepayment (herein the "Reserved
--------
Commitment Amount") shall be reserved and shall not be available for borrowings
- -----------------
hereunder except and to the extent that the proceeds of such borrowings are to
be applied to make Subsequent Acquisitions permitted under Section 8.05 hereof
or to make prepayments of Loans under Section 2.10(d) hereof. The Borrower
agrees, upon the occasion of any borrowing of Revolving Credit Loans hereunder
that is to constitute a utilization of any Reserved Commitment Amount, to advise
the Administrative Agent in writing of such fact at the time of such borrowing,
identifying the amount of such borrowing that is to constitute such utilization,
the Subsequent Acquisition in respect of which the proceeds of such borrowing
are to be applied and the reduced Reserved Commitment Amount to be in effect
after giving effect to such borrowing.
(b) Term Loans. Each Term Lender severally agrees, on the terms and
----------
conditions of this Agreement, to make term loans to the Borrower in Dollars on
the Closing Date (provided that the same shall occur no later than the Term Loan
Commitment Termination Date) in an aggregate principal amount equal to the
amount of the Term Loan Commitment of such Lender. Subject to the terms and
conditions of this Agreement, on the Closing Date the Borrower may borrow the
Term Loan Commitments by means of Base Rate Loans and Eurodollar Loans, and
thereafter the Borrower may Convert Term Loans of one Type into Term Loans of
another Type
Credit Agreement
----------------
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(as provided in Section 2.09 hereof) or Continue Term Loans of one Type as Term
Loans of the same Type (as provided in Section 2.09 hereof).
Proceeds of Term Loans hereunder shall be available for any use permitted under
Section 8.17 hereof.
(c) Incremental Facility Loans. In addition to borrowings of Term Loans and
--------------------------
Revolving Credit Loans provided above, at any time during the Incremental
Facility Availability Period the Borrower may from time to time request
that the Lenders offer to enter into commitments to make additional term
loans to the Borrower hereunder, which commitment of any Lender shall not
be less than $10,000,000 and not greater than $50,000,000. In the event
that one or more of the Lenders offer, in their sole discretion, to enter
into such commitments, and such Lenders and the Borrower agree pursuant to
an instrument in writing (the form and substance of which shall be
satisfactory, and a copy of which shall be delivered, to the Administrative
Agent and the Lenders making such Loans) as to the amount of such
commitments that shall be allocated to the respective Lenders making such
offers, the fees (if any) to be payable by the Borrower in connection
therewith and the amortization to be applicable thereto, such Lenders shall
become obligated to make Incremental Facility Loans under this Agreement in
an amount equal to the amount of their respective Incremental Facility
Commitments. The Incremental Facility Loans to be made pursuant to any
such agreement between the Borrower and one or more Lenders in response to
any such request by the Borrower shall be deemed to be a separate "Series"
------
of Incremental Facility Loans for all purposes of this Agreement. Anything
herein to the contrary notwithstanding, (i) the minimum aggregate principal
amount of Incremental Facility Commitments entered into pursuant to any
such request (and, accordingly, the minimum aggregate principal amount of
any Series of Incremental Facility Loans) shall be $10,000,000, (ii) the
aggregate principal amount of all Commitments and Incremental Facility
Loans shall not exceed $50,000,000 and (iii) in no event shall the final
maturity date for the Incremental Facility Loans of any Series be earlier
than the final Principal Payment Date for the Term Loans, nor shall the
amortization for any Incremental Facility Loans of any Series be at a rate
faster (i.e. earlier) than the rate of amortization of the Term Loans (the
determination of whether or not such amortization is faster to be made by
the Administrative Agent).
Proceeds of Incremental Facility Loans hereunder shall be available for
any use permitted under Section 8.17 hereof.
(d) Limit on Eurodollar Loans. No more than seven separate Interest
-------------------------
Periods in respect of Eurodollar Loans of a Class from each Lender may be
outstanding at any one time, provided that, prior to February 15, 1998, all
--------
Eurodollar Loans of any Class must have an Interest Period of one month's
duration and be coterminous with the Interest Periods of all other Eurodollar
Loans of any Class, and, to the extent that prior to such date a Eurodollar Loan
would
Credit Agreement
----------------
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not satisfy such conditions, such Loan shall be made, or Continued as or
Converted into, a Base Rate Loan.
2.02 Borrowings. The Borrower shall give the Administrative Agent notice
----------
of each borrowing hereunder as provided in Section 4.05 hereof. Not later than
1:00 p.m. New York time on the date specified for each borrowing hereunder, each
Lender shall make available the amount of the Loan or Loans to be made by it on
such date to the Administrative Agent, at an account designated by the
Administrative Agent to the Lenders, in immediately available funds, for account
of the Borrower. The amount so received by the Administrative Agent shall,
subject to the terms and conditions of this Agreement, be made available to the
Borrower by depositing the same, in immediately available funds, in an account
of the Borrower designated by the Borrower and maintained with Chase at its
principal office.
2.03 Letters of Credit. Subject to the terms and conditions of this
-----------------
Agreement, the Revolving Credit Commitments may be utilized, upon the request of
the Borrower, in addition to the Revolving Credit Loans provided for by Section
2.01(a) hereof, by the issuance by the Issuing Lender of letters of credit
(collectively, "Letters of Credit") for account of the Borrower or any of its
-----------------
Subsidiaries (as specified by the Borrower), provided that in no event shall (i)
--------
the aggregate amount of all Letter of Credit Liabilities, together with the
aggregate principal amount of the Revolving Credit Loans, exceed the aggregate
amount of the Revolving Credit Commitments as in effect from time to time, (ii)
the outstanding aggregate amount of all Letter of Credit Liabilities exceed
$35,000,000 and (iii) the expiration date of any Letter of Credit extend beyond
the earlier of the date five Business Days prior to the Revolving Credit
Commitment Termination Date and the date twelve months following the issuance of
such Letter of Credit (or, in the case of any renewal or extension thereof,
twelve months after the then-current expiration date of such Letter of Credit,
so long as such renewal or extension occurs within three months of such then-
current expiration date). The following additional provisions shall apply to
Letters of Credit:
(a) The Borrower shall give the Administrative Agent at least three Business
Days' irrevocable prior notice (effective upon receipt) specifying the
Business Day (which shall be no later than 30 days preceding the Revolving
Credit Commitment Termination Date) each Letter of Credit is to be issued
and the account party or parties therefor and describing in reasonable
detail the proposed terms of such Letter of Credit (including the
beneficiary thereof) and the nature of the transactions or obligations
proposed to be supported thereby (including whether such Letter of Credit
is to be a commercial letter of credit or a standby letter of credit).
Upon receipt of any such notice, the Administrative Agent shall advise the
Issuing Lender of the contents thereof.
(b) On each day during the period commencing with the issuance by the Issuing
Lender of any Letter of Credit and until such Letter of Credit shall have
expired or been terminated, the Revolving Credit Commitment of each
Revolving Credit Lender shall be
Credit Agreement
----------------
-32-
deemed to be utilized for all purposes of this Agreement in an amount equal
to such Lender's Revolving Credit Commitment Percentage of the then undrawn
face amount of such Letter of Credit. Each Revolving Credit Lender (other
than the Issuing Lender) agrees that, upon the issuance of any Letter of
Credit hereunder, it shall automatically acquire a participation in the
Issuing Lender's liability under such Letter of Credit in an amount equal
to such Lender's Revolving Credit Commitment Percentage of such liability,
and each Revolving Credit Lender (other than the Issuing Lender) thereby
shall absolutely, unconditionally and irrevocably assume, as primary
obligor and not as surety, and shall be unconditionally obligated to the
Issuing Lender to pay and discharge when due, its Revolving Credit
Commitment Percentage of the Issuing Lender's liability under such Letter
of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of any demand for
payment under such Letter of Credit, the Issuing Lender shall promptly
notify the Borrower (through the Administrative Agent) of the amount to be
paid by the Issuing Lender as a result of such demand and the date on which
payment is to be made by the Issuing Lender to such beneficiary in respect
of such demand. Notwithstanding the identity of the account party of any
Letter of Credit, the Borrower hereby unconditionally agrees to pay and
reimburse the Administrative Agent for account of the Issuing Lender for
the amount of each demand for payment under such Letter of Credit that is
in substantial compliance with the provisions of such Letter of Credit at
or prior to the date on which payment is to be made by the Issuing Lender
to the beneficiary thereunder, without presentment, demand, protest or
other formalities of any kind.
(d) Forthwith upon its receipt of a notice referred to in paragraph (c) of this
Section 2.03, the Borrower shall advise the Administrative Agent whether or
not the Borrower intends to borrow hereunder to finance its obligation to
reimburse the Issuing Lender for the amount of the related demand for
payment and, if it does, submit a notice of such borrowing as provided in
Section 4.05 hereof.
(e) Each Revolving Credit Lender (other than the Issuing Lender) shall pay to
the Administrative Agent for account of the Issuing Lender at its principal
office in Dollars and in immediately available funds, the amount of such
Lender's Revolving Credit Commitment Percentage of any payment under a
Letter of Credit upon notice by the Issuing Lender (through the
Administrative Agent) to such Revolving Credit Lender requesting such
payment and specifying such amount. Each such Revolving Credit Lender's
obligation to make such payment to the Administrative Agent for account of
the Issuing Lender under this paragraph (e), and the Issuing Lender's right
to receive the same, shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation, the
failure of any other Revolving Credit Lender to make its payment under this
paragraph (e), the financial condition of the
Credit Agreement
----------------
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Borrower (or any other account party), the existence of any Default or the
termination of the Commitments. Each such payment to the Issuing Lender
shall be made without any offset, abatement, withholding or reduction
whatsoever. If any Revolving Credit Lender shall default in its obligation
to make any such payment to the Administrative Agent for account of the
Issuing Lender, for so long as such default shall continue the
Administrative Agent may at the request of the Issuing Lender withhold from
any payments received by the Administrative Agent under this Agreement or
any Note for account of such Revolving Credit Lender the amount so in
default and, to the extent so withheld, pay the same to the Issuing Lender
in satisfaction of such defaulted obligation.
(f) Upon the making of each payment by a Revolving Credit Lender to the Issuing
Lender pursuant to paragraph (e) above in respect of any Letter of Credit,
such Lender shall, automatically and without any further action on the part
of the Administrative Agent, the Issuing Lender or such Lender, acquire (i)
a participation in an amount equal to such payment in the Reimbursement
Obligation owing to the Issuing Lender by the Borrower hereunder and under
the Letter of Credit Documents relating to such Letter of Credit and (ii) a
participation in a percentage equal to such Lender's Revolving Credit
Commitment Percentage in any interest or other amounts payable by the
Borrower hereunder and under such Letter of Credit Documents in respect of
such Reimbursement Obligation (other than the commissions, charges, costs
and expenses payable to the Issuing Lender pursuant to paragraph (g) of
this Section 2.03). Upon receipt by the Issuing Lender from or for account
of the Borrower of any payment in respect of any Reimbursement Obligation
or any such interest or other amount (including by way of setoff or
application of proceeds of any collateral security) the Issuing Lender
shall promptly pay to the Administrative Agent for account of each
Revolving Credit Lender entitled thereto, such Revolving Credit Lender's
Revolving Credit Commitment Percentage of such payment, each such payment
by the Issuing Lender to be made in the same money and funds in which
received by the Issuing Lender. In the event any payment received by the
Issuing Lender and so paid to the Revolving Credit Lenders hereunder is
rescinded or must otherwise be returned by the Issuing Lender, each
Revolving Credit Lender shall, upon the request of the Issuing Lender
(through the Administrative Agent), repay to the Issuing Lender (through
the Administrative Agent) the amount of such payment paid to such Lender,
with interest at the rate specified in paragraph (j) of this Section 2.03.
(g) The Borrower shall pay to the Administrative Agent for account of each
Revolving Credit Lender (ratably in accordance with their respective
Commitment Percentages) a letter of credit fee in respect of each Letter of
Credit in an amount equal to the Applicable Margin, in effect from time to
time, for Revolving Credit Loans that are Eurodollar Loans on the daily
average undrawn face amount of such Letter of Credit for the period from
and including the date of issuance of such Letter of Credit (i) in the case
Credit Agreement
----------------
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of a Letter of Credit that expires in accordance with its terms, to and
including such expiration date and (ii) in the case of a Letter of Credit
that is drawn in full or is otherwise terminated other than on the stated
expiration date of such Letter of Credit, to but excluding the date such
Letter of Credit is drawn in full or is terminated (such fee to be non-
refundable, to be paid in arrears on each Quarterly Date and on the
Revolving Credit Commitment Termination Date and to be calculated for any
day after giving effect to any payments made under such Letter of Credit on
such day).
In addition, the Borrower shall pay to the Administrative Agent for
account of the Issuing Lender a fronting fee in respect of each Letter of
Credit in an amount equal to 1/4 of 1% per annum of the daily average
undrawn face amount of such Letter of Credit for the period from and
including the date of issuance of such Letter of Credit (i) in the case of
a Letter of Credit that expires in accordance with its terms, to and
including such expiration date and (ii) in the case of a Letter of Credit
that is drawn in full or is otherwise terminated other than on the stated
expiration date of such Letter of Credit, to but excluding the date such
Letter of Credit is drawn in full or is terminated (such fee to be non-
refundable, to be paid in arrears on each Quarterly Date and on the
Revolving Credit Commitment Termination Date and to be calculated for any
day after giving effect to any payments made under such Letter of Credit on
such day) plus all commissions, charges, costs and expenses in the amounts
customarily charged by the Issuing Lender from time to time in like
circumstances with respect to the issuance of each Letter of Credit and
drawings and other transactions relating thereto.
(h) Promptly following the end of each calendar month, the Issuing Lender shall
deliver (through the Administrative Agent) to each Revolving Credit Lender
and the Borrower a notice describing the aggregate amount of all Letters of
Credit outstanding at the end of such month. Upon the request of any
Revolving Credit Lender from time to time, the Issuing Lender shall deliver
any other information reasonably requested by such Lender with respect to
each Letter of Credit then outstanding.
(i) The issuance by the Issuing Lender of each Letter of Credit shall, in
addition to the conditions precedent set forth in Section 6 hereof, be
subject to the conditions precedent that (i) such Letter of Credit shall be
in such form, contain such terms and support such transactions as shall be
satisfactory to the Issuing Lender consistent with its then current
practices and procedures with respect to letters of credit of the same type
and (ii) the Borrower shall have executed and delivered such applications,
agreements and other instruments relating to such Letter of Credit as the
Issuing Lender shall have reasonably requested consistent with its then
current practices and procedures with respect to letters of credit of the
same type, provided that in the event of any conflict between any such
--------
application, agreement or other instrument and the provisions of this
Credit Agreement
----------------
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Agreement or any Security Document, the provisions of this Agreement and
the Security Documents shall control.
(j) To the extent that any Lender shall fail to pay any amount required to be
paid pursuant to paragraph (e) or (f) of this Section 2.03 on the due date
therefor, such Lender shall pay interest to the Issuing Lender (through the
Administrative Agent) on such amount from and including such due date to
but excluding the date such payment is made at a rate per annum equal to
the Federal Funds Rate, provided that if such Lender shall fail to make
--------
such payment to the Issuing Lender within three Business Days of such due
date, then, retroactively to the due date, such Lender shall be obligated
to pay interest on such amount at the Post-Default Rate.
(k) The issuance by the Issuing Lender of any modification or supplement to any
Letter of Credit hereunder shall be subject to the same conditions
applicable under this Section 2.03 to the issuance of new Letters of
Credit, and no such modification or supplement shall be issued hereunder
unless either (i) the respective Letter of Credit affected thereby would
have complied with such conditions had it originally been issued hereunder
in such modified or supplemented form or (ii) each Revolving Credit Lender
shall have consented thereto.
The Borrower hereby indemnifies and holds harmless each Revolving Credit Lender
and the Administrative Agent from and against any and all claims and damages,
losses, liabilities, costs or expenses that such Lender or the Administrative
Agent may incur (or that may be claimed against such Lender or the
Administrative Agent by any Person whatsoever) by reason of or in connection
with the execution and delivery or transfer of or payment or refusal to pay by
the Issuing Lender under any Letter of Credit; provided that the Borrower shall
--------
not be required to indemnify any Lender or the Administrative Agent for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, caused by (x) the willful misconduct or gross negligence of the
Issuing Lender in determining whether a request presented under any Letter of
Credit complied with the terms of such Letter of Credit or (y) in the case of
the Issuing Lender, such Lender's failure to pay under any Letter of Credit
after the presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit. Nothing in this Section 2.03 is intended
to limit the other obligations of the Borrower, any Lender or the Administrative
Agent under this Agreement.
2.04 Changes of Commitments.
----------------------
(a) The aggregate amount of the Revolving Credit Commitments shall be
automatically reduced to zero on the Revolving Credit Commitment Termination
Date. In addition, the aggregate amount of the Revolving Credit Commitments
shall be automatically reduced on each Revolving Credit Commitment Reduction
Date set forth in column (A) below,
Credit Agreement
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(x) by an amount (subject to reduction pursuant to paragraph (c) below) equal to
the amount set forth in column (B) below opposite such Revolving Credit
Commitment Reduction Date, (y) to an amount (subject to reduction pursuant to
paragraph (c) below) equal to the amount set forth in column (C) below opposite
such Revolving Credit Commitment Reduction Date:
(A) (B) (C)
Revolving Credit Revolving Credit Revolving Credit
Commitment Reduction Commitments Reduced Commitments Reduced
Date Falling on or by the Following to the Following
Nearest to: Amounts: Amounts:
---------- ------- -------
March 31, 2001 $ 1,750,000 $138,250,000
June 30, 2001 $ 1,750,000 $136,500,000
September 30, 2001 $ 1,750,000 $134,750,000
December 31, 2001 $ 1,750,000 $133,000,000
March 31, 2002 $ 3,500,000 $129,500,000
June 30, 2002 $ 3,500,000 $126,000,000
September 30, 2002 $ 3,500,000 $122,500,000
December 31, 2002 $ 3,500,000 $119,000,000
March 31, 2003 $ 5,250,000 $113,750,000
June 30, 2003 $ 5,250,000 $108,500,000
September 30, 2003 $ 5,250,000 $103,250,000
December 31, 2003 $ 5,250,000 $ 98,000,000
March 31, 2004 $ 7,000,000 $ 91,000,000
June 30, 2004 $ 7,000,000 $ 84,000,000
September 30, 2004 $ 7,000,000 $ 77,000,000
December 31, 2004 $ 7,000,000 $ 70,000,000
March 31, 2005 $ 8,750,000 $ 61,250,000
June 30, 2005 $ 8,750,000 $ 52,500,000
September 30, 2005 $ 8,750,000 $ 43,750,000
December 31, 2005 $ 8,750,000 $ 35,000,000
March 31, 2006 $17,500,000 $ 17,500,000
June 30, 2006 $17,500,000 $ 0
(b) The Borrower shall have the right at any time or from time to time (i) so
long as no Revolving Credit Loans or Letter of Credit Liabilities are
outstanding, to terminate the
Credit Agreement
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Revolving Credit Commitments, (ii) so long as no Term Loans are outstanding, to
terminate the Term Loan Commitments, (iii) so long as no Incremental Facility
Loans of a Series are outstanding, to terminate the Incremental Facility
Commitments of such Series and (iv) to reduce the aggregate unused amount of the
Revolving Credit Commitments or Incremental Facility Commitments of any Series
(for which purpose use of the Revolving Credit Commitments shall be deemed to
include the aggregate amount of Letter of Credit Liabilities); provided that (x)
--------
the Borrower shall give notice of each such termination or reduction as provided
in Section 4.05 hereof, (y) each partial reduction shall be in an aggregate
amount at least equal to $1,000,000 (or a larger multiple of $500,000) and (z)
prior to the making of the initial Loans hereunder, each such reduction of
Commitments shall be applied ratably to the Commitments of each Class.
(c) Each reduction in the aggregate amount of the Revolving Credit
Commitments pursuant to paragraph (b) above, or pursuant to Section 2.10 hereof,
on any date shall be applied to the reductions set forth in the schedule in
paragraph (a) above ratably as follows: each such reduction shall result in an
automatic and simultaneous reduction (but not below zero) of the respective
amounts set forth in column (B) at the end of paragraph (a) above (ratably in
accordance with the respective remaining amounts thereof, after giving effect to
any prior reductions pursuant to this paragraph (c)), with appropriate
reductions (but not below zero) being made to the respective amounts set forth
in column (C) of said paragraph (a) after giving effect to such reduction of the
amounts in said column (B).
(d) The aggregate amount of the Term Loan Commitments shall be automatically
reduced to zero on the close of business on the Term Loan Commitment Termination
Date. The aggregate amount of the Incremental Facility Commitments shall be
automatically reduced to zero on the close of business on the last day of the
Incremental Facility Availability Period.
(e) The Commitments once terminated or reduced may not be reinstated.
2.05 Commitment Fee. The Borrower shall pay to the Administrative Agent
--------------
for account of each Revolving Credit Lender a commitment fee on the daily
average unused amount of such Lender's Revolving Credit Commitment (for which
purpose (i) the aggregate amount of any Letter of Credit Liabilities shall be
deemed to be a pro rata (based on the Revolving Credit Commitments) use of each
Lender's Revolving Credit Commitment and (ii) any Reserved Commitment Amount
shall be deemed to be unused), for the period from and including the date hereof
to but not including the earlier of the date such Revolving Credit Commitment is
terminated and the Revolving Credit Commitment Termination Date, at a rate per
annum equal (x) at any time the then-current Rate Ratio (determined pursuant to
Section 3.03 hereof) is greater than or equal to 5.50 to 1, 1/2 of 1% and (y) at
any time the then-current Rate Ratio (so determined) is less than 5.50 to 1, 3/8
of 1%, provided that commitment fee for the period from and including the date
--------
hereof to but excluding the Closing Date shall be determined on the assumption
that the Rate Ratio is greater than 5.50 to 1. The Borrower shall pay to the
Credit Agreement
----------------
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Administrative Agent for account of each Incremental Facility Lender of any
Series a commitment fee in such amounts, and on such dates, as shall have been
agreed to by the Borrower and such Incremental Facility Lender upon the
allocation of the Incremental Facility Commitment of such Series to such Lender
pursuant to Section 2.01(c) hereof. Accrued commitment fee shall be payable on
each Quarterly Date and on the earlier of the date the relevant Commitments are
terminated and the Revolving Credit Commitment Termination Date or the
Incremental Facility Commitment Termination Date, as the case may be.
2.06 Lending Offices. The Loans of each Type made by each Lender shall be
---------------
made and maintained at such Lender's Applicable Lending Office for Loans of such
Type.
2.07 Several Obligations; Remedies Independent. The failure of any Lender
-----------------------------------------
to make any Loan to be made by it on the date specified therefor shall not
relieve any other Lender of its obligation to make its Loan on such date, but
neither any Lender nor the Administrative Agent shall be responsible for the
failure of any other Lender to make a Loan to be made by such other Lender, and
(except as otherwise provided in Section 4.06 hereof) no Lender shall have any
obligation to the Administrative Agent or any other Lender for the failure by
such Lender to make any Loan required to be made by such Lender. Anything in
this Agreement to the contrary notwithstanding, each Lender hereby agrees with
each other Lender that no Lender shall take any action to protect or enforce its
rights arising out of this Agreement (including, without limitation, exercising
any rights of off-set) without first obtaining the prior written consent of the
Administrative Agent or the Majority Lenders, it being the intent of the Lenders
that any such action to protect or enforce rights under this Agreement shall be
taken in concert and at the direction or with the consent of the Administrative
Agent or the Majority Lenders and not individually by a single Lender.
2.08 Loan Accounts; Promissory Notes.
-------------------------------
(a) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender to the Borrower, including the
amounts of principal and interest payable and paid to such Lender by the
Borrower from time to time hereunder.
(b) The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder to the Borrower, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder from the Borrower for the account of the
Lenders and each Lender's share thereof.
Credit Agreement
----------------
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(c) The entries made in the accounts maintained pursuant to paragraph (a) or
(b) of this Section shall be prima facie evidence of the existence and amounts
----- -----
of the obligations recorded therein; provided that the failure of any Lender or
--------
the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.
(d) Any Lender may request that Loans of any Class made by it to the Borrower
be evidenced by a promissory note. In such event, such Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the
Loans of the Borrower evidenced by such promissory note and interest thereon
shall at all times (including after assignment pursuant to Section 11.06 hereof)
be represented by one or more promissory notes in such form payable to the order
of the payee named therein (or, if such promissory note is a registered note, to
such payee and its registered assigns).
2.09 Optional Prepayments and Conversions or Continuations of Loans. Subject
--------------------------------------------------------------
to Section 4.04 hereof, the Borrower shall have the right to prepay Loans, or to
Convert Loans of one Type into Loans of another Type or Continue Loans of one
Type as Loans of the same Type, at any time or from time to time, provided that:
--------
(a) the Borrower shall give the Administrative Agent notice of each such
prepayment, Conversion or Continuation as provided in Section 4.05 hereof
(and, upon the date specified in any such notice of prepayment, the amount
to be prepaid shall become due and payable hereunder);
(b) Eurodollar Loans may be prepaid or Converted at any time from time to time,
provided that the Borrower shall pay any amounts owing under Section 5.05
--------
hereof in the event of any such prepayment or Conversion on any date other
than the last day of an Interest Period for such Loans;
(c) prepayments of any Term Loan shall be effected in such manner so that the
Term Loans (and, to the extent that Incremental Loans are outstanding, the
Incremental Loans of all Series) are concurrently prepaid ratably in
accordance with the respective outstanding principal amounts thereof and
the aggregate principal amount of all such concurrent prepayments is at
least equal to $1,000,000 or a greater multiple of $500,000;
(d) prepayments of the Term Loans and Incremental Facility Loans shall be
applied to the remaining installments of such Loans ratably in accordance
with the respective principal amounts thereof; and
Credit Agreement
----------------
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(e) any Conversion or Continuation of Eurodollar Loans shall be subject to the
provisions of Section 2.01(d) hereof.
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 9 hereof, in the event that any Event of Default shall
have occurred and be continuing, the Administrative Agent may (and at the
request of the Majority Lenders shall) suspend the right of the Borrower to
Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar
Loan, in which event all Loans shall be Converted (on the last day(s) of the
respective Interest Periods therefor) or Continued, as the case may be, as Base
Rate Loans.
2.10 Mandatory Prepayments and Reductions of Commitments.
---------------------------------------------------
(a) Casualty Events. Upon the date 270 days following the receipt by the
---------------
Borrower or any of its Subsidiaries of the proceeds of insurance, condemnation
award or other compensation in respect of any Casualty Event affecting any
Property of the Borrower or any of its Subsidiaries (or upon such earlier date
as the Borrower or such Subsidiary, as the case may be, shall have determined
not to repair or replace the Property affected by such Casualty Event), the
Borrower shall prepay the Loans (and/or provide cover for Letter of Credit
Liabilities as specified in paragraph (g) below), and the Commitments shall be
subject to automatic reduction, in an aggregate amount, if any, equal to 100% of
the Net Available Proceeds of such Casualty Event not theretofore applied (or
committed to be applied pursuant to executed construction contracts or equipment
orders) to the repair or replacement of such Property, such prepayment to be
effected in each case in the manner and to the extent specified in paragraph (f)
of this Section 2.10. Notwithstanding the foregoing, the Borrower shall not be
required to make any prepayment (and/or provide cover for Letter of Credit
Liabilities) under this paragraph (a), and the Commitments shall not be subject
to automatic reduction, until the aggregate amount of the Net Available Proceeds
that must be prepaid under this paragraph (a) (reduced by the amount of such Net
Available Proceeds that has previously been applied to the prepayment of Loans
or reduction of Commitments hereunder as a result of previous Casualty Events)
is at least equal to $2,000,000.
Nothing in this paragraph (a) shall be deemed to limit any obligation of the
Borrower and its Subsidiaries pursuant to the Security Agreement to remit to the
Collateral Account the proceeds of insurance, condemnation award or other
compensation received in respect of any Casualty Event, and the Administrative
Agent shall release such proceeds to the Borrower in the manner and to the
extent provided in Section 4.01 of the Security Agreement.
(b) Excess Cash Flow. Not later than the date 150 days after the end of the
----------------
each fiscal year of the Borrower (or, if earlier, 30 days after the delivery of
the audited financial statements for such fiscal year pursuant to Section
8.01(c) hereof), commencing with the fiscal year ending on December 31, 2000,
the Borrower shall prepay the Loans (and/or provide cover
Credit Agreement
----------------
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for Letter of Credit Liabilities as specified in paragraph (g) below), and the
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to the excess of (A) 50% of Excess Cash Flow for such fiscal year over (B)
the aggregate amount of voluntary prepayments of Term Loans and Incremental
Facility Loans made during such fiscal year pursuant to Section 2.09 hereof
(other than that portion, if any, of such prepayments applied to installments of
the Term Loans and Incremental Facility Loans falling due in such fiscal year),
such prepayment and reduction to be effected in each case in the manner and to
the extent specified in paragraph (f) of this Section 2.10.
(c) Equity and Debt Issuances. Upon any Equity Issuance or Debt Issuance,
-------------------------
the Borrower shall prepay the Loans (and/or provide cover for Letter of Credit
Liabilities as specified in paragraph (g) below), and the Commitments shall be
subject to automatic reduction, in an aggregate amount equal to 100% of the Net
Available Proceeds thereof, such prepayment and reduction to be effected in each
case in the manner and to the extent specified in paragraph (f) of this Section
2.10.
(d) Sale of Assets. Without limiting the obligation of the Borrower to
--------------
obtain the consent of the Majority Lenders pursuant to Section 8.05 hereof to
any Disposition not otherwise permitted hereunder, in the event that the Net
Available Proceeds of any Disposition (herein, the "Current Disposition"), and
-------------------
of all prior Dispositions after the date hereof as to which a prepayment has not
yet been made under this Section 2.10(d), shall exceed $5,000,000 then, no later
than five Business Days prior to the occurrence of the Current Disposition, the
Borrower will deliver to the Lenders a statement, certified by a Senior Officer,
in form and detail satisfactory to the Administrative Agent, of the amount of
the Net Available Proceeds of the Current Disposition and of all such prior
Dispositions and will prepay the Loans (and/or provide cover for Letter of
Credit Liabilities as specified in paragraph (g) below), and the Commitments
shall be subject to automatic reduction, in an aggregate amount equal to 100% of
the Net Available Proceeds of the Current Disposition and such prior
Dispositions, such prepayment and reduction to be effected in each case in the
manner and to the extent specified in paragraph (f) of this Section 2.10.
Notwithstanding the foregoing, the Borrower shall not be required to make a
prepayment pursuant to this paragraph (d) with respect to Net Available Proceeds
from any Disposition in the event that the Borrower advises the Administrative
Agent at the time the Net Available Proceeds from such Disposition are received
that it intends to reinvest such Net Available Proceeds in replacement assets
pursuant to an acquisition permitted under Section 8.05(d)(v) hereof so long as
(x) such Net Available Proceeds are either (i) held by the Administrative
Agent in the Collateral Account pending such reinvestment, in which event
the Administrative Agent need not release such Net Available Proceeds
except upon
Credit Agreement
----------------
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presentation of evidence satisfactory to it that such Net Available
Proceeds are to be so reinvested in compliance with the provisions of this
Agreement or (ii) applied by the Borrower to the prepayment of Revolving
Credit Loans hereunder (in which event the Borrower agrees to advise the
Administrative Agent in writing at the time of such prepayment of Revolving
Credit Loans that such prepayment is being made from the proceeds of a
Disposition and that, as contemplated by Section 2.01(a) hereof, a portion
of the Revolving Credit Commitments hereunder equal to the amount of such
prepayment gives rise to a Reserved Commitment Amount that shall be
available hereunder only for purposes of making an acquisitions under
Section 8.05(d)(v) hereof),
(y) the Net Available Proceeds from any Disposition are in fact so reinvested
within 270 days of such Disposition (it being understood that, in the event
Net Available Proceeds from more than one Disposition are paid into the
Collateral Account or applied to the prepayment of Revolving Credit Loans
as provided in clause (x) above, such Net Available Proceeds shall be
deemed to be released (or, as the case may be, Revolving Credit Loans
utilizing the Reserved Commitment Amount shall be deemed to be made) in the
same order in which such Dispositions occurred and, accordingly, (A) any
such Net Available Proceeds so held for more than 270 days shall be
forthwith applied to the prepayment of Loans and reductions of Commitments
as provided above and (B) any Reserved Commitment Amount that remains so
unutilized for more than 270 days shall, subject to the satisfaction of the
conditions precedent to such borrowing in Section 6.02 hereof, be utilized
through the borrowing by the Borrower of Revolving Credit Loans the
proceeds of which shall be applied to the prepayment of Loans and
reductions of Commitments as provided in paragraph (f) of this Section
2.10) and
(z) the aggregate amount of Net Available Proceeds (together with investment
earnings thereon) so held at any time by the Administrative Agent pending
reinvestment as contemplated by this sentence, together with the aggregate
amount of the Reserved Commitment Amount, shall not at any time exceed
$40,000,000 or such greater amount as the Majority Lenders may otherwise
agree.
As contemplated by Section 4.01 of the Security Agreement, nothing in this
paragraph (d) shall be deemed to obligate the Administrative Agent to release
any of such proceeds from the Collateral Account to the Borrower for purposes of
reinvestment as aforesaid upon the occurrence and during the continuance of any
Event of Default.
(e) Retained Franchises. In the event that the Borrower receives any payment
-------------------
in respect of Retained Franchises pursuant to Section 9.06 of the Cablevision
Acquisition Agreement, the Revolving Credit Commitments shall be subject to
automatic reduction in an amount equal to such payment and, to the extent that,
after giving effect to such reduction, the aggregate principal amount of
Revolving Credit Loans, together with the aggregate amount of all
Credit Agreement
----------------
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Letter of Credit Liabilities, would exceed the Revolving Credit Commitments, the
Borrower shall, first, prepay Revolving Credit Loans and second, provide cover
for Letter of Credit Liabilities as specified in paragraph (g) below, in an
aggregate amount equal to such excess.
(f) Application. Prepayments and reductions of Commitments described in
-----------
paragraphs (a), (b), (c) and (d) of this Section 2.10 shall be effected as
follows:
(i) first, the amount of prepayment specified in such paragraphs shall be
applied to the Term Loans and Incremental Facility Loans of each Series
then outstanding, ratably as between the outstanding Term Loans and the
outstanding Incremental Facility Loans (if any) of each Series, (x) in the
case of prepayments pursuant to paragraphs (b) and (c) of this Section
2.10, to the respective installments thereof ratably in accordance with the
respective principal amounts of such installments and (y) in the case of
prepayments pursuant to paragraphs (a) and (d) of this Section 2.10, to the
remaining installments thereof in direct order of maturity (or, in the
event that the Closing Date shall not yet have occurred, the Term Loan
Commitments shall be automatically reduced in an aggregate amount equal to
the required prepayment); and
(ii) second, the Revolving Credit Commitments shall be automatically reduced in
an amount equal to any excess over the amount referred to in the foregoing
clause (i) and to the extent that, after giving effect to such reduction,
the aggregate principal amount of Revolving Credit Loans, together with the
aggregate amount of all Letter of Credit Liabilities, would exceed the
Revolving Credit Commitments, the Borrower shall, first, prepay Revolving
Credit Loans and second, provide cover for Letter of Credit Liabilities as
specified in paragraph (g) below, in an aggregate amount equal to such
excess.
(g) Cover for Letter of Credit Liabilities. In the event that the Borrower
--------------------------------------
shall be required pursuant to this Section 2.10, to provide cover for Letter of
Credit Liabilities, the Borrower shall effect the same by paying to the
Administrative Agent immediately available funds in an amount equal to the
required amount, which funds shall be retained by the Administrative Agent in
the Collateral Account (as provided therein as collateral security in the first
instance for the Letter of Credit Liabilities) until such time as the Letters of
Credit shall have been terminated and all of the Letter of Credit Liabilities
paid in full.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans.
------------------
(a) The Borrower hereby promises to pay to the Administrative Agent for
account of each Lender the entire outstanding principal amount of such Lender's
Revolving Credit Loans,
Credit Agreement
----------------
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and each Revolving Credit Loan shall mature, on the Revolving Credit Commitment
Termination Date. In addition, if following any Revolving Credit Commitment
Reduction Date the aggregate principal amount of the Revolving Credit Loans
shall exceed the Revolving Credit Commitments, the Borrower shall pay Revolving
Credit Loans, and provide cover for Letter of Credit Liabilities as specified in
Section 2.10(g), in an aggregate amount equal to such excess.
(b) The Borrower hereby promises to pay to the Administrative Agent for
account of the Term Loan Lenders the principal of the Term Loans in twenty-two
consecutive quarterly installments payable on the Principal Payment Dates as
follows:
Principal Payment Date Amount of Installment ($)
---------------------- -------------------------
March 31, 2001 $ 1,000,000
June 30, 2001 $ 1,000,000
September 30, 2001 $ 1,000,000
December 31, 2001 $ 1,000,000
March 31, 2002 $ 1,875,000
June 30, 2002 $ 1,875,000
September 30, 2002 $ 1,875,000
December 31, 2002 $ 1,875,000
March 31, 2003 $ 3,500,000
June 30, 2003 $ 3,500,000
September 30, 2003 $ 3,500,000
December 31, 2003 $ 3,500,000
March 31, 2004 $ 4,500,000
June 30, 2004 $ 4,500,000
September 30, 2004 $ 4,500,000
December 31, 2004 $ 4,500,000
March 31, 2005 $ 5,000,000
June 30, 2005 $ 5,000,000
September 30, 2005 $ 5,000,000
December 31, 2005 $ 5,000,000
March 31, 2006 $10,750,000
June 30, 2006 $10,750,000
Credit Agreement
----------------
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(c) The Borrower hereby promises to pay to the Administrative Agent for
account of the Incremental Facility Lenders of any Series the principal of the
Incremental Facility Loans of such Series on the respective Principal Payment
Dates agreed upon between the Borrower and such Incremental Facility Lenders
pursuant to Section 2.10(c) hereof at the time such Lenders become obligated to
make such Incremental Facility Loans hereunder.
3.02 Interest. The Borrower hereby promises to pay to the Administrative
--------
Agent for account of each Lender interest on the unpaid principal amount of each
Loan made by such Lender for the period from and including the date of such Loan
to but excluding the date such Loan shall be paid in full, at the following
rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base Rate (as in
effect from time to time) plus the Applicable Margin and
----
(b) during such periods as such Loan is a Eurodollar Loan, for each Interest
Period relating thereto, the Eurodollar Rate for such Loan for such
Interest Period plus the Applicable Margin.
----
Notwithstanding the foregoing, the Borrower promises to pay to the
Administrative Agent for account of each Lender interest at the applicable Post-
Default Rate on any principal of any Loan made by such Lender, on any
Reimbursement Obligation held by such Lender and on any other amount payable by
the Borrower hereunder to or for account of such Lender, that shall not be paid
in full when due (whether at stated maturity, by acceleration, by mandatory
prepayment or otherwise), for the period from and including the due date thereof
to but excluding the date the same is paid in full. Accrued interest on each
Loan shall be payable (i) in the case of a Base Rate Loan, quarterly on the
Quarterly Dates, (ii) in the case of a Eurodollar Loan, on the last day of each
Interest Period therefor and, if such Interest Period is longer than three
months, at three-month intervals following the first day of such Interest
Period, (iii) in the case of any Eurodollar Loan, upon the payment, prepayment
or Conversion thereof (but only on the principal amount so paid, prepaid or
Converted) and (iv) in the case of all Loans, upon the payment or prepayment in
full of the principal of the Loans, and the termination of the Commitments,
hereunder, except that interest payable at the Post-Default Rate shall be
payable from time to time on demand. Promptly after the determination of any
interest rate provided for herein or any change therein, the Administrative
Agent shall give notice thereof to the Lenders to which such interest is payable
and to the Borrower.
3.03 Determination of Applicable Margin.
----------------------------------
(a) The Applicable Margin for the period from the Closing Date to the day
prior to the first Quarterly Date occurring after the Closing Date shall be
determined based upon the certificate delivered pursuant to Section 6.01(o)
hereof. Thereafter, the Applicable Margin for
Credit Agreement
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each Quarterly Payment Period shall be determined based upon a Rate Ratio
Certificate for such Quarterly Payment Period delivered by the Borrower to the
Lenders and the Administrative Agent under this Section 3.03. If the Rate Ratio
Certificate for any Quarterly Payment Period is delivered to the Administrative
Agent three or more days prior to the first day of such Quarterly Payment
Period, any adjustment in the Applicable Margin required to be made, as shown in
such Rate Ratio Certificate, shall be effective on the first day of such
Quarterly Payment Period.
(b) If the Rate Ratio Certificate for any Quarterly Payment Period is
delivered by the Borrower to the Administrative Agent later than three days
prior to the commencement of such Quarterly Payment Period, then (i) any
decrease in the Applicable Margin for such Quarterly Payment Period shall not
become effective on the first day of such Quarterly Payment Period but shall
instead become effective on the third day following receipt by the
Administrative Agent of such Rate Ratio Certificate and (ii) any increase in the
Applicable Margin for such Quarterly Payment Period shall become effective
retroactively from the first day of such Quarterly Payment Period.
(c) If it shall be determined at any time, on the basis of a certificate of a
Senior Officer delivered pursuant to the last sentence of Section 8.01 hereof,
that the Applicable Margin then in effect for the current Quarterly Payment
Period, or any previous Quarterly Payment Period, is or was incorrect, and that
a correction would have the effect of increasing the Applicable Margin, then the
Applicable Margin shall be so increased effective retroactively from the first
day of such Quarterly Payment Period, provided that in the event such
--------
certificate for any fiscal quarter is not delivered to the Lenders pursuant to
said Section 8.01 within 60 days of the end of such fiscal quarter, then, unless
the Borrower shall deliver such certificate within 10 days after notice of such
non-delivery shall be given by any Lender or the Administrative Agent to the
Borrower, the Applicable Margin for such Quarterly Payment Period shall be
deemed to be the highest Applicable Margin provided for in the definition of
such term in Section 1.01 hereof.
(d) In the event of any retroactive increase in the Applicable Margin for any
Quarterly Payment Period pursuant to paragraph (a), (b) or (c) above, the amount
of interest in respect of any Loan outstanding during all or any portion of such
Quarterly Payment Period shall be recalculated using the Applicable Margin as so
increased. On the Business Day immediately following receipt by the Borrower of
notice from the Administrative Agent of such increase, the Borrower shall pay to
the Administrative Agent, for account of the Lenders, an amount equal to the
difference between (i) the amount of interest previously paid or payable by the
Borrower in respect of such Loan for such Quarterly Payment Period and (ii) the
amount of interest in respect of such Loan as so recalculated for such Quarterly
Payment Period.
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Section 4. Payments; Pro Rata Treatment; Computations; Etc.
4.01 Payments.
--------
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Borrower under this Agreement, and except to the extent otherwise provided
therein, all payments to be made by the Borrower under any other Loan Document
shall be made in Dollars, in immediately available funds, without deduction,
set-off or counterclaim, to the Administrative Agent at an account designated by
the Administrative Agent to the Borrower, not later than 1:00 p.m. New York time
on the date on which such payment shall become due (each such payment made after
such time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) Any Lender for whose account any such payment is to be made may (but
shall not be obligated to) debit the amount of any such payment that is not made
by such time to any ordinary deposit account of the Borrower with such Lender
(with notice to the Borrower and the Administrative Agent), provided that such
--------
Lender's failure to give such notice shall not affect the validity thereof.
(c) The Borrower shall, at the time of making each payment under this
Agreement for account of any Lender, specify to the Administrative Agent (which
shall so notify the intended recipient(s) thereof) the Loans, Reimbursement
Obligations or other amounts payable by the Borrower hereunder to which such
payment is to be applied (and in the event that the Borrower fails to so
specify, or if an Event of Default has occurred and is continuing, the
Administrative Agent may distribute such payment to the Lenders for application
in such manner as it or the Majority Lenders, subject to Section 4.02 hereof,
may determine to be appropriate).
(d) Except to the extent otherwise provided in the last sentence of Section
2.03(e) hereof, each payment received by the Administrative Agent under this
Agreement for account of any Lender shall be paid by the Administrative Agent
promptly to such Lender, in immediately available funds, for account of such
Lender's Applicable Lending Office for the Loan or other obligation in respect
of which such payment is made.
(e) If the due date of any payment under this Agreement would otherwise fall
on a day that is not a Business Day, such date shall be extended to the next
succeeding Business Day, and interest shall be payable for any principal so
extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided herein:
------------------
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(a) each borrowing of Loans of a particular Class (including of a particular
Series of Incremental Facility Loans) from the Lenders under Section 2.01
hereof shall be made from the relevant Lenders, each payment of commitment
fee under Section 2.05 hereof in respect of Commitments of a particular
Class shall be made for account of the relevant Lenders, and each
termination or reduction of the amount of the Commitments of a particular
Class under Section 2.04 hereof shall be applied to the respective
Commitments of such Class of the relevant Lenders, pro rata according to
the amounts of their respective Commitments of such Class;
(b) except as otherwise provided in Section 5.04 hereof, Eurodollar Loans of
any Class (including of a particular Series of Incremental Facility Loans)
having the same Interest Period shall be allocated pro rata among the
relevant Lenders according to the amounts of their respective Revolving
Credit, Term Loan and Incremental Facility Loan Commitments of the relevant
Series (in the case of the making of Loans) or their respective Revolving
Credit, Term and Incremental Facility Loans of the relevant Series (in the
case of Conversions and Continuations of Loans);
(c) each payment or prepayment of principal of Revolving Credit, Term and
Incremental Facility Loans by the Borrower shall be made for account of the
relevant Lenders pro rata in accordance with the respective unpaid
principal amounts of the Loans of such Class held by them; and
(d) each payment of interest on Revolving Credit, Term and Incremental Facility
Loans by the Borrower shall be made for account of the relevant Lenders pro
rata in accordance with the amounts of interest on such Loans then due and
payable to the respective Lenders.
4.03 Computations. Interest on Eurodollar Loans shall be computed on the
------------
basis of a year of 360 days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable and interest
on Base Rate Loans and Reimbursement Obligations, commitment fee and letter of
credit fees shall be computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day but, except as
otherwise provided in Section 2.03(g) hereof, excluding the last day) occurring
in the period for which payable. Notwithstanding the foregoing, for each day
that the Base Rate is calculated by reference to the Federal Funds Rate,
interest on Base Rate Loans shall be computed on the basis of a year of 360 days
and actual days elapsed.
4.04 Minimum Amounts. Except for mandatory prepayments made pursuant to
---------------
Section 2.10 hereof and Conversions or prepayments made pursuant to Section 5.04
hereof, each borrowing, Conversion and partial prepayment of principal of Base
Rate Loans (other than prepayments of Term Loans, as to which the provisions of
Section 2.09(c) hereof shall apply)
Credit Agreement
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shall be in an aggregate amount at least equal to $100,000 or a larger multiple
of $100,000 and each borrowing, Conversion and partial prepayment of Eurodollar
Loans (other than prepayments of Term Loans, as to which the provisions of
Section 2.09(c) hereof shall apply) shall be in an aggregate amount at least
equal to $1,000,000 or a larger multiple of $100,000 (borrowings, Conversions or
prepayments of or into Loans of different Types or, in the case of Eurodollar
Loans, having different Interest Periods at the same time hereunder to be deemed
separate borrowings, Conversions and prepayments for purposes of the foregoing,
one for each Type or Interest Period). If any Eurodollar Loans would otherwise
be in a lesser principal amount for any period, such Loans shall be Base Rate
Loans during such period.
4.05 Certain Notices. Notices by the Borrower to the Administrative Agent
---------------
of terminations or reductions of the Commitments, of borrowings, Conversions,
Continuations and optional prepayments of Loans and of Classes of Loans, of
Types of Loans and of the duration of Interest Periods shall be irrevocable and
shall be effective only if received by the Administrative Agent not later than
1:00 p.m. New York time on the number of Business Days prior to the date of the
relevant termination, reduction, borrowing, Conversion, Continuation or
prepayment or the first day of such Interest Period specified below:
Number of
Business
Notice Days Prior
- ------ ----------
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans (including, if applicable, the particular Series of Incremental
Facility Loans) to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or
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optional prepayment (which shall be a Business Day). Each such notice of the
duration of an Interest Period shall specify the Loans to which such Interest
Period is to relate.
The Administrative Agent shall promptly notify the Lenders of the contents of
each such notice. In the event that the Borrower fails to select the Type of
Loan, or the duration of any Interest Period for any Eurodollar Loan, within the
time period and otherwise as provided in this Section 4.05, such Loan (if
outstanding as a Eurodollar Loan) will be automatically Converted into a Base
Rate Loan on the last day of the then current Interest Period for such Loan or
(if outstanding as a Base Rate Loan) will remain as, or (if not then
outstanding) will be made as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent. Unless the
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Administrative Agent shall have been notified by a Lender or the Borrower (the
"Payor") prior to the date on which the Payor is to make payment to the
-----
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender hereunder or (in the case of the Borrower) a payment to the
Administrative Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "Required Payment"), which notice shall be
----------------
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
------------
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, provided that if neither the recipient(s)
--------
nor the Payor shall return the Required Payment to the Administrative Agent
within three Business Days of the Advance Date, then, retroactively to the
Advance Date, the Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made
by the Borrower to the Lenders, the Borrower and the recipient(s) shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment at the Post-Default Rate (without
duplication of the obligation of the Borrower under Section 3.02 hereof to
pay interest on the Required Payment at the Post-Default Rate), it being
understood that the return by the recipient(s) of the Required Payment to
the Administrative Agent shall not limit such obligation of the Borrower
under said Section 3.02 to pay interest at the Post-Default Rate in respect
of the Required Payment and
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(ii) if the Required Payment shall represent proceeds of a Loan
to be made by the Lenders to the Borrower, the Payor and the Borrower shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment pursuant to whichever of the rates
specified in Section 3.02 hereof is applicable to the Type of such Loan, it
being understood that the return by the Borrower of the Required Payment to
the Administrative Agent shall not limit any claim the Borrower may have
against the Payor in respect of such Required Payment.
4.07 Sharing of Payments, Etc.
-------------------------
(a) The Borrower agrees that, in addition to (and without limitation of) any
right of set-off, banker's lien or counterclaim a Lender may otherwise have,
each Lender shall be entitled, at its option (to the fullest extent permitted by
law), to set off and apply any deposit (general or special, time or demand,
provisional or final), or other indebtedness, held by it for the credit or
account of the Borrower at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans,
Reimbursement Obligations or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such deposit or other
indebtedness are then due to the Borrower), in which case it shall promptly
notify the Borrower and the Administrative Agent thereof, provided that such
--------
Lender's failure to give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from the Borrower payment of any principal of
or interest on any Loan of any Class or Letter of Credit Liability owing to it
or payment of any other amount under this Agreement or any other Loan Document
through the exercise of any right of set-off, banker's lien or counterclaim or
similar right or otherwise (other than from the Administrative Agent as provided
herein), and, as a result of such payment, such Lender shall have received a
greater percentage of the principal of or interest on the Loans of such Class or
Letter of Credit Liabilities or such other amounts then due hereunder or
thereunder by the Borrower to such Lender than the percentage received by any
other Lender, it shall promptly purchase from such other Lenders participations
in (or, if and to the extent specified by such Lender, direct interests in) the
Loans of such Class or Letter of Credit Liabilities or such other amounts,
respectively, owing to such other Lenders (or in interest due thereon, as the
case may be) in such amounts, and make such other adjustments from time to time
as shall be equitable, to the end that all the Lenders shall share the benefit
of such excess payment (net of any expenses that may be incurred by such Lender
in obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans of such Class or Letter of
Credit Liabilities or such other amounts, respectively, owing to each of the
Lenders. To such end all the Lenders shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if such payment
is rescinded or must otherwise be restored.
Credit Agreement
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(c) The Borrower agrees that any Lender so purchasing such a participation
(or direct interest) may exercise all rights of set-off, banker's lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any such
right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrower. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
5.01 Additional Costs.
----------------
(a) The Borrower shall pay directly to each Lender from time to time such
amounts as such Lender may determine to be necessary to compensate such Lender
for any costs that such Lender determines are attributable to its making or
maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
----------
Costs"), resulting from any Regulatory Change that:
(i) shall subject any Lender (or its Applicable Lending Office
for any of such Loans) to any tax, duty or other charge in respect of such
Loans or changes the basis of taxation of any amounts payable to such
Lender under this Agreement in respect of any of such Loans (excluding
changes in the rate of tax on the overall net income of such Lender or of
such Applicable Lending Office by the jurisdiction in which such Lender has
its principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Loans or any deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 hereof), or any commitment of such Lender (including,
without limitation, the Commitments of such Lender hereunder); or
Credit Agreement
----------------
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(iii) imposes any other condition affecting this Agreement (or
any of such extensions of credit or liabilities) or its Commitments.
If any Lender requests compensation from the Borrower under this Section
5.01(a), the Borrower may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender thereafter to make
or Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar
Loans, until the Regulatory Change giving rise to such request ceases to be in
effect (in which case the provisions of Section 5.04 hereof shall be
applicable), provided that such suspension shall not affect the right of such
--------
Lender to receive the compensation so requested.
(b) Without limiting the effect of the foregoing provisions of this Section
5.01 (but without duplication), the Borrower shall pay directly to each Lender
from time to time on request such amounts as such Lender may determine to be
necessary to compensate such Lender (or, without duplication, the bank holding
company of which such Lender is a subsidiary) for any costs that it determines
are attributable to the maintenance by such Lender (or any Applicable Lending
Office or such bank holding company), pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) of any court or
governmental or monetary authority (i) following any Regulatory Change or (ii)
implementing any risk-based capital guideline or other requirement (whether or
not having the force of law and whether or not the failure to comply therewith
would be unlawful) hereafter issued by any government or governmental or
supervisory authority implementing at the national level the Basle Accord, of
capital in respect of its Commitments or Loans (such compensation to include,
without limitation, an amount equal to any reduction of the rate of return on
assets or equity of such Lender (or any Applicable Lending Office or such bank
holding company) to a level below that which such Lender (or any Applicable
Lending Office or such bank holding company) could have achieved but for such
law, regulation, interpretation, directive or request).
(c) Each Lender shall notify the Borrower of any event occurring after the
date hereof entitling such Lender to compensation under paragraph (a) or (b) of
this Section 5.01 as promptly as practicable, but in any event within 45 days,
after such Lender obtains actual knowledge thereof; provided that (i) if any
--------
Lender fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Lender shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 45 days prior to the date that such Lender does
give such notice and (ii) each Lender will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, except that such Lender
Credit Agreement
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shall have no obligation to designate an Applicable Lending Office located in
the United States of America. Each Lender will furnish to the Borrower a
certificate setting forth the basis and amount of each request by such Lender
for compensation under paragraph (a) or (b) of this Section 5.01. Determinations
and allocations by any Lender for purposes of this Section 5.01 of the effect of
any Regulatory Change pursuant to paragraph (a) of this Section 5.01, or of the
effect of capital maintained pursuant to paragraph (b) of this Section 5.01, on
its costs or rate of return of maintaining Loans or its obligation to make
Loans, or on amounts receivable by it in respect of Loans, and of the amounts
required to compensate such Lender under this Section 5.01, shall be conclusive,
provided that such determinations and allocations are made on a reasonable
- --------
basis.
5.02 Limitation on Types of Loans. Anything herein to the contrary
----------------------------
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period:
(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(b) if the related Loans are Revolving Credit Loans, the Majority Revolving
Credit Lenders, if the related Loans are Term Loans, the Majority Term Loan
Lenders, or if the related Loans are Incremental Facility Loans of any
Series, the Majority Incremental Facility Lenders of such Series determine,
which determination shall be conclusive, and notify the Administrative
Agent that the relevant rates of interest referred to in the definition of
"Eurodollar Base Rate" in Section 1.01 hereof upon the basis of which the
rate of interest for Eurodollar Loans for such Interest Period is to be
determined are not likely adequately to cover the cost to such Lenders of
making or maintaining Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Borrower and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the
Borrower shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans
into Base Rate Loans in accordance with Section 2.09 hereof.
5.03 Illegality. Notwithstanding any other provision of this Agreement,
----------
in the event that it becomes unlawful for any Lender or its Applicable Lending
Office to honor its obligation to make or maintain Eurodollar Loans hereunder
(and, in the sole opinion of such
Credit Agreement
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Lender, the designation of a different Applicable Lending Office would either
not avoid such unlawfulness or would be disadvantageous to such Lender), then
such Lender shall promptly notify the Borrower thereof (with a copy to the
Administrative Agent) and such Lender's obligation to make or Continue, or to
Convert Loans of any other Type into, Eurodollar Loans shall be suspended until
such time as such Lender may again make and maintain Eurodollar Loans (in which
case the provisions of Section 5.04 hereof shall be applicable).
5.04 Treatment of Affected Loans. If the obligation of any Lender to make
---------------------------
Eurodollar Loans of any Class or to Continue, or to Convert Base Rate Loans
into, Eurodollar Loans of any Class shall be suspended pursuant to Section 5.01
or 5.03 hereof, such Lender's Eurodollar Loans of such Class shall be
automatically Converted into Base Rate Loans of such Class on the last day(s) of
the then current Interest Period(s) for Eurodollar Loans (or, in the case of a
Conversion resulting from a circumstance described in Section 5.03 hereof, on
such earlier date as such Lender may specify to the Borrower with a copy to the
Administrative Agent) and, unless and until such Lender gives notice as provided
below that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans of such Class have been
so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Eurodollar Loans of such Class shall
be applied instead to its Base Rate Loans of such Class; and
(b) all Loans of such Class that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans of such Class of such Lender that would
otherwise be Converted into Eurodollar Loans shall remain as Base Rate
Loans.
If such Lender gives notice to the Borrower with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans of the same
Class made by other Lenders are outstanding, such Lender's Base Rate Loans of
such Class shall be automatically Converted, on the first day(s) of the next
succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the
extent necessary so that, after giving effect thereto, all Base Rate and
Eurodollar Loans of such Class are allocated among the Lenders ratably (as to
principal amounts, Types and Interest Periods) in accordance with their
respective Commitments of such Class.
5.05 Compensation. The Borrower shall pay to the Administrative Agent
------------
for account of each Lender, upon the request of such Lender through the
Administrative Agent, such
Credit Agreement
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amount or amounts as shall be sufficient (in the reasonable opinion of such
Lender) to compensate it for any loss, cost or expense that such Lender
determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a Eurodollar
Loan made by such Lender for any reason (including, without limitation, the
acceleration of the Loans pursuant to Section 9 hereof) on a date other
than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including, without limitation,
the failure of any of the conditions precedent specified in Section 6
hereof to be satisfied) to borrow a Eurodollar Loan from such Lender on the
date for such borrowing specified in the relevant notice of borrowing given
pursuant to Section 2.02 hereof.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Lender).
5.06 Additional Costs in Respect of Letters of Credit. Without limiting the
------------------------------------------------
obligations of the Borrower under Section 5.01 hereof (but without duplication),
if as a result of any Regulatory Change or any risk-based capital guideline or
other requirement heretofore or hereafter issued by any government or
governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing participations in) or maintaining its
obligation hereunder to issue (or purchase participations in) any Letter of
Credit hereunder or reduce any amount receivable by any Lender hereunder in
respect of any Letter of Credit (which increases in cost, or reductions in
amount receivable, shall be the result of such Lender's or Lenders' reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then, upon demand by such Lender or Lenders (through the Administrative
Agent), the Borrower shall pay immediately to the Administrative Agent for
account of such Lender or Lenders, from time to time as specified by such Lender
or Lenders (through the Administrative Agent), such additional amounts as shall
be sufficient to compensate
Credit Agreement
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such Lender or Lenders (through the Administrative Agent) for such increased
costs or reductions in amount. A statement as to such increased costs or
reductions in amount incurred by any such Lender or Lenders, submitted by such
Lender or Lenders to the Borrower shall be conclusive in the absence of manifest
error as to the amount thereof.
5.07 U.S. Taxes.
----------
(a) The Borrower agrees to pay to each Lender that is not a U.S. Person such
additional amounts as are necessary in order that the net payment of any amount
due to such non-U.S. Person hereunder after deduction for or withholding in
respect of any U.S. Taxes imposed with respect to such payment (or in lieu
thereof, payment of such U.S. Taxes by such non-U.S. Person), will not be less
than the amount stated herein to be then due and payable, provided that the
--------
foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to any Lender hereunder unless such Lender
is, on the date hereof (or on the date it becomes a Lender hereunder as
provided in Section 11.06(b) hereof) and on the date of any change in the
Applicable Lending Office of such Lender, either entitled to submit a Form
1001 (relating to such Lender and entitling it to a complete exemption from
withholding on all interest to be received by it hereunder in respect of
the Loans) or a Form 4224 (relating to all interest to be received by such
Lender hereunder in respect of the Loans), or
(ii) to any U.S. Taxes imposed solely by reason of the failure
by such non-U.S. Person (or, if such non-U.S. Person is not the beneficial
owner of the relevant Loan, such beneficial owner) to comply with
applicable certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity or connections
with the United States of America of such non-U.S. Person (or beneficial
owner, as the case may be) if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 5.06(a), (A) "Form 1001" shall mean Form 1001
---------
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America and (B) "Form 4224" shall mean Form
---------
4224 (Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates).
Credit Agreement
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(b) Within 30 days after paying any amount to the Administrative Agent or any
Lender from which it is required by law to make any deduction or withholding,
and within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, the Borrower shall
deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
5.08 Replacement of Lenders. If any Lender requests compensation pursuant
----------------------
to Section 5.01, 5.06 or 5.07 hereof, or any Lender's obligation to make or
Continue, or to Convert Loans of any Type into, the other Type of Loan shall be
suspended pursuant to Section 5.01 or 5.03 hereof (any such Lender requesting
such compensation being herein called a "Requesting Lender"), the Borrower, upon
-----------------
three Business Days notice, may require that such Requesting Lender transfer all
of its right, title and interest under this Agreement to any bank or other
financial institution (a "Proposed Lender") identified by the Borrower that is
---------------
reasonably satisfactory to the Administrative Agent (i) if such Proposed Lender
agrees to assume all of the obligations of such Requesting Lender hereunder, and
to purchase all of such Requesting Lender's Loans hereunder for consideration
equal to the aggregate outstanding principal amount of such Requesting Lender's
Loans, together with interest thereon to the date of such purchase, and
satisfactory arrangements are made for payment to such Requesting Lender of all
other amounts payable hereunder to such Requesting Lender on or prior to the
date of such transfer (including any fees accrued hereunder and any amounts that
would be payable under Section 5.05 hereof, as if all of such Requesting
Lender's Loans were being prepaid in full on such date) and (ii) if such
Requesting Lender has requested compensation pursuant to said Section 5.01, 5.06
or 5.07 hereof, such Proposed Lender's aggregate requested compensation, if any,
pursuant to said Section 5.01, 5.06 or 5.07 with respect to such Requesting
Lender's Loans is lower than that of the Requesting Lender. Subject to the
provisions of Section 11.06(b) hereof, such Proposed Lender shall be a "Lender"
for all purposes hereunder. Without prejudice to the survival of any other
agreement of the Borrower hereunder the agreements of the Borrower contained in
Sections 5.01, 5.06, 5.07 and 11.03 hereof (without duplication of any payments
made to such Requesting Lender by the Borrower or the Proposed Lender) shall
survive for the benefit of such Requesting Lender under this Section 5.08 with
respect to the time prior to such replacement.
Section 6. Conditions Precedent.
6.01 Initial Extension of Credit. The obligation of any Lender to make
---------------------------
its initial extension of credit hereunder (whether by making a Loan or issuing a
Letter of Credit) is subject to the conditions precedent that (i) such extension
of credit shall occur on or before January 31, 1998 and (ii) the Administrative
Agent shall have received the following documents (with, in the case of clauses
(a), (b), (c) and (d) below, sufficient copies for each Lender), each of which
shall
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----------------
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be satisfactory to the Administrative Agent (and to the extent specified below,
to each Lender) in form and substance:
(a) Corporate Documents. Certified copies of each of the Operating Agreement
-------------------
and of the charter and by-laws (or equivalent documents) of each Obligor
and of all limited liability company and corporate authority for each
Obligor (including, without limitation, board of director resolutions,
member approvals and evidence of incumbency, including specimen signatures,
of officers of each Obligor) with respect to the execution, delivery and
performance of the Basic Documents to which such Obligor is to be a party
and each other document to be delivered by such Obligor from time to time
in connection herewith and the extensions of credit hereunder (and the
Administrative Agent and each Lender may conclusively rely on such
certificate until it receives notice in writing from such Obligor to the
contrary).
(b) Officer's Certificate. A certificate of a Senior Officer, dated the
---------------------
Closing Date, to the effect set forth in the first sentence of Section 6.02
hereof.
(c) Opinions of Counsel to the Obligors. An opinion, dated the Closing Date,
-----------------------------------
of Cooperman Levitt Winikoff Lester & Newman, P.C., counsel to the
Obligors, substantially in the form of Exhibit G hereto and covering such
other matters as the Administrative Agent or any Lender may reasonably
request (and the Borrower hereby instructs such counsel to deliver such
opinion to the Lenders and the Administrative Agent).
(d) Opinion of Special New York Counsel to Chase. An opinion, dated the
--------------------------------------------
Closing Date, of Milbank, Tweed, Hadley & McCloy, special New York counsel
to Chase, substantially in the form of Exhibit H hereto (and Chase hereby
instructs such counsel to deliver such opinion to the Lenders).
(e) Notes. Promissory notes for each Lender that shall have requested the
-----
execution and delivery of a promissory note, on or prior to the Closing
Date, pursuant to Section 2.08(d) hereof.
(f) Security Agreement. The Security Agreement, duly executed and delivered by
------------------
the Borrower, each of the Subsidiaries of the Borrower in existence on the
Closing Date and the Administrative Agent. In addition, each such Obligor
shall have taken such other action as the Administrative Agent shall have
requested in order to perfect the security interests created pursuant to
the Security Agreement, including, without limitation, delivering to the
Administrative Agent, for filing, appropriately completed and duly executed
copies of Uniform Commercial Code financing statements.
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----------------
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(g) Guarantee and Pledge Agreement. The Guarantee and Pledge Agreement, duly
------------------------------
executed and delivered by Mediacom and the Administrative Agent and the
certificates (if any) evidencing the ownership interests in the Borrower
held by Mediacom, accompanied by undated stock powers executed in blank.
In addition, Mediacom shall have taken such other action as the
Administrative Agent shall have requested in order to perfect the security
interests created pursuant to the Guarantee and Pledge Agreement,
including, without limitation, delivering to the Administrative Agent, for
filing, appropriately completed and duly executed copies of Uniform
Commercial Code financing statements.
(h) Management Fee Subordination Agreement. A Management Fee Subordination
--------------------------------------
Agreement, duly executed and delivered by the Borrower, the Manager and the
Administrative Agent.
(i) Cablevision Acquisition. Evidence that (x) Mediacom shall have assigned
-----------------------
all of its rights to acquire the CATV Systems to be sold by the Sellers
under the Cablevision Acquisition Agreement to the Borrower, (y) the
Cablevision Acquisition shall have been duly consummated by the Borrower
for an aggregate purchase price not exceeding $315,000,000 (subject to
purchase price adjustments as set forth in the Cablevision Acquisition
Agreement) in all material respects in accordance with the terms of the
Cablevision Acquisition Agreement, including the schedules and exhibits
thereto (and no material provision thereof shall have been waived, amended,
supplemented or otherwise modified in any material respect without the
consent of the Majority Lenders) and (z) Franchises covering at least 90%
of the Basic Subscribers to the CATV Systems to be acquired in connection
with the Cablevision Acquisition shall have been transferred by the Sellers
to the Borrower; and the Administrative Agent shall have received a
certificate of a Senior Officer to such effect and to the effect that
attached thereto are true and complete copies of the documents delivered in
connection with the closing thereunder, together with (in the case of each
legal opinion delivered to the Borrower pursuant thereto) a letter from
each Person delivering such opinion (which shall in any event include an
opinion of special FCC counsel) authorizing reliance thereon by the
Administrative Agent and the Lenders.
(j) Release of Existing Liens. Evidence that, to the extent the assets
-------------------------
purchased in the Cablevision Acquisition shall be subject to any Liens not
permitted hereunder, such Liens shall have been released (or arrangements
for such release satisfactory to the Administrative Agent shall have been
made).
(k) Capitalization. Evidence that (i) not less than $94,000,000 shall have
--------------
been contributed to the Borrower as an equity contribution by Mediacom to
the Borrower and (ii) the Borrower shall have received an additional
$20,000,000 representing proceeds of
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----------------
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the issuance of Preferred Membership Interests to Mediacom, in each case
upon terms and conditions in form and substance satisfactory to the
Majority Lenders, and the Administrative Agent shall have received copies
of each of the instruments pursuant to which such equity interests and
Preferred Membership Interests shall have been issued by Mediacom and the
Borrower, in each case certified by a Senior Officer.
(l) Pro Forma Financial Statements. An unaudited consolidated pro forma
------------------------------ --- -----
balance sheet of the Borrower and its Subsidiaries as at the Closing Date
giving effect to the Cablevision Acquisition and the initial Loans
hereunder to be outstanding on the Closing Date (subject, however, to asset
value adjustments based on subsequent appraisals), and a consolidated pro
---
forma calculation of Adjusted System Cash Flow of the Borrower and its
-----
Subsidiaries for the fiscal quarter ending September 30, 1997, in each case
in form and providing such details as are reasonably satisfactory to the
Administrative Agent, together with a certificate of a Senior Officer
stating that said balance sheet and calculation fairly present the pro
forma financial condition and Adjusted System Cash Flow of the Borrower and
its Subsidiaries as at such date and period, as applicable, in accordance
with GAAP, after giving effect to the Cablevision Acquisition and the
initial Loans hereunder to be outstanding on the Closing Date.
(m) Adjusted System Cash Flow. Evidence that the product of Adjusted System
-------------------------
Cash Flow for the fiscal quarter ending on or most recently prior to the
Closing Date times four is at least equal to $35,750,000.
-----
(n) Approvals. Evidence of receipt of all material licenses, permits,
---------
approvals and consents, if any, required (or, in the discretion of the
Administrative Agent, advisable) with respect to the Cablevision
Acquisition (including, without limitation, the consents of the respective
municipal franchising authorities to the acquisition of the respective CATV
Systems being acquired by the Borrower pursuant to the Cablevision
Acquisition) other than the Retained Franchises.
(o) Total Leverage Ratio Certificate. A certificate of a Senior Officer, dated
--------------------------------
the Closing Date, setting forth, in reasonable detail, the calculation (and
the basis for such calculation) of Rate Ratio as of such date.
(p) Other Documents. Such other documents as the Administrative Agent or any
---------------
Lender or special New York counsel to Chase may reasonably request.
The obligation of any Lender to make its initial extension of credit hereunder
is also subject to the payment by the Borrower of such fees as the Borrower
shall have agreed to pay or deliver to any Lender or the Administrative Agent in
connection herewith, including, without limitation, the reasonable fees and
expenses of Milbank, Tweed, Hadley & McCloy, special New York
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----------------
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counsel to Chase, in connection with the negotiation, preparation, execution and
delivery of this Agreement and the other Loan Documents and the extensions of
credit hereunder (to the extent that statements for such fees and expenses have
been delivered to the Borrower).
6.02 Initial and Subsequent Extensions of Credit. The obligation of the
-------------------------------------------
Lenders to make any Loan or otherwise extend any credit to the Borrower upon the
occasion of each borrowing or other extension of credit hereunder (including the
initial borrowing) is subject to the further conditions precedent that, both
immediately prior to the making of such Loan or other extension of credit and
also after giving effect thereto and to the intended use thereof:
(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by the Borrower in Section 7
hereof, and by each Obligor in the other Loan Documents to which it is a
party, shall be true and complete on and as of the date of the making of
such Loan or other extension of credit with the same force and effect as if
made on and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date).
Each notice of borrowing or request for the issuance of a Letter of Credit by
the Borrower hereunder shall constitute a certification by the Borrower to the
effect set forth in the preceding sentence (both as of the date of such notice
or request and, unless the Borrower otherwise notifies the Administrative Agent
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
Section 7. Representations and Warranties. The Borrower represents and
warrants to the Administrative Agent and the Lenders that:
7.01 Corporate Existence. Each of the Borrower and its Subsidiaries:
-------------------
(a) is a corporation, partnership, limited liability company or other entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (c) is qualified to do business and is in good
standing in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure so to qualify could
(either individually or in the aggregate) have a Material Adverse Effect.
Credit Agreement
----------------
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7.02 Financial Condition. The Borrower has heretofore furnished to each
-------------------
of the Lenders the following financial statements:
(i) the audited consolidated balance sheet of U.S. Cable for the
fiscal year ended December 31, 1996, and the related consolidated statement
of income for such fiscal year;
(ii) the unaudited consolidated balance sheets of U.S. Cable as
at March 31, 1997, June 30, 1997 and September 30, 1997 and the related
unaudited consolidated statements of income for the fiscal quarters ended
on such dates; and
(iii) an unaudited pro forma consolidated balance sheet of the
Borrower and its Subsidiaries as at September 30, 1997 and an unaudited pro
forma consolidated statement of System Cash Flow for the fiscal quarter
ended on such date, in each case prepared under the assumption that the
Cablevision Acquisition was consummated on July 1, 1997 and that all of the
transactions contemplated by Section 6.01 hereof had been effected on such
date.
All such financial statements are complete and correct and fairly present in all
material respects the actual or pro forma (as the case may be) consolidated
financial condition of the respective entities as at said respective dates and
the actual or pro forma (as the case may be) results of their operations for the
applicable periods ended on said respective dates, all in accordance with
generally accepted accounting principles and practices applied on a consistent
basis. The financial statements of U.S. Cable referred to in clauses (i) and
(ii) above include in the consolidation the financial position and results of
operations of ECC and Missouri L.P. and do not include the financial position
and results of operations of any other entity, whether or not a subsidiary of
any of the Sellers, or any other CATV Systems (other than CATV Systems to be
acquired pursuant to the Cablevision Acquisition, or CATV Systems covered by the
Retained Franchises). As of the date hereof, there are no material contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments of U.S. Cable,
ECC or Missouri L.P., or any of the CATV Systems to be acquired pursuant to the
Cablevision Acquisition, except as referred to or reflected or provided for in
said unaudited financial statements as at June 30, 1997.
Since September 30, 1997, there has been no material adverse change in the
consolidated financial condition, operations, business or prospects (x) of the
Borrower and its Subsidiaries taken as a whole from that set forth in said pro
forma balance sheet as at said date referred to in clause (iii) above (other
than with respect to the Retained Franchises, to the extent not transferred to
the Borrower on the Closing Date), or (y) of the CATV Systems (taken as a whole)
to be purchased by the Borrower on the Closing Date from that set forth in said
financial statements as at said date referred to in clause (ii) above.
Credit Agreement
----------------
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7.03 Litigation. There are no legal or arbitral proceedings, or any
----------
proceedings or investigations by or before any governmental or regulatory
authority or agency, now pending or (to the knowledge of the Borrower)
threatened against the Borrower or any of its Subsidiaries, or against the
Sellers (and in respect of which the Borrower would be obligated after giving
effect to the Cablevision Acquisition), that, if adversely determined could
(either individually or in the aggregate) have a Material Adverse Effect.
7.04 No Breach. None of the execution and delivery of this Agreement and
---------
the other Basic Documents, the consummation of the transactions herein and
therein contemplated or compliance with the terms and provisions hereof and
thereof will conflict with or result in a breach of, or require any consent
under, the Operating Agreement, or any applicable law or regulation, or any
order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which the Borrower or any of its
Subsidiaries is a party or by which any of them or any of their Property is
bound or to which any of them is subject, or constitute a default under any such
agreement or instrument, or (except for the Liens created pursuant to the
Security Documents) result in the creation or imposition of any Lien upon the
Borrower or any of its Subsidiaries pursuant to the terms of any such agreement
or instrument.
7.05 Action. The Borrower has all necessary limited liability company
------
power, authority and legal right to execute, deliver and perform its obligations
under each of the Basic Documents to which it is a party; the execution,
delivery and performance by the Borrower of each of the Basic Documents to which
it is a party have been duly authorized by all necessary limited liability
company action on its part (including, without limitation, any required member
approvals); and this Agreement has been duly and validly executed and delivered
by the Borrower and constitutes, and the other Basic Documents to which it is a
party when executed and delivered will constitute, its legal, valid and binding
obligation, enforceable against the Borrower in accordance with its terms,
except as such enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and (b) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
7.06 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by the Borrower of this Agreement or any of the other Basic
Documents to which it is a party or for the legality, validity or enforceability
hereof or thereof, except for (i) filings and recordings in respect of the Liens
created pursuant to the Security Documents, (ii) the authorizations, approvals,
consents, filings and registrations contemplated by the Cablevision Acquisition
Agreement (each of which shall have been made or obtained on or before the date
the Cablevision Acquisition is consummated,
Credit Agreement
----------------
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to the extent required under the Cablevision Acquisition Agreement to be
obtained before such date, except that orders of the FCC may not have become
final under the rules and regulations of the FCC) and (iii) the exercise of
remedies under the Security Documents (and the creation of a valid security
interest in Franchises and the other Collateral as described in Sections 6.01(f)
and 8.18 hereof) may require the prior approval of the FCC or the issuing
municipalities or States under one or more of the Franchises.
7.07 ERISA. Each Plan, and, to the knowledge of the Borrower, each
-----
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which the Borrower would be
under an obligation to furnish a report to the Lenders under Section 8.01(g)
hereof.
7.08 Taxes. The Borrower and each of its Subsidiaries has filed all
-----
Federal income tax returns and all other material tax returns and information
statements that are required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any assessment received by the Borrower
or any of its Subsidiaries, except such taxes, if any, as are being contested in
good faith and as to which adequate reserves have been set aside by the Borrower
in accordance with GAAP. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes and other governmental charges
are, in the opinion of the Borrower, adequate. The Borrower has not given or
been requested to give a waiver of the statute of limitations relating to the
payment of any Federal, state, local and foreign taxes or other impositions.
7.09 Investment Company Act. Neither the Borrower nor any of its
----------------------
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.10 Public Utility Holding Company Act. Neither the Borrower nor any of
----------------------------------
its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7.11 Material Agreements and Liens.
-----------------------------
(a) Part A of Schedule II hereto sets forth (i) a complete and correct list of
each credit agreement, loan agreement, indenture, purchase agreement,
guarantee, letter of credit or other arrangement (other than the Loan
Documents) providing for or otherwise relating to any Indebtedness or any
extension of credit (or commitment for any extension of credit) to, or
guarantee by, the Borrower or any of its Subsidiaries, outstanding on the
date hereof, or that
Credit Agreement
----------------
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(after giving effect to the transactions contemplated hereunder to occur on
or before the Closing Date) will be outstanding on the Closing Date, the
aggregate principal or face amount of which equals or exceeds (or may equal
or exceed) $500,000, and the aggregate principal or face amount outstanding
or that may become outstanding under each such arrangement is correctly
described in Part A of said Schedule II, and (ii) a statement of the
aggregate amount of obligations in respect of surety and performance bonds
backing pole rental or conduit attachments and the like, or backing
obligations under Franchises, of the Borrower or any of its Subsidiaries
outstanding on the date hereof, or that (after giving effect to the
transactions contemplated hereunder to occur on or before the Closing Date)
will be outstanding on the Closing Date.
(b) Part B of Schedule II hereto is a complete and correct list of each Lien
(other than the Liens created pursuant to the Security Documents) securing
Indebtedness of any Person outstanding on the date hereof, or that (after
giving effect to the transactions contemplated hereunder to occur on or
before the Closing Date) will be outstanding on the Closing Date, the
aggregate principal or face amount of which equals or exceeds (or may equal
or exceed) $500,000 and covering any Property of the Borrower or any of its
Subsidiaries, and the aggregate Indebtedness secured (or that may be
secured) by each such Lien and the Property covered by each such Lien is
correctly described in Part B of said Schedule II.
7.12 Environmental Matters. The Borrower and each of its Subsidiaries has
---------------------
obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business as
now being or as proposed to be conducted, except to the extent failure to have
any such permit, license or authorization would not (either individually or in
the aggregate) have a Material Adverse Effect. Each of such permits, licenses
and authorizations is in full force and effect and the Borrower and each of its
Subsidiaries is in compliance with the terms and conditions thereof, and is also
in compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
therewith would not (either individually or in the aggregate) have a Material
Adverse Effect. In addition, no notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and, to the Borrower's knowledge, no
investigation or review is pending or threatened by any governmental or other
entity with respect to any alleged failure by the Borrower or any of its
Subsidiaries to have any environmental, health or safety permit, license or
other authorization required under any Environmental Law in connection with the
conduct of the business of the Borrower or any of its Subsidiaries or with
respect to any generation, treatment, storage, recycling, transportation,
discharge or disposal, or any Release of any Hazardous Materials generated by
the Borrower or any of its Subsidiaries. All environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or that are in
the possession of the Borrower or any of its Subsidiaries in
Credit Agreement
----------------
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relation to facts, circumstances or conditions at or affecting
any site or facility now or previously owned, operated or leased by the Borrower
or any of its Subsidiaries and that could result in a Material Adverse Effect
have been made available to the Lenders.
7.13 Capitalization. The Borrower has heretofore delivered to the Lenders
--------------
true and complete copies of the Operating Agreement. The only member of the
Borrower on the date hereof is Mediacom. As of the date hereof, except for
Sections 6.2 and 7.3 of the Operating Agreement relating to Preferred Membership
Interests, (x) there are no outstanding Equity Rights with respect to the
Borrower and (y) except for the redemption permitted pursuant to Section 8.09(e)
hereof, there are no outstanding obligations of the Borrower or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any equity interests in
the Borrower nor are there any outstanding obligations of the Borrower or any of
its Subsidiaries to make payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market value or equity value of the Borrower or any of its Subsidiaries.
7.14 Subsidiaries, Etc.
------------------
(a) As of the date hereof, the Borrower has no Subsidiaries.
(b) Set forth in Schedule III hereto is a complete and correct list of all
Investments (other than Investments of the type referred to in paragraphs
(b), (c) and (e) of Section 8.08 hereof) held by the Borrower or any of its
Subsidiaries in any Person on the date hereof and, for each such
Investment, (x) the identity of the Person or Persons holding such
Investment and (y) the nature of such Investment. Except as disclosed in
Schedule III hereto, the Borrower and each of its Subsidiaries owns, free
and clear of all Liens (other than the Liens created pursuant to the
Security Documents), all such Investments.
(c) None of the Subsidiaries of the Borrower is, on the date hereof, subject to
any indenture, agreement, instrument or other arrangement of the type
described in Section 8.18(d) hereof.
7.15 True and Complete Disclosure. The information, reports, financial
----------------------------
statements, exhibits and schedules (including the Information Memorandum, other
than the information contained therein with respect to the Sellers and
Cablevision) furnished in writing by or on behalf of the Borrower to the
Administrative Agent or any Lender in connection with the negotiation,
preparation or delivery of this Agreement and the other Loan Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole do not contain any untrue statement of material fact or omit to state
any material fact necessary to make the statements herein or therein, in light
of the circumstances under which they were made, not misleading. Nothing has
come to the attention of the Borrower which would lead the Borrower to believe
that the information contained in the Information Memorandum with respect to the
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Sellers and Cablevision includes any untrue statement of a material fact or
omits to state any material fact necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading. All written
information furnished after the date hereof by the Borrower and its Subsidiaries
to the Administrative Agent and the Lenders in connection with this Agreement
and the other Loan Documents and the transactions contemplated hereby and
thereby will be true, complete and accurate in every material respect, or (in
the case of projections) based on reasonable estimates, on the date as of which
such information is stated or certified. There is no fact known to the Borrower
that could have a Material Adverse Effect (other than facts affecting the cable
television industry in general) that has not been disclosed herein, in the other
Loan Documents or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to the Lenders for use in
connection with the transactions contemplated hereby or thereby.
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7.16 Franchises. Set forth in Schedule IV hereto is a complete and correct
----------
list of all Franchises (identified by issuing authority, franchisee and
expiration date) (i) owned by the Borrower and its Subsidiaries on the date
hereof or (ii) that, with the exception of any Retained Franchises, will by
owned by the Borrower on the Closing Date (after giving effect to the
Cablevision Acquisition), and identifying the respective Seller from which such
Franchises are to be purchased. The Borrower and each of its Subsidiaries
possesses or has the right to use, or will possess or have the right to use on
the Closing Date (after giving effect to the Cablevision Acquisition), all such
Franchises (other than any Retained Franchises), and all copyrights, licenses,
trademarks, service marks, trade names or other rights, including licenses and
permits granted by the FCC, agreements with public utilities and microwave
transmission companies, pole or conduit attachment, use, access or rental
agreements and utility easements that are necessary for the conduct of the CATV
Systems of the Borrower and its Subsidiaries, except for such of the foregoing
the absence of which could not have a Material Adverse Effect on the Borrower or
any of its Subsidiaries, and each of such Franchises, copyrights, licenses,
patents, trademarks, service marks, trade names and rights is (or on the Closing
Date will be) in full force and effect and no material default has occurred and
is continuing thereunder. No approval, application, filing, registration,
consent or other action of any local, state or federal authority is required to
enable the Borrower or any of its Subsidiaries to operate the CATV Systems of
the Borrower and its Subsidiaries, except for approvals, applications, filings,
registrations, consents or other actions relating to the Retained Franchises or
that (if not made or obtained) could not have a Material Adverse Effect on the
Borrower or any of its Subsidiaries. Neither the Borrower or any of its
Subsidiaries nor (to the knowledge of the Borrower) any of the Sellers has
received any notice from the granting body or any other governmental authority
with respect to any breach of any covenant under, or any default with respect
to, any Franchise. Complete and correct copies of all Franchises have heretofore
been made available to the Administrative Agent.
7.17 The CATV Systems.
----------------
(a) The Borrower and each of its Subsidiaries, and, (after giving effect to
the transactions contemplated hereunder to occur on or before the Closing Date),
the CATV Systems to be owned by it, are in compliance with all applicable
federal, state and local laws, rules and regulations, including without
limitation, the Communications Act of 1934, the Cable Communications Policy Act
of 1984, the Cable Television Consumer Protection and Competition Act of 1992,
the Copyright Revision Act of 1976, and the rules and regulations of the FCC and
the United States Copyright Office, including, without limitation, rules and
laws governing system registration, use of aeronautical frequencies and signal
carriage, equal employment opportunity, cumulative leakage index testing and
reporting, signal leakage, and subscriber privacy, except to the extent that the
failure to so comply with any of the foregoing could not (either individually or
in the aggregate) reasonably be expected to have a Material Adverse Effect.
Without limiting the generality of the foregoing (except to the extent that the
failure to comply with any of the following could not (either individually or in
the aggregate)
Credit Agreement
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reasonably be expected to have a Material Adverse Effect and except as set forth
in Schedule V hereto:
(i) the communities included in the areas covered by the
Franchises have been registered with the FCC;
(ii) all of the annual performance tests on such CATV Systems
required under the rules and regulations of the FCC have been performed and
the results of such tests demonstrate satisfactory compliance with the
applicable requirements being tested in all material respects;
(iii) to the knowledge of the Borrower, such CATV Systems
currently meet or exceed the technical standards set forth in the rules and
regulations of the FCC, including, without limitation, the leakage limits
contained in 47 C.F.R. Section 76.605(a)(11);
(iv) to the knowledge of the Borrower, such CATV Systems are
being operated in compliance with the provisions of 47 C.F.R. Sections
76.610 through 76.619 (mid-band and super-band signal carriage), including
47 C.F.R. Section 76.611 (compliance with the cumulative signal leakage
index); and
(v) to the knowledge of the Borrower, where required,
appropriate authorizations from the FCC have been obtained for the use of
all aeronautical frequencies in use in such CATV Systems and such CATV
Systems are presently being operated in compliance with such authorizations
(and all required certificates, permits and clearances from governmental
agencies, including the Federal Aviation Administration, with respect to
all towers, earth stations, business radios and frequencies utilized and
carried by such CATV Systems have been obtained).
(b) To the knowledge of the Borrower, all notices, statements of account,
supplements and other documents required under Section 111 of the Copyright Act
of 1976 and under the rules of the Copyright Office with respect to the carriage
of off-air signals by the CATV Systems (the "Copyright Filings") to be owned by
-----------------
the Borrower and its Subsidiaries (after giving effect to the transactions
contemplated hereunder to occur on or before the Closing Date) have been duly
filed, and the proper amount of copyright fees have been paid on a timely basis,
and each such CATV System qualifies for the compulsory license under Section 111
of the Copyright Act of 1976, except to the extent that the failure to so file
or pay could not (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect. To the knowledge of the Borrower,
there is no pending claim, action, demand or litigation by any other person with
respect to the Copyright Filings or related royalty payments made by the CATV
Systems.
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(c) The carriage of all off-air signals by the CATV Systems to be owned by
the Borrower and its Subsidiaries (after giving effect to the transactions
contemplated hereunder to occur on or before the Closing Date) is permitted by
valid transmission consent agreements or by must-carry elections by
broadcasters, or is otherwise permitted under applicable law, except to the
extent the failure to obtain any of the foregoing could not (either individually
or in the aggregate) reasonably be expected to have a Material Adverse Effect.
(d) The assets of the CATV Systems to be owned by the Borrower and its
Subsidiaries (after giving effect to the transactions contemplated hereunder to
occur on or before the Closing Date) are adequate and sufficient in all material
respects for all of the current operations of such CATV Systems.
7.18 Rate Regulation. Each of the Borrower and its Subsidiaries have
---------------
each reviewed and evaluated in detail the FCC rules currently in effect (the
"Rate Regulation Rules") implementing the rate regulation provisions of the
---------------------
Cable Television Consumer Protection and Competition Act of 1992 (the "Rate
----
Regulation Act"). Based upon such review and completion by the Borrower and its
- --------------
Subsidiaries of all applicable worksheets contemplated by the Rate Regulation
Rules for each CATV System to be owned by the Borrower and its Subsidiaries
(after giving effect to the transactions contemplated hereunder to occur on or
before the Closing Date):
(i) except as set forth in Schedule V hereto, to the knowledge
of the Borrower, none of such CATV Systems is subject to effective
competition as of the date hereof;
(ii) except as set forth in Schedule V hereto, no franchising
authority has notified the Borrower or any of its Subsidiaries or any
Seller of its application to be certified to regulate rates as provided in
Section 76.910 of the Rate Regulation Rules;
(iii) except as set forth in Schedule V hereto, no franchising
authority has notified the Borrower or any of its Subsidiaries or any
Seller that it has been certified and has adopted regulations required to
commence regulation as provided in Section 76.910(c)(2) of the Rate
Regulation Rules;
(iv) except as set forth in Schedule V hereto, there have been
no cable programming rate complaints filed with the FCC; and
(v) no reduction of rates or refunds to subscribers is required
as of the date hereof under the Rate Regulation Act and the Rate Regulation
Rules applicable to the CATV Systems of the Borrower and its Subsidiaries.
7.19 Acquisition Agreement.
---------------------
The Borrower has heretofore delivered to the Administrative Agent a true and
complete copy of the Cablevision Acquisition Agreement
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----------------
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(including all modifications or supplements thereto) and the Cablevision
Acquisition Agreement has been duly executed and delivered by each party thereto
and is in full force and effect.
Section 8. Covenants of the Borrower. The Borrower covenants and agrees
with the Lenders and the Administrative Agent that, so long as any Commitment,
Loan or Letter of Credit Liability is outstanding and until payment in full of
all amounts payable by the Borrower hereunder:
8.01 Financial Statements Etc. The Borrower shall deliver to each of
------------------------
the Lenders:
(a) as soon as available and in any event within 60 days after the end of the
fiscal quarter ending December 31, 1997, pro forma consolidated statements
of income and cash flows of the Borrower and its Subsidiaries for such
period and for the period from July 1, 1997 to the end of such period, and
the related pro forma consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such period, in each prepared under the
assumption that the Cablevision Acquisition was consummated on July 1, 1997
and that all of the transactions contemplated by Section 6.01 hereof had
been effected on such date, accompanied by a certificate of a Senior
Officer, which certificate shall state that said financial statements
fairly present the pro forma consolidated financial condition and results
of operations of the Borrower and its Subsidiaries;
(b) as soon as available and in any event within 60 days after the end of each
quarterly fiscal period of each fiscal year of the Borrower ending after
December 31, 1997, consolidated statements of income, retained earnings and
cash flows of the Borrower and its Subsidiaries for such period and for the
period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such period, setting forth in each case
(other than financial statements for any period ending prior to December
31, 1998) in comparative form the corresponding figures for the
corresponding periods in the preceding fiscal year (except that, in the
case of balance sheets, such comparison shall be to the last day of the
prior fiscal year), accompanied by a certificate of a Senior Officer, which
certificate shall state that said financial statements fairly present the
consolidated financial condition and results of operations of the Borrower
and its Subsidiaries in accordance with generally accepted accounting
principles consistently applied as at the end of, and for, such period
(subject to normal year-end audit adjustments);
(c) as soon as available and in any event within 120 days after the end of each
fiscal year of the Borrower, consolidated statements of income, retained
earnings and cash flows of the Borrower and its Subsidiaries for such
fiscal year and the related
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consolidated balance sheet of the Borrower and its Subsidiaries as at the
end of such fiscal year, setting forth in each case (other than financial
statements for the fiscal year ending December 31, 1998) in comparative
form the corresponding consolidated figures for the preceding fiscal year
and accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall state that
said consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Borrower and its
Subsidiaries as at the end of, and for, such fiscal year in accordance with
generally accepted accounting principles, and a statement of such
accountants to the effect that, in making the examination necessary for
their opinion, nothing came to their attention that caused them to believe
that the Borrower was not in compliance with Sections 8.07, 8.08, 8.09,
8.10, 8.11, 8.12 or 8.15 hereof, insofar as such Sections relate to
accounting matters;
(d) as soon as available and in any event not later than April 30, 1998, the
audited consolidated financial statements for U.S. Cable and its
consolidated Subsidiaries as of and for the year ending December 31, 1997
to be delivered by the Sellers to the Borrower pursuant to Section 9.08 of
the Cablevision Acquisition Agreement;
(e) promptly upon their becoming available, copies of all registration
statements and regular periodic reports, if any, that the Borrower shall
have filed with the Securities and Exchange Commission (or any governmental
agency substituted therefor) or any national securities exchange;
(f) promptly upon the mailing thereof by the Borrower to the members of the
Borrower generally, to holders of Affiliate Subordinated Indebtedness
generally, or by Mediacom to the holders of its senior notes (if any),
copies of all financial statements, reports and proxy statements so mailed;
(g) as soon as possible, and in any event within ten days after the Borrower
knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred
or exists, a statement signed by a Senior Officer setting forth details
respecting such event or condition and the action, if any, that the
Borrower or its ERISA Affiliate proposes to take with respect thereto (and
a copy of any report or notice required to be filed with or given to the
PBGC by the Borrower or an ERISA Affiliate with respect to such event or
condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which the PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided that a failure to meet the minimum
--------
funding standard of Section 412 of the Code or Section 302 of
Credit Agreement
----------------
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ERISA, including, without limitation, the failure to make on or before
its due date a required installment under Section 412(m) of the Code
or Section 302(e) of ERISA, shall be a reportable event regardless of
the issuance of any waivers in accordance with Section 412(d) of the
Code); and any request for a waiver under Section 412(d) of the Code
for any Plan;
(ii) the distribution under Section 4041 of ERISA of a
notice of intent to terminate any Plan or any action taken by the
Borrower or an ERISA Affiliate to terminate any Plan;
(iii) the institution by the PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Borrower or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by the Borrower or any ERISA Affiliate that results
in liability under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a purchaser
default) or the receipt by the Borrower or any ERISA Affiliate of
notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it
intends to terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(vi) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA,
would result in the loss of tax-exempt status of the trust of which
such Plan is a part if the Borrower or an ERISA Affiliate fails to
timely provide security to the Plan in accordance with the provisions
of said Sections;
(h) within 60 days of the end of each quarterly fiscal period of the Borrower,
a Quarterly Officer's Report as at the end of such period;
(i) promptly after the Borrower knows or has reason to believe that any Default
has occurred, a notice of such Default describing the same in reasonable
detail and, together with such notice or as soon thereafter as possible, a
description of the action that the Borrower has taken or proposes to take
with respect thereto; and
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(j) from time to time such other information regarding the financial condition,
operations, business or prospects of the Borrower or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Administrative Agent may reasonably request.
The Borrower will furnish to each Lender, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
Senior Officer (i) to the effect that no Default has occurred and is continuing
(or, if any Default has occurred and is continuing, describing the same in
reasonable detail and describing the action that the Borrower has taken or
proposes to take with respect thereto) and (ii) setting forth in reasonable
detail the computations necessary to determine whether the Borrower is in
compliance with Sections 8.07, 8.08, 8.09, 8.10, 8.11, 8.12 and 8.15 hereof
(including, without limitation, calculations demonstrating compliance with the
requirements of Section 8.09(e)(ii) hereof after giving effect to any Capital
Expenditure pursuant to Section 8.12(b) hereof) as of the end of the respective
quarterly fiscal period or fiscal year.
8.02 Litigation. The Borrower will promptly give to each Lender notice
----------
of all legal or arbitral proceedings, and of all proceedings or investigations
by or before any governmental or regulatory authority or agency, and any
material development in respect of such legal or other proceedings, affecting
the Borrower or any of its Subsidiaries or any of their Franchises, except
proceedings that, if adversely determined, would not (either individually or in
the aggregate) have a Material Adverse Effect. Without limiting the generality
of the foregoing, the Borrower will give to each Lender (i) notice of the
assertion of any Environmental Claim by any Person against, or with respect to
the activities of, the Borrower or any of its Subsidiaries and notice of any
alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations, other than any Environmental Claim or
alleged violation that, if adversely determined, would not (either individually
or in the aggregate) have a Material Adverse Effect and (ii) copies of any
notices received by the Borrower or any of its Subsidiaries under any Franchise
of a material default by the Borrower or any of its Subsidiaries in the
performance of its obligations thereunder.
8.03 Existence, Etc. The Borrower will, and will cause each of
--------------
its Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material rights,
privileges, licenses and franchises (provided that nothing in this Section
--------
8.03 shall prohibit any transaction expressly permitted under Section 8.05
hereof);
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(b) comply with the requirements of all applicable laws, rules, regulations and
orders of governmental or regulatory authorities if failure to comply with
such requirements could (either individually or in the aggregate) have a
Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its Property prior
to the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good
faith and by proper proceedings and against which adequate reserves are
being maintained;
(d) maintain, in all material respects, all of its Properties used or useful in
its business in good working order and condition, ordinary wear and tear
excepted;
(e) keep adequate records and books of account, in which complete entries will
be made in accordance with generally accepted accounting principles
consistently applied; and
(f) permit representatives of any Lender or the Administrative Agent, during
normal business hours, to examine, copy and make extracts from its books
and records, to inspect any of its Properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested by
such Lender or the Administrative Agent (as the case may be).
8.04 Insurance. The Borrower will, and will cause each of its Subsidiaries
---------
to, maintain insurance with financially sound and reputable insurance companies,
and with respect to Property and risks of a character usually maintained by
corporations engaged in the same or similar business similarly situated, against
loss, damage and liability of the kinds and in the amounts customarily
maintained by such corporations, provided that the Borrower will in any event
--------
maintain (with respect to itself and each of its Subsidiaries) casualty
insurance and insurance against claims for damages with respect to defamation,
libel, slander, privacy or other similar injury to person or reputation
(including misappropriation of personal likeness), in such amounts as are then
customary for Persons engaged in the same or similar business similarly
situated.
8.05 Prohibition of Fundamental Changes.
----------------------------------
(a) Restrictions on Merger. The Borrower will not, nor will it permit any of
----------------------
it Subsidiaries to, enter into any transaction of merger or consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution).
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(b) Restrictions on Acquisitions. The Borrower will not, nor will it permit
----------------------------
any of its Subsidiaries to, acquire any business or Property from, or capital
stock of, or be a party to any acquisition of, any Person except for purchases
of equipment, programming rights and other Property to be sold or used in the
ordinary course of business, Investments permitted under Section 8.08(f) hereof,
and Capital Expenditures permitted under Section 8.12 hereof.
(c) Restrictions on Sales and Other Dispositions. The Borrower will not, nor
--------------------------------------------
will it permit any of its Subsidiaries to, convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, any part
of its business or Property, whether now owned or hereafter acquired (including,
without limitation, receivables and leasehold interests, but excluding (i)
obsolete or worn-out Property, tools or equipment no longer used or useful in
its business so long as the amount thereof sold in any single fiscal year by the
Borrower and its Subsidiaries shall not have a fair market value in excess of
$2,000,000 and (ii) any equipment, programming rights or other Property sold or
disposed of in the ordinary course of business and on ordinary business terms).
(d) Certain Permitted Transactions. Notwithstanding the foregoing provisions
------------------------------
of this Section 8.05:
(i) Intercompany Mergers and Consolidations. Any Subsidiary of
---------------------------------------
the Borrower may be merged or consolidated with or into: (x) the Borrower
if the Borrower shall be the continuing or surviving corporation or (y) any
other such Subsidiary; provided that if any such transaction shall be
--------
between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned
Subsidiary shall be the continuing or surviving corporation.
(ii) Intercompany Dispositions. Any Subsidiary of the Borrower
-------------------------
may sell, lease, transfer or otherwise dispose of any or all of its
Property (upon voluntary liquidation or otherwise) to the Borrower or a
Wholly Owned Subsidiary of the Borrower.
(iii) Cablevision Acquisition. The Borrower may consummate the
-----------------------
Cablevision Acquisition, so long as the same is consummated in accordance
in all material respects with the Cablevision Acquisition Agreement.
(iv) Permitted Dispositions. The Borrower or any Wholly Owned
----------------------
Subsidiary of the Borrower may enter into one or more transactions intended
to trade (by means of either an exchange or a sale and subsequent purchase)
one or more of the CATV Systems owned by the Borrower and its Subsidiaries
for one or more CATV Systems owned by any other Person, which transactions
may be effected either by (i) the Borrower or such Wholly Owned Subsidiary
selling one or more CATV Systems owned by it, and either depositing the Net
Available Proceeds thereof into the Collateral Account, or prepaying
Revolving Credit Loans (and creating a Reserved Commitment Amount), as
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contemplated by the second paragraph of Section 2.10(d) hereof, and then
within 270 days acquiring one or more other CATV Systems or (ii) exchanging
one or more CATV Systems, together with cash not exceeding 20% of the fair
market value of such acquired CATV Systems, so long as (x) at the time of
any such transactions and after giving effect thereto, no Default shall
have occurred and be continuing and (y) with respect to any exchange of
CATV Systems pursuant to clause (ii), the sum of (A) the System Cash Flow
for the period of four fiscal quarters ending on, or most recently ended
prior to, the date of such exchange attributable to the CATV Systems being
exchanged plus (B) the System Cash Flow for such period attributable to all
----
other CATV Systems previously exchanged pursuant to said clause (ii) does
not exceed 20% of Adjusted System Cash Flow for such period. If, in
connection with an exchange permitted under this subparagraph (iv), the
Borrower or Wholly Owned Subsidiary receives cash in excess of 20% the fair
market value of the acquired CATV Systems, such exchange shall be permitted
as a sale under this subparagraph (iv) and the cash received by the
Borrower in connection with such transaction shall be applied in accordance
with Section 2.10(d).
(v) Subsequent Acquisitions. The Borrower or a Wholly Owned
-----------------------
Subsidiary of the Borrower may acquire any business or Property from, or
capital stock of, or be a party to any acquisition of, any Person, so long
as:
(A) the aggregate Purchase Price of any individual such acquisition shall
not exceed $50,000,000;
(B) such acquisition (if by purchase of assets, merger or consolidation)
shall be effected in such manner so that the acquired business, and
the related assets, are owned either by the Borrower or a Wholly Owned
Subsidiary of the Borrower and, if effected by merger or consolidation
involving the Borrower, the Borrower shall be the continuing or
surviving entity and, if effected by merger or consolidation involving
a Wholly Owned Subsidiary of the Borrower, such Wholly Owned
Subsidiary shall be the continuing or surviving entity;
(C) such acquisition (if by purchase of stock) shall be effected in such
manner so that the acquired entity becomes a Wholly Owned Subsidiary
of the Borrower;
(D) with respect to any acquisition involving an aggregate Purchase Price
in excess of $10,000,000, the Borrower shall deliver to the
Administrative Agent (which shall promptly forward a copy to each
Lender which requests one) (1) no later than five Business Days prior
to the consummation of each such acquisition (or such earlier date as
shall be five Business Days after the execution and delivery thereof),
copies of the respective agreements or instruments pursuant to
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----------------
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which such acquisition is to be consummated (including, without
limitation, any related management, non-compete, employment, option or
other material agreements), any schedules to such agreements or
instruments and all other material ancillary documents to be executed
or delivered in connection therewith and (2) promptly following
request therefor (but in any event within three Business Days
following such request), copies of such other information or documents
relating to each such acquisition as the Administrative Agent shall
have requested;
(E) with respect to any acquisition involving an aggregate Purchase Price
in excess of $10,000,000, the Administrative Agent shall have received
(and shall promptly forward a copy thereof to each Lender which
requests one) a letter (in the case of each legal opinion delivered to
the Borrower pursuant to such acquisition) from each Person delivering
such opinion (which shall in any event include an opinion of special
FCC counsel) authorizing reliance thereon by the Administrative Agent
and the Lenders;
(F) with respect to any acquisition involving an aggregate Purchase Price
in excess of $10,000,000, the Borrower shall have delivered to the
Administrative Agent and the Lenders evidence satisfactory to the
Administrative Agent and the Majority Lenders of receipt of all
licenses, permits, approvals and consents, if any, required with
respect to such acquisition (including, without limitation, the
consents of the respective municipal franchising authorities to the
acquisition of the respective CATV Systems being acquired (if any));
(G) the entire amount of the consideration payable by the Borrower and its
Subsidiaries in connection with such acquisition (other than customary
post-closing adjustments and indemnity obligations, and other than
Indebtedness incurred in connection with such acquisition that is
permitted under paragraphs (c) or (e) of Section 8.07 hereof) shall be
payable on the date of such acquisition;
(H) neither the Borrower nor any of its Subsidiaries shall, in connection
with such acquisition, assume or remain liable in respect of (x) any
Indebtedness of the seller or sellers (except for Indebtedness
permitted under Section 8.07(e) hereof) or (y) other obligations of
the seller or sellers (except for obligations incurred in the ordinary
course of business in operating the CATV System so acquired and
necessary and desirable to the continued operation of such CATV
System);
(I) to the extent the assets purchased in such acquisition shall be
subject to any Liens not permitted hereunder, such Liens shall have
been released (or
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----------------
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arrangements for such release satisfactory to the Administrative Agent
shall have been made);
(J) to the extent applicable, the Borrower shall have complied with the
provisions of Section 8.18 hereof, including, without limitation, to
the extent not theretofore delivered, delivery to the Administrative
Agent of (x) the shares of stock or other ownership interests,
accompanied by undated stock powers or other powers executed in blank,
and (y) the agreements, instruments, opinions of counsel and other
documents required under Section 8.18 hereof;
(K) after giving effect to such acquisition the Borrower shall be in
compliance with Section 8.10 hereof (the determination of such
compliance to be calculated on a pro forma basis, as at the end of and
for the fiscal quarter most recently ended prior to the date of such
acquisition for which financial statements of the Borrower and its
Subsidiaries are available, under the assumption that such acquisition
shall have occurred, and any Indebtedness in connection therewith
shall have been incurred, at the beginning of the applicable period,
and under the assumption that interest for such period had been equal
to the actual weighted average interest rate in effect for the Loans
hereunder on the date of such acquisition), and the Borrower shall
have delivered to the Administrative Agent a certificate of a Senior
Officer showing such calculations in reasonable detail to demonstrate
such compliance;
(L) immediately prior to such acquisition and after giving effect thereto,
no Default shall have occurred and be continuing; and
(M) the Borrower shall deliver such other documents and shall have taken
such other action as the Majority Lenders or the Administrative Agent
may request (which may include evidence that the Borrower shall have
received an equity contribution from Mediacom or the proceeds of the
issuance of Affiliate Subordinated Indebtedness pursuant to
documentation and in amounts in form and substance satisfactory to the
Majority Lenders and the Administrative Agent).
8.06 Limitation on Liens. The Borrower will not, nor will it permit any
-------------------
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of its Property, whether now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part B of Schedule II
hereto (or, to the extent not meeting the minimum thresholds for required
listing on said
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Schedule II pursuant to Section 7.11 hereof, in an aggregate amount not
exceeding $5,000,000);
(c) Liens imposed by any governmental authority for taxes, assessments or
charges not yet due or that are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Borrower or the affected Subsidiaries, as
the case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other
like Liens arising in the ordinary course of business that are not overdue
for a period of more than 30 days or that are being contested in good faith
and by appropriate proceedings and Liens securing judgments but only to the
extent for an amount and for a period not resulting in an Event of Default
under Section 9.01(i) hereof;
(e) pledges or deposits under worker's compensation, unemployment insurance and
other social security legislation;
(f) deposits to secure the performance of bids, trade contracts (other than for
Indebtedness), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of
Property or minor imperfections in title thereto that, in the aggregate,
are not material in amount, and that do not in any case materially detract
from the value of the Property subject thereto or interfere with the
ordinary conduct of the business of the Borrower or any of its
Subsidiaries; and
(h) Liens upon real and/or tangible personal Property acquired after the date
hereof (by purchase, construction or otherwise) by the Borrower or any of
its Subsidiaries and securing Indebtedness permitted under Section 8.07(e)
hereof, each of which Liens either (A) existed on such Property before the
time of its acquisition and was not created in anticipation thereof or (B)
was created solely for the purpose of securing Indebtedness representing,
or incurred to finance, refinance or refund, the cost (including the cost
of construction) of such Property; provided that (i) no such Lien shall
--------
extend to or cover any Property of the Borrower or any such Subsidiary
other than the Property so acquired and improvements thereon and (ii) the
principal amount of Indebtedness secured by any such Lien shall at no time
exceed the fair market value (as determined in good faith by a Senior
Officer) of such Property at the time it was acquired (by purchase,
construction or otherwise).
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8.07 Indebtedness. The Borrower will not, nor will it permit any of
------------
its Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder, including, without limitation,
Incremental Facility Loans in an aggregate principal amount up to but not
exceeding $50,000,000;
(b) Indebtedness outstanding on the date hereof and listed in Part A of
Schedule II hereto (or, to the extent not meeting the minimum thresholds
for required listing on said Schedule II pursuant to Section 7.11 hereof,
in an aggregate amount not exceeding $5,000,000);
(c) Affiliate Subordinated Indebtedness incurred in accordance with Section
8.14 hereof;
(d) Indebtedness of the Borrower to any Subsidiary of the Borrower, and of any
Subsidiary of the Borrower to the Borrower or its other Subsidiaries; and
(e) additional Indebtedness of the Borrower and its Subsidiaries (including,
without limitation, Capital Lease Obligations and other Indebtedness
secured by Liens permitted under Section 8.06(h) hereof) up to but not
exceeding an aggregate amount of $10,000,000 at any one time outstanding.
In addition to the foregoing, the Borrower will not, nor will it permit its
Subsidiaries to, incur or suffer to exist any obligations in an aggregate amount
in excess of $5,000,000 at any one time outstanding in respect of surety and
performance bonds backing pole rental or conduit attachments and the like, or
backing obligations under Franchises, arising in the ordinary course of business
of the CATV Systems of the Borrower and its Subsidiaries.
8.08 Investments. The Borrower will not, nor will it permit any of its
-----------
Subsidiaries to, make or permit to remain outstanding any Investments except:
(a) Investments outstanding on the date hereof and identified in Schedule III
hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
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(d) Investments by the Borrower in its Subsidiaries and Investments by any
Subsidiary of the Borrower in the Borrower and its other Subsidiaries;
(e) Interest Rate Protection Agreements; provided that, without limiting the
--------
obligation of the Borrower under Section 8.13 hereof, when entering into
any Interest Rate Protection Agreement that at the time has, or at any time
in the future may give rise to, any credit exposure, the aggregate credit
exposure under all Interest Rate Protection Agreements (including the
Interest Rate Protection Agreement being entered into) shall not exceed
$15,000,000;
(f) Investments by the Borrower and its Subsidiaries consisting of acquisitions
permitted under subparagraphs (iv) or (v) of Section 8.05(d); and
(g) additional Investments (including, without limitation, Investments by the
Borrower or any of its Subsidiaries in Affiliates of the Borrower), so long
as the aggregate amount of all such Investments shall not exceed
$7,500,000.
Without limiting the generality of the forgoing, the Borrower will not create,
or make any Investment in, any Subsidiary after the date hereof without the
prior written consent of the Majority Lenders.
8.09 Restricted Payments. The Borrower will not make any Restricted
-------------------
Payment at any time, provided that, so long as at the time thereof, and after
--------
giving effect thereto, no Default or Event of Default shall have occurred and be
continuing, the Borrower may make the following Restricted Payments (subject, in
each case, to the applicable conditions set forth below):
(a) the Borrower may make Restricted Payments to its members on or after April
12 of each fiscal year (the "current year") in an amount equal to the Tax
------------
Payment Amount for the immediately preceding fiscal year (the "prior
-----
year"), so long as at least fifteen days prior to making any such
----
Restricted Payment, the Borrower shall have delivered to each Lender (i)
notification of the amount and proposed payment date of such Restricted
Payment and (ii) a statement from the Borrower's independent certified
public accountants setting forth a detailed calculation of the Tax Payment
Amount for the prior year and showing the amount of such Restricted Payment
and all prior Restricted Payments;
(b) the Borrower may make payments in respect of Management Fees to the extent
permitted under Section 8.11 hereof;
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----------------
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(c) the Borrower may make payments in respect of the interest on Affiliate
Subordinated Indebtedness constituting Supplemental Capital or Cure Monies;
(d) the Borrower may make payments in respect of Preferred Membership Interests
in an aggregate amount up to but not exceeding (prior to the issuance of
the Senior Notes by Mediacom) the amount of interest payable by Mediacom on
the Mediacom Notes and (following the issuance of Senior Notes by Mediacom)
the amount of interest payable by Mediacom on Senior Notes having a
principal amount equal to the amount of capital contributions made by
Mediacom in consideration for the issuance of such Preferred Membership
Interests, provided that such payments shall not include any payment in
--------
respect of, or the setting apart of money for a sinking or other analogous
fund for, the purchase, redemption, retirement or other acquisition by the
Borrower of, such Preferred Membership Interests or any rights related
thereto; and
(e) the Borrower may make payments in respect of the principal of Affiliate
Subordinated Indebtedness constituting Supplemental Capital or Cure Monies
or to redeem, retire or otherwise acquire Preferred Membership Interests,
so long as
(i) in the case of any such payment in respect of the
principal of Affiliate Subordinated Indebtedness constituting Cure
Monies, at least one complete fiscal quarter shall have elapsed
subsequent to the last date upon which the Borrower shall have
utilized its cure rights under Section 9.02 hereof, without the
occurrence of any Event of Default (and, for purposes hereof, unless
the Borrower indicates otherwise at the time of any such payment, such
payment shall be deemed to be made first from Cure Monies and second
from Supplemental Capital);
(ii) after giving effect to such payment during any fiscal
quarter (the "current fiscal quarter"), and to the making of any
----------------------
Capital Expenditures pursuant to Section 8.12(b) hereof during the
current fiscal quarter, the Borrower would (as at the last day of the
most recent fiscal quarter immediately prior to the current fiscal
quarter) have been in compliance on a pro forma basis with Section
8.10 hereof and the Total Leverage Ratio calculated on a pro forma
basis is at the time less than 5.50 to 1 (or, if lower, the applicable
requirement at the time under Section 8.10(a) hereof), the
determination of such compliance and such Total Leverage Ratio to be
determined as if (x) for purposes of calculating the Total Leverage
Ratio, the amount of such payment, together with the amount of any
such Capital Expenditures, were added to Indebtedness, and (y) for
purposes of calculating the Interest Coverage Ratio and Pro Forma Debt
Service Coverage Ratio, the amount of such payment (and any Cure
Monies received during the period for which the Interest Coverage
Ratio or Pro Forma Debt Service Coverage
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----------------
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Ratio is calculated), together with the amount of any such Capital
Expenditures, represented additional principal of the Loans
outstanding hereunder at all times during the respective fiscal
quarter for which such Ratios are calculated and the amount of
interest that would have been payable hereunder during such fiscal
quarter were recalculated to take into account such additional
principal or the amount of such payment in respect of the redemption,
retirement or other acquisition by the Borrower of Preferred
Membership Interests; and
(iii) at least three Business Days prior to the date of any
such payment, the Borrower shall have delivered to the Lenders a
certificate of a Senior Officer setting forth calculations, in form
and detail satisfactory to the Majority Lenders, demonstrating
compliance with the requirements of this paragraph (e) after giving
effect to such payment.
Nothing herein shall be deemed to prohibit the payment of dividends by any
Subsidiary of the Borrower to such Borrower or to any other Subsidiary of the
Borrower.
8.10 Certain Financial Covenants.
---------------------------
(a) Total Leverage Ratio. The Borrower will not permit the Total Leverage
--------------------
Ratio to exceed the following respective ratios at any time during the following
respective periods:
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Total
Period Leverage Ratio
------ --------------
From the Closing Date
through December 30, 1998 6.00 to 1
From December 31, 1998
through December 30, 1999 5.50 to 1
From December 31, 1999
through December 30, 2000 5.00 to 1
From December 31, 2000
through December 30, 2001 4.50 to 1
From December 31, 2001
through December 30, 2002 4.00 to 1
From December 31, 2002
through December 30, 2003 3.50 to 1
From December 31, 2003
and at all times thereafter 3.00 to 1
(b) Interest Coverage Ratio. The Borrower will not permit the Interest
-----------------------
Coverage Ratio to be less than the following respective ratios as at the last
day of any fiscal quarter ending during the following respective periods:
Period Ratio
------ -----
From the Closing Date
through December 30, 1998 1.50 to 1
From December 31, 1998
through December 30, 1999 1.75 to 1
From December 31, 1999
and at all times thereafter 2.00 to 1
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----------------
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(c) Pro Forma Debt Service Coverage Ratio. The Borrower will not permit the
-------------------------------------
Pro Forma Debt Service Coverage Ratio to be less than 1.15 to 1 at any time.
8.11 Management Fees. The Borrower will not permit the aggregate amount
---------------
of Management Fees accrued in respect of any fiscal year of the Borrower to
exceed 4.5% of the Gross Operating Revenue of the Borrower and its Subsidiaries
for such fiscal year. In addition, the Borrower will not, as at the last day of
the first, second and third fiscal quarters in any fiscal year, permit the
amount of Management Fees paid during the portion of such fiscal year ending
with such fiscal quarter to exceed 4.5% of the Gross Operating Revenue of the
Borrower and its Subsidiaries for such portion of such fiscal year (based upon
the financial statements of the Borrower provided pursuant to Section 8.01(b)
hereof), provided that in any event the Borrower will not pay any Management
--------
Fees at any time following the occurrence and during the continuance of any
Default. Any Management Fees that are accrued for any fiscal quarter (the
"current fiscal quarter") but which are not paid during the current fiscal
----------------------
quarter may be paid at any time during the period of four fiscal quarters
following the current fiscal quarter (and for these purposes any payment of
Management Fees during such period shall be deemed to be applied to Management
Fees in the order of the fiscal quarters in respect of which such Management
Fees are accrued). Any Management Fees which may not be paid as a result of the
limitations set forth in the forgoing provisions of this Section 8.11 shall be
deferred and shall not be payable until the principal of and interest on the
Loans, and all other amounts owing hereunder, shall have been paid in full. For
purposes of this Section 8.11 "Gross Operating Revenue" shall mean the aggregate
-----------------------
gross operating revenues derived by the Borrower from its CATV Systems and from
other telecommunications services as determined in accordance with GAAP
excluding, however, revenue or income derived by the Borrower from any of the
following sources: (i) from the sale of any asset of such CATV Systems not in
the ordinary course of business, (ii) interest income, (iii) proceeds from the
financing or refinancing of any Indebtedness of the Borrower or any of its
Subsidiaries and (iv) extraordinary gains in accordance with GAAP.
Neither the Borrower nor any of its Subsidiaries shall be obligated to pay
Management Fees to any Person, unless the Borrower and such Person shall have
executed and delivered to the Administrative Agent a Management Fee
Subordination Agreement, and neither the Borrower nor any of its Subsidiaries
shall pay Management Fees to any person except to the extent permitted under the
respective Management Fee Subordination Agreement to which such Person is a
party.
Neither the Borrower nor any of its Subsidiaries shall employ or retain any
executive management personnel (or pay any Person, other than the Manager, in
respect of executive management personnel or matters, for the Borrower or any of
its Subsidiaries), it being the intention of the parties hereto that all
executive management personnel required in connection with the business or
operations of the Borrower and its Subsidiaries shall be
Credit Agreement
----------------
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employees of the Manager (and that the Executive Compensation for such employees
shall be covered by Management Fees payable hereunder). For purposes hereof,
"executive management personnel" shall not include any individual (such as a
system manager or a regional manager) who is employed solely in connection with
the day-to-day operations of a CATV System or a Region.
8.12 Capital Expenditures.
--------------------
(a) Scheduled Capital Expenditures. The Borrower will not permit the
------------------------------
aggregate amount of Capital Expenditures to exceed the following respective
amounts for the following respective fiscal years of the Borrower:
Fiscal Year Ending Amount
------------------ ------
December 31, 1998 $ 25,000,000
December 31, 1999 $ 25,500,000
December 31, 2000 $ 29,000,000
December 31, 2001 $ 29,500,000
December 31, 2002 $ 21,200,000
December 31, 2003 $ 18,000,000
December 31, 2004 $ 16,000,000
December 31, 2005 $ 16,000,000
December 31, 2006 $ 16,000,000,
provided that, the amounts set forth above for any fiscal year of the Borrower
- --------
in which the Borrower enters into a Subsequent Acquisition pursuant to Section
8.05(d)(v) shall be increased by such amount as the Borrower shall propose in a
notice to the Administrative Agent and the Lenders (which amount shall be based
on a proposed budget and operating plan set forth in such notice) which increase
shall become effective unless Requisite Lenders object to such amount, by notice
to the Administrative Agent, within 10 Business Days following receipt of the
Borrower's notice. For purposes of this Section 8.12(a), "Requisite Lenders"
-----------------
shall mean Lenders having at least 33-1/3% of the sum of (a) the aggregate
outstanding principal amount of the Term Loans or, if the Term Loans shall not
have been made, the aggregate outstanding principal amount of the Term Loan
Commitments plus (b) the aggregate outstanding principal amount of the
----
Incremental Facility Loans or, if the Incremental Facility Loans shall not have
been made, the aggregate outstanding principal amount of the Incremental
Facility Commitments plus (c) the sum of (i) the aggregate unused amount, if
----
any, of the Revolving Credit Commitments at such time plus (ii) the aggregate
----
outstanding principal amount of the Revolving Credit Loans at such time
If the aggregate amount of Capital Expenditures for any fiscal year of the
Borrower shall be less than the amount set forth opposite such fiscal year in
the schedule above,
Credit Agreement
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then the shortfall shall be added to the amount of Capital Expenditures
permitted for the immediately succeeding (but not any other) fiscal year and,
for purposes hereof, the amount of Capital Expenditures made during any fiscal
year shall be deemed to have been made first from the carryover from any
previous year and last from the permitted amount for such fiscal year.
(b) Additional Capital Expenditures. In addition to the Capital Expenditures
-------------------------------
permitted under paragraph (a) above, the Borrower and its Subsidiaries may make
additional Capital Expenditures during any fiscal quarter in such amounts as
would be permitted under Section 8.09(e)(ii) (in the case of a payment of
principal of Affiliate Subordinated Indebtedness, as if such Capital Expenditure
constituted a payment in respect of Supplemental Capital thereunder).
8.13 Interest Rate Protection Agreements. The Borrower will within 90 days
-----------------------------------
of the Closing Date, enter into, and thereafter maintain in full force and
effect, one or more Interest Rate Protection Agreements with one or more of the
Lenders or their affiliates (and/or with a bank or other financial institution
having capital, surplus and undivided profits of at least $500,000,000), that
effectively enables the Borrower (in a manner satisfactory to the Majority
Lenders) to protect itself, in a manner and on terms reasonably satisfactory to
the Majority Lenders, against adverse fluctuations in the three-month London
interbank offered rates as to a notional principal amount at least equal to 40%
of the aggregate outstanding principal amount of the Loans.
8.14 Affiliate Subordinated Indebtedness.
-----------------------------------
(a) The Borrower may at any time after the date hereof incur Affiliate
Subordinated Indebtedness to Mediacom or one or more other Affiliates, so long
as the proceeds of any such Affiliate Subordinated Indebtedness constituting
Cure Monies are immediately applied to the reduction of the Revolving Credit
Commitments and the prepayment of principal of the Term Loans and Incremental
Facility Loans of each Series hereunder, applied ratably to the Revolving Credit
Commitments, the Term Loans and the Incremental Facility Loans of each Series in
accordance with the respective then-outstanding aggregate amounts of such
Commitments and Loans (and to the simultaneous prepayment of the Revolving
Credit Loans in an amount equal to such required reduction of Revolving Credit
Commitments), provided that to the extent any such required prepayment of
--------
Revolving Credit Loans shall exceed the then-outstanding aggregate principal
amount of Revolving Credit Loans, such excess shall be applied to the ratable
prepayment of Term Loans and Incremental Facility Loans of each Series.
(b) The Borrower will not, nor will it permit any of its Subsidiaries to,
purchase, redeem, retire or otherwise acquire for value, or set apart any money
for a sinking, defeasance or other analogous fund for the purchase, redemption,
retirement or other acquisition of, or make any voluntary payment or prepayment
of the principal of or interest on, or any other amount
Credit Agreement
----------------
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owing in respect of, any Affiliate Subordinated Indebtedness, except to the
extent permitted under Section 8.09 hereof.
(c) After December 31, 1999, so long as no Default has occurred and is
continuing, Preferred Membership Interests may be converted into Affiliate
Subordinated Indebtedness on terms and conditions in form and substance
satisfactory to the Majority Lenders.
8.15 Lines of Business. The Borrower will at all times ensure that not
-----------------
more than 15% of gross operating revenue of the Borrower and its Subsidiaries
for any fiscal year shall be derived from any line or lines of business activity
other than the business of owning and operating CATV Systems and related
communications businesses.
8.16 Transactions with Affiliates. Except as expressly permitted by this
----------------------------
Agreement, the Borrower will not, nor will it permit any of its Subsidiaries to,
directly or indirectly: (a) make any Investment in an Affiliate except for
Investments permitted under Section 8.08(g), provided that, the monetary or
--------
business consideration arising therefrom would be substantially as advantageous
to the Borrower and its Subsidiaries as the monetary or business consideration
that would obtain in a comparable transaction with a Person not an Affiliate;
(b) transfer, sell, lease, assign or otherwise dispose of any Property to an
Affiliate; (c) merge into or consolidate with or purchase or acquire Property
from an Affiliate; (d) make any contribution towards, or reimbursement for, any
Federal income taxes payable by any member of the Borrower or any of its
Subsidiaries in respect of income of the Borrower; or (e) enter into any other
transaction directly or indirectly with or for the benefit of an Affiliate
(including, without limitation, Guarantees and assumptions of obligations of an
Affiliate); provided that
--------
(i) any Affiliate who is an individual may serve as a director,
officer or employee of the Borrower or any of its Subsidiaries and receive
reasonable compensation for his or her services in such capacity,
(ii) the Borrower and its Subsidiaries may enter into
transactions (other than extensions of credit by the Borrower or any of its
Subsidiaries to an Affiliate) providing for the leasing of Property, the
rendering or receipt of services or the purchase or sale of equipment,
programming rights, advertising time and other Property in the ordinary
course of business if the monetary or business consideration arising
therefrom would be substantially as advantageous to the Borrower and its
Subsidiaries as the monetary or business consideration that would obtain in
a comparable transaction with a Person not an Affiliate,
(iii) the Borrower may enter into and perform its obligations
under, the Management Agreement, and
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----------------
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(iv) the Borrower and its Subsidiaries may pay to the Manager
the aggregate amount of intercompany shared expenses payable to Mediacom
that are allocated by Mediacom to the Borrower and its Subsidiaries in
accordance with Section 5.05 of the Guarantee and Pledge Agreement.
8.17 Use of Proceeds. The Borrower will use the proceeds of the Loans
---------------
hereunder solely to (i) provide financing for Acquisitions and to pay the fees
and expenses related thereto, (ii) make Restricted Payments, (iii) pay
Management Fees, (iv) make Investments permitted under Section 8.08 hereof and
(v) finance capital expenditures and working capital needs of the Borrower and
its Subsidiaries and acquisitions permitted hereunder (in each case in
compliance with all applicable legal and regulatory requirements); provided that
--------
(x) any borrowing of Revolving Credit Loans hereunder that would constitute a
utilization of any Reserved Commitment Amount shall be applied solely to make
acquisitions permitted under Section 8.05(d)(v) hereof, or to make prepayments
of Loans under Section 2.10(d) hereof and (y) neither the Administrative Agent
nor any Lender shall have any responsibility as to the use of any of such
proceeds.
8.18 Certain Obligations Respecting Subsidiaries.
-------------------------------------------
(a) Subsidiary Guarantors. In the event that the Borrower or any of its
---------------------
Subsidiaries shall form or acquire any Subsidiary after the date hereof (after
obtaining any necessary consent of the Lenders), the Borrower shall cause, and
shall cause its Subsidiaries to cause, such Subsidiary to:
(i) execute and deliver to the Administrative Agent a Subsidiary
Guarantee Agreement in the form of Exhibit E hereto (and, thereby, to
become a "Subsidiary Guarantor", and an "Obligor" hereunder and a "Securing
Party" under the Security Agreement);
(ii) deliver the shares of its stock or other ownership
interests accompanied by undated stock powers or other powers executed in
blank to the Administrative Agent, and to take other such action, as shall
be necessary to create and perfect valid and enforceable first priority
Liens (subject to Liens permitted under Section 8.06 hereof) on
substantially all of the Property of such new Subsidiary as collateral
security for the obligations of such new Subsidiary under the Subsidiary
Guarantee Agreement, and
(iii) deliver such proof of corporate action, limited liability
company action or partnership action, as the case may be, incumbency of
officers, opinions of counsel and other documents as is consistent with
those delivered by each Obligor pursuant to Section 6.01 hereof on the
Closing Date or as the Administrative Agent shall have reasonably
requested.
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(b) Ownership of Subsidiaries. The Borrower will, and will cause each of its
-------------------------
Subsidiaries to, take such action from time to time as shall be necessary to
ensure that each of its Subsidiaries is a Wholly Owned Subsidiary. In the event
that any additional shares of stock or other ownership interests shall be issued
by any Subsidiary, the Borrower agrees forthwith to deliver to the
Administrative Agent pursuant to the Security Agreement the certificates
evidencing such shares of stock or other ownership interests, accompanied by
undated stock or other powers executed in blank and to take such other action as
the Administrative Agent shall request to perfect the security interest created
therein pursuant to the Security Agreement.
(c) Further Assurances. The Borrower will, and will cause each of its
------------------
Subsidiaries to, take such action from time to time (including filing
appropriate Uniform Commercial Code financing statements and executing and
delivering such assignments, security agreements and other instruments) as shall
be requested by the Administrative Agent to create, in favor of the
Administrative Agent for the benefit of the Lenders, perfected security
interests and Liens in substantially all of the personal Property of the
Borrower and each of its Subsidiaries.
(d) Certain Restrictions. The Borrower will not, and will not permit any of
--------------------
its Subsidiaries to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of the Borrower or any Subsidiary to create,
incur or permit to exist any Lien upon any of its property or assets securing
the obligations of the Borrower or any Subsidiary under any of the Loan
Documents, or in respect of any Interest Rate Protection Agreement, or (b) the
ability of any Subsidiary to pay dividends or other distributions with respect
to any shares of its capital stock or to make or repay loans or advances to the
Borrower or any Subsidiary or to Guarantee Indebtedness of the Borrower or any
Subsidiary under any of the Loan Documents; provided that (i) the foregoing
--------
shall not apply to restrictions and conditions imposed by law or by any of the
Loan Documents, (ii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted hereunder, (iii) clause
(a) of the foregoing shall not apply to restrictions or conditions imposed by
any agreement relating to secured Indebtedness permitted by this Agreement or
any other Loan Document if such restrictions or conditions apply only to the
property or assets securing such Indebtedness and (iv) clause (a) of the
foregoing shall not apply to customary provisions in leases and other contracts
restricting the assignment thereof.
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8.19 Modifications of Certain Documents. The Borrower will not consent to
----------------------------------
any modification, supplement or waiver of any of the provisions of the
Management Agreement, any Acquisition Agreement, or any agreement, instrument or
other document evidencing or relating to Affiliate Subordinated Indebtedness
without the prior consent of the Administrative Agent (with the approval of the
Majority Lenders).
Section 9. Events of Default.
9.01 Events of Default. If one or more of the following events (herein
-----------------
called "Events of Default") shall occur and be continuing:
-----------------
(a) The Borrower shall default in the payment when due (whether at stated
maturity or upon mandatory or optional prepayment) of any principal of or
interest on any Loan or any Reimbursement Obligation, any fee or any other
amount payable by it hereunder or under any other Loan Document; or
(b) The Borrower or any Subsidiary of the Borrower shall default in the payment
when due of any principal of or interest on any of its other Indebtedness
aggregating $3,000,000 or more; or any event specified in any note,
agreement, indenture or other document evidencing or relating to any such
Indebtedness shall occur if the effect of such event is to cause, or
(without the lapse of time or the taking of any action, other than the
giving of notice) to permit the holder or holders of such Indebtedness (or
a trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity; or the Borrower shall default in the payment when due of any
amount aggregating $3,000,000 or more under any Interest Rate Protection
Agreement; or any event specified in any Interest Rate Protection Agreement
shall occur if the effect of such event is to cause, or (with the giving of
any notice or the lapse of time or both) to permit, termination or
liquidation payment or payments aggregating $500,000 or more to become due;
or
(c) Any representation, warranty or certification made or deemed made herein or
in any other Loan Document (or in any modification or supplement hereto or
thereto) by the Borrower, or any certificate furnished to any Lender or the
Administrative Agent pursuant to the provisions hereof or thereof, shall
prove to have been false or misleading as of the time made or furnished in
any material respect; or any representation or warranty made or deemed made
in any Acquisition Agreement by the respective seller(s) thereunder, shall
prove to have been false or misleading as of the time made or furnished in
any material respect (except to the extent fully covered by amounts held on
deposit
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pursuant to the respective escrow agreements under the relevant Acquisition
Agreement); or
(d) The Borrower shall default in the performance of any of its obligations
under any of Sections 8.01(i), 8.05, 8.06, 8.07, 8.08, 8.09, 8.10, 8.11,
8.12, 8.14, 8.16, 8.18 or 8.19 hereof; or the Borrower shall default in the
performance of any of its other obligations in this Agreement or any
Obligor shall default in the performance of its obligations under any other
Loan Document to which it is a party, and such default shall continue
unremedied for a period of thirty or more days after notice thereof to the
Borrower by the Administrative Agent or any Lender (through the
Administrative Agent); or
(e) Any Obligor shall admit in writing its inability to, or be generally unable
to, pay its debts as such debts become due; or
(f) Any Obligor shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee, examiner or
liquidator of itself or of all or a substantial part of its Property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code or (vi) take
any corporate action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application or consent
of any Obligor, in any court of competent jurisdiction, seeking (i) its
reorganization, liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
receiver, custodian, trustee, examiner, liquidator or the like of such
Obligor or of all or any substantial part of its Property or (iii) similar
relief in respect of such Obligor under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against such Obligor shall be entered in an
involuntary case under the Bankruptcy Code; or
(h) The Borrower shall be terminated, dissolved or liquidated (as a matter of
law or otherwise), or proceedings shall be commenced by the Borrower
seeking the termination, dissolution or liquidation of the Borrower, or
proceedings shall be
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commenced by any Person (other than the Borrower) seeking the termination,
dissolution or liquidation of the Borrower and such proceeding shall
continue undismissed for a period of 60 or more days; or
(i) A final judgment or judgments for the payment of money of $2,500,000 or
more in the aggregate (exclusive of judgment amounts fully covered by
insurance where the insurer has admitted liability in respect of such
judgment) or of $10,000,000 or more in the aggregate (regardless of
insurance coverage) shall be rendered by one or more courts, administrative
tribunals or other bodies having jurisdiction against the Borrower or any
of its Subsidiaries and the same shall not be discharged (or provision
shall not be made for such discharge), or a stay of execution thereof shall
not be procured, within 30 days from the date of entry thereof and the
Borrower or relevant Subsidiary shall not, within said period of 30 days,
or such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(j) An event or condition specified in Section 8.01(g) hereof shall occur or
exist with respect to any Plan or Multiemployer Plan and, as a result of
such event or condition, together with all other such events or conditions,
the Borrower or any ERISA Affiliate shall incur or in the opinion of the
Majority Lenders shall be reasonably likely to incur a liability to a Plan,
a Multiemployer Plan or the PBGC (or any combination of the foregoing)
that, in the determination of the Majority Lenders, would (either
individually or in the aggregate) have a Material Adverse Effect; or
(k) A reasonable basis shall exist for the assertion against the Borrower or
any of its Subsidiaries, or any predecessor in interest of the Borrower or
any of its Subsidiaries or Affiliates, of (or there shall have been
asserted against the Borrower or any of its Subsidiaries) an Environmental
Claim that, in the judgment of the Majority Lenders is reasonably likely to
be determined adversely to the Borrower or any of its Subsidiaries, and the
amount thereof (either individually or in the aggregate) is reasonably
likely to have a Material Adverse Effect (insofar as such amount is payable
by the Borrower or any of its Subsidiaries but after deducting any portion
thereof that is reasonably expected to be paid by other creditworthy
Persons jointly and severally liable therefor); or
(l) Any one or more of the following events shall occur and be continuing:
(i) Rocco Commisso shall cease to be Chairman and Chief
Executive Officer of the Manager;
(ii) Mediacom Management Corporation shall cease to act as
Manager of the Borrower;
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----------------
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(iii) Mediacom shall cease to own 100% of the aggregate
ownership interests in the Borrower;
(iv) any person or group (within the meaning of Rule 13d-5
under the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act") and Section 13(d) and 14(d) of the Exchange Act) other than a
---
Commisso Entity or any entity controlled by or under common control
with Chase Manhattan Capital Corporation becomes, directly or
indirectly, in a single transaction or in a related series of
transactions by way of merger, consolidation or other business
combination or otherwise, the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 25% of the capital stock of
the Borrower on a fully-diluted basis (in other words, giving effect
to the exercise of any warrants, options and conversion and other
rights); or
(v) the Commisso Entities shall sell, transfer, pledge or
otherwise dispose of more than 20% of the aggregate equity interests
in Mediacom held by them on the date hereof; or
(m) Except for Franchises that cover fewer than 10% of the Subscribers of the
Borrower and its Subsidiaries (determined as at the last day of the most
recent fiscal quarter for which a Quarterly Officers' Report shall have
been delivered) and except for any Retained Franchises, one or more
Franchises relating to the CATV Systems of the Borrower and its
Subsidiaries shall be terminated or revoked such that the Borrower or
relevant Subsidiary is no longer able to operate such Franchises and retain
the revenue received therefrom or the Borrower or relevant Subsidiary or
the grantors of such Franchises shall fail to renew such Franchises at the
stated expiration thereof such that the Borrower or relevant Subsidiary is
no longer able to operate such Franchises and retain the revenue received
therefrom; or
(n) The Liens created by the Security Documents shall at any time not
constitute a valid and perfected Lien on the collateral intended to be
covered thereby (to the extent perfection by filing, registration,
recordation or possession is required herein or therein) in favor of the
Administrative Agent, free and clear of all other Liens (other than Liens
permitted under Section 8.06 hereof or under the respective Security
Documents), or, except for expiration in accordance with its terms, any of
the Security Documents shall for whatever reason be terminated or cease to
be in full force and effect, or the enforceability thereof shall be
contested by the Borrower; or
(o) The Operating Agreement shall be modified in any manner that would
adversely affect the obligations of the Borrower, or the rights of the
Lenders or the
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----------------
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Administrative Agent, hereunder or under any of the other Loan Documents
(including, without limitation, in respect of any Preferred Membership
Interests);
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to the Borrower, the
Administrative Agent shall, if instructed by the Majority Lenders, by notice to
the Borrower, terminate the Commitments and/or declare the principal amount then
outstanding of, and the accrued interest on, the Loans, the Reimbursement
Obligations and all other amounts payable by the Borrower hereunder (including,
without limitation, any amounts payable under Section 5.05 or 5.06 hereof) to be
forthwith due and payable, whereupon such amounts shall be immediately due and
payable without presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrower; and (2) in the case of
the occurrence of an Event of Default referred to in clause (f) or (g) of this
Section 9 with respect to the Borrower, the Commitments shall automatically be
terminated and the principal amount then outstanding of, and the accrued
interest on, the Loans, Reimbursement Obligations and all other amounts payable
by the Borrower hereunder (including, without limitation, any amounts payable
under Section 5.05 or 5.06 hereof) shall automatically become immediately due
and payable without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by the Borrower.
In addition, upon the occurrence and during the continuance of any Event of
Default (if the Administrative Agent has declared the principal amount then
outstanding of, and accrued interest on, the Revolving Credit Loans and all
other amounts payable by the Borrower hereunder to be due and payable), the
Borrower agrees that it shall, if requested by the Administrative Agent or the
Majority Revolving Credit Lenders through the Administrative Agent (and, in the
case of any Event of Default referred to in clause (f) or (g) of this Section 9
with respect to the Borrower, forthwith, without any demand or the taking of any
other action by the Administrative Agent or such Lenders) provide cover for the
Letter of Credit Liabilities by paying to the Administrative Agent immediately
available funds in an amount equal to the then aggregate undrawn face amount of
all Letters of Credit, which funds shall be held by the Administrative Agent in
the Collateral Account as collateral security in the first instance for the
Letter of Credit Liabilities and be subject to withdrawal only as therein
provided.
9.02 Certain Cure Rights.
-------------------
(a) Notwithstanding the provisions of Section 9.01 hereof, but without
limiting the obligations of the Borrower under Section 8.10(a) hereof, a breach
by the Borrower as of the last day of any fiscal quarter or any fiscal year of
its obligations under said Section 8.10(a) shall not constitute an Event of
Default hereunder (except for purposes of Section 6 hereof) until the date (the
"Cut-Off Date") which is the earlier of the date thirty days after (a) the date
------------
the financial
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----------------
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statements for the Borrower and its Subsidiaries with respect to such fiscal
quarter or fiscal year, as the case may be, are delivered pursuant to Section
8.01(b) or 8.01(c) hereof or (b) the latest date on which such financial
statements are required to be delivered pursuant to said Section 8.01(b) or
8.01(c), provided that, if following the last day of such fiscal quarter or
--------
fiscal year and prior to the Cut-Off Date, the Borrower shall have received Cure
Monies (and shall have applied the proceeds thereof to the prepayment of the
Loans hereunder, which prepayment, in the case of Affiliate Subordinated
Indebtedness, shall be effected in the manner provided in Section 8.14(a)
hereof), or shall have prepaid the Loans hereunder from available cash, in an
amount sufficient to bring the Borrower into compliance with said Section
8.10(a) assuming that the Total Leverage Ratio, as of the last day of such
fiscal quarter or fiscal year, as the case may be, were recalculated to subtract
such prepayment from the aggregate outstanding amount of Indebtedness, then such
breach or breaches shall be deemed to have been cured; provided, further, that
-------- -------
breaches of Section 8.10 hereof (including pursuant to paragraph (b) below) may
not be deemed to be cured pursuant to this Section 9.02 (x) more than three
times during the term of this Agreement or (y) during consecutive fiscal
quarters.
(b) Notwithstanding the provisions of Section 9.01 hereof, but without
limiting the obligations of the Borrower under Section 8.10(b) or 8.10(c)
hereof, a breach by the Borrower as of the last day of any fiscal quarter or any
fiscal year of its obligations under said Section 8.10(b) or 8.10(c) shall not
constitute an Event of Default hereunder (except for purposes of Section 6
hereof) until the date (the "Cut-Off Date") which is the earlier of the date
------------
thirty days after (a) the date the financial statements for the Borrower and its
Subsidiaries with respect to such fiscal quarter or fiscal year, as the case may
be, are delivered pursuant to Section 8.01(b) or 8.01(c) hereof or (b) the
latest date on which such financial statements are required to be delivered
pursuant to said Section 8.01(b) or 8.01(c), provided that, if following the
--------
last day of such fiscal quarter or fiscal year and prior to the Cut-Off Date,
the Borrower shall have received Cure Monies (and shall have applied the
proceeds thereof to the prepayment of the Loans hereunder, which prepayment, in
the case of Affiliate Subordinated Indebtedness, shall be effected in the manner
provided in Section 8.14(a) hereof), or shall have prepaid the Loans hereunder
from available cash, in an amount sufficient to bring the Borrower into
compliance with said Section 8.10(b) or 8.10(c) assuming that the Interest
Coverage Ratio and the Pro Forma Debt Service Coverage Ratio (as the case may
be), as of the last day of such fiscal quarter or fiscal year, as the case may
be, were recalculated to deduct from Interest Expense the aggregate amount of
interest that would not have been required to be paid hereunder if such
prepayment had been made on the first day of the period for which the Interest
Coverage Ratio and the Pro Form Debt Service Coverage Ratio is determined under
said Section 8.10(b) or 8.10(c), then such breach or breaches shall be deemed to
have been cured; provided, further, that breaches of Section 8.10 hereof
-------- -------
(including pursuant to paragraph (a) above) may not be deemed to be cured
pursuant to this Section 9.02 (x) more than three times during the term of this
Agreement or (y) during consecutive fiscal quarters.
Credit Agreement
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Section 10. The Administrative Agent.
10.01 Appointment, Powers and Immunities. Each Lender hereby appoints
----------------------------------
and authorizes the Administrative Agent to act as its agent hereunder and under
the other Loan Documents with such powers as are specifically delegated to the
Administrative Agent by the terms of this Agreement and under the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent (which term as used in this sentence and in Section
10.05 and the first sentence of Section 10.06 hereof shall include reference to
its affiliates and its own and its affiliates' officers, directors, employees
and agents):
(a) shall have no duties or responsibilities except those expressly set forth
in this Agreement and in the other Loan Documents, and shall not by reason
of this Agreement or any other Loan Document be a trustee for any Lender;
(b) shall not be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any other
Loan Document, or in any certificate or other document referred to or
provided for in, or received by any of them under, this Agreement or any
other Loan Document, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other
Loan Document or any other document referred to or provided for herein or
therein or for any failure by the Borrower or any other Person to perform
any of its obligations hereunder or thereunder;
(c) shall not, except to the extent expressly instructed by the Majority
Lenders with respect to the collateral security under the Security
Documents, be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; and
(d) shall not be responsible for any action taken or omitted to be taken by it
hereunder or under any other Loan Document or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful
misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or attorneys-
in-fact selected by it in good faith.
10.02 Reliance by Administrative Agent. The Administrative Agent shall be
--------------------------------
entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telegram or
cable) reasonably believed by it to be
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genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Administrative Agent.
As to any matters not expressly provided for by this Agreement or any other Loan
Document, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder or thereunder in accordance with
instructions given by the Majority Lenders or, if provided herein, in accordance
with the instructions given by the Majority Revolving Credit Lenders, the
Majority Term Loan Lenders, the Majority Incremental Facility Lenders of a
Series or all of the Lenders as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all of the Lenders.
10.03 Defaults. The Administrative Agent shall not be deemed to have
--------
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or the Borrower specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 10.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders or, if
provided herein, the Majority Revolving Credit Lenders , the Majority Term Loan
Lenders or the Majority Incremental Facility Lenders of a Series, provided that,
--------
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interest of the Lenders except to the extent that
this Agreement expressly requires that such action be taken, or not be taken,
only with the consent or upon the authorization of the Majority Lenders, the
Majority Revolving Credit Lenders, the Majority Term Loan Lenders or the
Majority Incremental Facility Lenders of a Series or all of the Lenders.
10.04 Rights as a Lender. With respect to its Commitments and the Loans
------------------
made by it, Chase (and any successor acting as Administrative Agent) in its
capacity as a Lender hereunder shall have the same rights and powers hereunder
as any other Lender and may exercise the same as though it were not acting as
the Administrative Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. Chase (and any successor acting as Administrative Agent) and its
affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Borrower (and any of its
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and Chase (and any such successor) and its affiliates may accept fees and
other consideration from the Borrower for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
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10.05 Indemnification. The Lenders agree to indemnify the Administrative
---------------
Agent (to the extent not reimbursed under Section 11.03 hereof, but without
limiting the obligations of the Borrower under said Section 11.03) ratably in
accordance with the aggregate principal amount of the Loans and Reimbursement
Obligations held by the Lenders (or, if no Loans or Reimbursement Obligations
are at the time outstanding, ratably in accordance with their respective
Commitments), for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Administrative Agent (including by any Lender) arising out of or by
reason of any investigation in or in any way relating to or arising out of this
Agreement or any other Loan Document any other documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
(including, without limitation, the costs and expenses that the Borrower is
obligated to pay under Section 11.03 hereof, but excluding, unless a Default has
occurred and is continuing, normal administrative costs and expenses incident to
the performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents, provided that no Lender
--------
shall be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified.
10.06 Non-Reliance on Administrative Agent and Other Lenders. Each Lender
------------------------------------------------------
agrees that it has, independently and without reliance on the Administrative
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrower and its
Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or under any other Loan Document. The
Administrative Agent shall not be required to keep itself informed as to the
performance or observance by the Borrower of this Agreement or any of the other
Loan Documents or any other document referred to or provided for herein or
therein or to inspect the Properties or books of the Borrower or any of its
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder or under the Security Documents, the Administrative Agent shall not
have any duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrower or any of its Subsidiaries (or any of their affiliates) that may come
into the possession of the Administrative Agent or any of its affiliates.
10.07 Failure to Act. Except for action expressly required of the
--------------
Administrative Agent hereunder and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder or thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under
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Section 10.05 hereof against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action.
10.08 Resignation or Removal of Administrative Agent. Subject to the
----------------------------------------------
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving five days prior
notice thereof to the Lenders and the Borrower, and the Administrative Agent may
be removed at any time with or without cause by the Majority Lenders. Upon any
such resignation or removal, the Majority Lenders shall have the right, in
consultation with the Borrower, to appoint a successor Administrative Agent. If
no successor Administrative Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders, in consultation with the
Borrower, appoint a successor Administrative Agent, that shall be a bank that
has an office in New York, New York with a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Section 10
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Administrative Agent.
10.09 Consents under Other Loan Documents. Except as otherwise provided
-----------------------------------
in Section 11.04 hereof with respect to this Agreement, the Administrative Agent
may, with the prior consent of the Majority Lenders (but not otherwise), consent
to any modification, supplement or waiver under any of the Loan Documents,
provided that, without the prior consent of each Lender, the Administrative
- --------
Agent shall not (except as provided herein or in the Security Documents) release
any collateral or otherwise terminate any Lien under any Security Document
providing for collateral security, or agree to additional obligations being
secured by such collateral security (unless the Lien for such additional
obligations shall be junior to the Lien in favor of the other obligations
secured by such Security Document, in which event the Administrative Agent may
consent to such junior Lien provided that it obtains the consent of the Majority
Lenders thereto), alter the relative priorities of the obligations entitled to
the benefits of the Liens created under the Security Documents or release any
guarantor under any Security Document from its guarantee obligations thereunder,
except that no such consent shall be required, and the Administrative Agent is
hereby authorized, to release any Lien covering Property (and to release any
such guarantor) that is the subject of either a disposition of Property
permitted hereunder or a Disposition to which the Majority Lenders have
consented.
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Section 11. Miscellaneous.
-------------
11.01 Waiver. No failure on the part of the Administrative Agent or any
------
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
The Borrower irrevocably waives, to the fullest extent permitted by applicable
law, any claim that any action or proceeding commenced by the Administrative
Agent or any Lender relating in any way to this Agreement should be dismissed or
stayed by reason, or pending the resolution, of any action or proceeding
commenced by the Borrower relating in any way to this Agreement whether or not
commenced earlier. To the fullest extent permitted by applicable law, the
Borrower shall take all measures necessary for any such action or proceeding
commenced by the Administrative Agent or any Lender to proceed to judgment prior
to the entry of judgment in any such action or proceeding commenced by the
Borrower.
11.02 Notices. All notices, requests and other communications provided
-------
for herein and under the Security Documents (including, without limitation, any
modifications of, or waivers, requests or consents under, this Agreement) shall
be given or made in writing (including, without limitation, by telecopy)
delivered to the intended recipient at (i) in the case of the Borrower and the
Administrative Agent, at the "Address for Notices" specified below its name on
the signature pages hereof and (ii) in the case of each of the Lenders, the
address (or telecopy number) set forth in its Administrative Questionnaire; or,
as to any party, at such other address as shall be designated by such party in a
notice to each other party. Notwithstanding the foregoing, notices of borrowing,
prepayment and Conversion of Loans pursuant to Section 4.05 hereof may be made
by telephone, so long as the same are promptly confirmed in writing. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier or personally delivered or,
in the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
11.03 Expenses, Etc. The Borrower agrees to pay or reimburse each of
-------------
the Lenders and the Administrative Agent for: (a) all reasonable out-of-pocket
costs and expenses of the Administrative Agent (including, without limitation,
the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New
York counsel to Chase) in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement and the other Loan Documents and the
extension of credit hereunder and (ii) the negotiation or preparation of any
modification, supplement or waiver of any of the terms of this Agreement or any
of the other Loan Documents (whether or not consummated); (b) all reasonable
out-of-pocket costs and
Credit Agreement
----------------
-104-
expenses of the Lenders and the Administrative Agent (including,
without limitation, the reasonable fees and expenses of legal counsel) in
connection with (i) any Default and any enforcement or collection proceedings
resulting therefrom, including, without limitation, all manner of participation
in or other involvement with (x) bankruptcy, insolvency, receivership,
foreclosure, winding up or liquidation proceedings, (y) judicial or regulatory
proceedings and (z) workout, restructuring or other negotiations or proceedings
(whether or not the workout, restructuring or transaction contemplated thereby
is consummated) and (ii) the enforcement of this Section 11.03; and (c) all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement or
any of the other Loan Documents or any other document referred to herein or
therein and all costs, expenses, taxes, assessments and other charges incurred
in connection with any filing, registration, recording or perfection of any
security interest contemplated by any Security Document or any other document
referred to therein.
The Borrower hereby agrees to indemnify the Administrative Agent and each
Lender and their respective directors, officers, employees, attorneys and agents
from, and hold each of them harmless against, any and all losses, liabilities,
claims, damages or expenses incurred by any of them (including, without
limitation, any and all losses, liabilities, claims, damages or expenses
incurred by the Administrative Agent to any Lender, whether or not the
Administrative Agent or any Lender is a party thereto) arising out of or by
reason of any investigation or litigation or other proceedings (including any
threatened investigation or litigation or other proceedings) relating to the
extensions of credit hereunder or any actual or proposed use by the Borrower or
any of its Subsidiaries of the proceeds of any of the extensions of credit
hereunder, including, without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified).
11.04 Amendments, Etc. Except as otherwise expressly provided in this
---------------
Agreement, any provision of this Agreement may be modified or supplemented only
by an instrument in writing signed by the Borrower and the Majority Lenders, or
by the Borrower and the Administrative Agent acting with the consent of the
Majority Lenders, and any provision of this Agreement may be waived by the
Majority Lenders or by the Administrative Agent acting with the consent of the
Majority Lenders; provided that: (a) no modification, supplement or waiver
--------
shall, unless by an instrument signed by all of the Lenders or by the
Administrative Agent acting with the consent of all of the Lenders: (i)
increase, or extend the term of any of the Commitments, or extend the time or
waive any requirement for the reduction or termination of any of the
Commitments, (ii) extend the date fixed for the payment of principal of or
interest on any Loan, the Reimbursement Obligations or any fee hereunder, (iii)
reduce the amount of any such payment of principal, (iv) reduce the rate at
which interest is payable thereon or any fee is payable hereunder, (v) alter the
manner in which payments or prepayments of principal, interest
Credit Agreement
----------------
-105-
or other amounts hereunder shall be applied as between the Lenders or
Classes of Loans, (vi) alter the terms of this Section 11.04, (vii) modify the
definition of the term "Majority Lenders", "Majority Revolving Credit Lenders",
"Majority Term Loan Lenders" or "Majority Incremental Facility Lenders", or
modify in any other manner the number or percentage of the Lenders required to
make any determinations or waive any rights hereunder or to modify any provision
hereof, or (viii) waive any of the conditions precedent set forth in Section
6.01 hereof; and (b) any modification or supplement of Section 10 hereof, or of
any of the rights or duties of the Administrative Agent hereunder, shall require
the consent of the Administrative Agent.
Anything in this Agreement to the contrary notwithstanding, no waiver or
modification of any provision of this Agreement that has the effect (either
immediately or at some later time) of enabling the Borrower to satisfy a
condition precedent to the making of a Revolving Credit Loan or Incremental
Facility Loan of any Series shall be effective against the Revolving Credit
Lenders for the purposes of the Revolving Credit Commitments and Incremental
Facility Commitments of such Series unless the Majority Revolving Credit Lenders
or Majority Incremental Facility Lenders of such Series, as applicable, shall
have concurred with such waiver or modification, and no waiver or modification
of any provision of this Agreement or any other Loan Document that could
reasonably be expected to adversely affect the Lenders of any Class shall be
effective against the Lenders of such Class unless the Majority Revolving Credit
Lenders, Majority Term Loan Lenders or Majority Incremental Facility Lenders or
the applicable Series, as the case may be, shall have concurred with such waiver
or modification.
11.05 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
11.06 Assignments and Participations.
------------------------------
(a) The Borrower may not assign any of its rights or obligations hereunder
without the prior consent of all of the Lenders and the Administrative Agent.
(b) Each Lender may assign any of its Loans, its Commitments and, if such
Lender is a Revolving Credit Lender, its Letter of Credit Interest (but only
with the consent of, in the case of its outstanding Commitments, the Borrower
and the Administrative Agent and, in the case of the Revolving Credit Commitment
or a Letter of Credit Interest, the Issuing Lender, which consents shall not be
unreasonably withheld or delayed); provided that
--------
(i) no such consent by the Borrower or the Administrative Agent
shall be required in the case of any assignment to another Lender or an
affiliate of a Lender;
Credit Agreement
----------------
-106-
(ii) except to the extent the Borrower and the Administrative
Agent shall otherwise consent, any such partial assignment (other than to
another Lender or an affiliate) shall be in an amount at least equal to
$5,000,000;
(iii) each such assignment by a Lender of its Revolving Credit
Loans or Revolving Credit Commitment or Letter of Credit Interest shall be
made in such manner so that the same portion of its Revolving Credit Loans,
Revolving Credit Commitment and Letter of Credit Interest is assigned to
the respective assignee;
(iv) each such assignment by a Lender of its Term Loans or Term
Loan Commitment shall be made in such manner so that the same portion of
its Term Loans and Term Loan Commitment is assigned to the respective
assignee;
(v) each such assignment by a Lender of its Incremental Facility
Loans of any Series shall be made in such manner so that the same portion
of its Incremental Facility Loans and Incremental Facility Commitment of
such Series is assigned to the respective assignee; and
(vi) upon each such assignment, the assignor and assignee shall
deliver to the Borrower, the Administrative Agent and the Issuing Lender an
Assignment and Acceptance in the form of Exhibit A hereto and the assignee,
if it shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire.
Upon execution and delivery by the assignor and the assignee to the Borrower,
the Administrative Agent and the Issuing Lender of such Assignment and
Acceptance, and upon consent thereto by the Borrower, the Administrative Agent
and the Issuing Lender to the extent required above, the assignee shall have, to
the extent of such assignment (unless otherwise consented to by the Borrower,
the Administrative Agent and the Issuing Lender), the obligations, rights and
benefits of a Lender hereunder holding the Commitment(s), Loans and, if
applicable, Letter of Credit Interest (or portions thereof) assigned to it and
specified in such Assignment and Acceptance (in addition to the Commitment(s),
Loans and Letter of Credit Interest, if any, theretofore held by such assignee)
and the assigning Lender shall, to the extent of such assignment, be released
from the Commitment(s) (or portion(s) thereof) so assigned. Upon each such
assignment the assigning Lender shall pay the Administrative Agent an assignment
fee of $3,500.
(c) A Lender may sell or agree to sell to one or more other Persons (each a
"Participant") a participation in all or any part of any Loans or Letter of
- ------------
Credit Interest held by it, or in its Commitments, provided that (i) such
--------
Participant shall not have any rights or obligations under this Agreement or any
other Loan Document (the Participant's rights against such Lender in respect of
such participation to be those set forth in the agreements executed by such
Lender in
Credit Agreement
----------------
-107-
favor of the Participant) and (ii) such Lender shall promptly notify
the Borrower of the sale of such participation. All amounts payable by the
Borrower to any Lender under Section 5 hereof in respect of Loans and Letter of
Credit Interests held by it, and its Commitments, shall be determined as if such
Lender had not sold or agreed to sell any participations in such Loans, Letter
of Credit Interest and Commitments, and as if such Lender were funding each of
such Loan, Letter of Credit Interest and Commitments in the same way that it is
funding the portion of such Loan, Letter of Credit Interest and Commitments in
which no participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Loan Document except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term of such Lender's related
Commitment or extend the amount or date of any scheduled reduction of such
Commitment pursuant to Section 2.04 hereof, (ii) extend the date fixed for the
payment of principal of or interest on the related Loan or Loans, Reimbursement
Obligations or any portion of any fee hereunder payable to the Participant,
(iii) reduce the amount of any such payment of principal, (iv) reduce the rate
at which interest is payable thereon, or any fee hereunder payable to the
Participant, to a level below the rate at which the Participant is entitled to
receive such interest or fee or (v) consent to any modification, supplement or
waiver hereof or of any of the other Loan Documents to the extent that the same,
under Section 10.09 or Section 11.04 hereof, requires the consent of each
Lender.
(d) In addition to the assignments and participations permitted under the
foregoing provisions of this Section 11.06, any Lender may (without notice to
the Borrower, the Administrative Agent or any other Lender and without payment
of any fee) (i) assign and pledge all or any portion of its Loans to any Federal
Reserve Bank as collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Lender and (ii) assign all or any
portion of its rights under this Agreement and its Loans to an affiliate. No
such assignment shall release the assigning Lender from its obligations
hereunder.
(e) A Lender may furnish any information concerning the Borrower or any of
its Subsidiaries in the possession of such Lender from time to time to assignees
and participants (including prospective assignees and participants), subject,
however, to the provisions of Section 11.12(b) hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding, no Lender
may assign or participate any interest in any Loan or Reimbursement Obligation
held by it hereunder to the Borrower or any of its Affiliates or Subsidiaries
without the prior consent of each Lender.
(g) The Administrative Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in The City of New York a copy of
each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amount of the Loans owing to,
Credit Agreement
----------------
-108-
each Lender pursuant to the terms hereof from time to time (the "Register"). The
--------
entries in the Register shall be conclusive, and the Borrower, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower and any Lender, at
any reasonable time and from time to time upon reasonable prior notice.
(h) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an assignee, the assignee's completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) above, the
Administrative Agent shall accept such Assignment and Acceptance and record the
information contained therein in the Register. No assignment shall be effective
for purposes of this Agreement unless it has been recorded in the Register as
provided in this paragraph.
11.07 Survival. The obligations of the Borrower under Sections 5.01,
--------
5.05, 5.06, 5.07 and 11.03 hereof, and the obligations of the Lenders under
Section 10.05 hereof, shall survive the repayment of the Loans and Reimbursement
Obligations and the termination of the Commitments and, in the case of any
Lender that may assign any interest in its Commitments, Loans or Letter of
Credit Interest hereunder, shall survive the making of such assignment,
notwithstanding that such assigning Lender may cease to be a "Lender" hereunder.
In addition, each representation and warranty made, or deemed to be made by a
notice of any extension of credit (whether by means of a Loan or a Letter of
Credit), herein or pursuant hereto shall survive the making of such
representation and warranty, and no Lender shall be deemed to have waived, by
reason of making any extension of credit hereunder (whether by means of a Loan
or a Letter of Credit), any Default that may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that such Lender or the Administrative Agent may have had notice
or knowledge or reason to believe that such representation or warranty was false
or misleading at the time such extension of credit was made.
11.08 Captions. The table of contents and captions and section headings
--------
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
11.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 Governing Law; Submission to Jurisdiction. This Agreement shall
------------------------------------------
be governed by, and construed in accordance with, the law of the State of New
York. The Borrower
Credit Agreement
----------------
-109-
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of the Supreme Court of the
State of New York sitting in New York County (including its Appellate Division),
and of any other appellate court in the State of New York, for the purposes of
all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The Borrower hereby irrevocably waives, to the
fullest extent permitted by applicable law, any objection that it may now or
hereafter have to the laying of the venue of any such proceeding brought in such
a court and any claim that any such proceeding brought in such a court has been
brought in an inconvenient forum.
11.11 Waiver of Jury Trial. EACH OF THE BORROWER, THE ADMINISTRATIVE
--------------------
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.12 Treatment of Certain Information; Confidentiality.
-------------------------------------------------
(a) The Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to the Borrower
or one or more of its Subsidiaries (in connection with this Agreement or
otherwise) by any Lender or by one or more subsidiaries or affiliates of such
Lender and the Borrower hereby authorize each Lender to share any information
delivered to such Lender by the Borrower and its Subsidiaries pursuant to this
Agreement, or in connection with the decision of such Lender to enter into this
Agreement, to any such subsidiary or affiliate, it being understood that any
such subsidiary or affiliate receiving such information shall be bound by the
provisions of paragraph (b) below as if it were a Lender hereunder. Such
authorization shall survive the repayment of the Loans and Reimbursement
Obligations and the termination of the Commitments.
(b) Each Lender and the Administrative Agent agrees (on behalf of itself and
each of its affiliates, directors, officers, employees and representatives) to
use reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of the same nature
and in accordance with safe and sound banking practices, any non-public
information supplied to it by any Obligor pursuant to this Agreement or any
other Loan Document that is identified by the Borrower as being confidential at
the time the same is delivered to the Lenders or the Administrative Agent,
provided that nothing herein shall limit the disclosure of any such information
- --------
(i) after such information shall have become public (other than through a
violation of this Section 11.12), (ii) to the extent required by statute, rule,
regulation or judicial process, (iii) to counsel for any of the Lenders or the
Administrative Agent, (iv) to bank examiners (or any other regulatory authority
having jurisdiction over any Lender or the Administrative Agent), or to auditors
or accountants, (v) to the Administrative Agent or any
Credit Agreement
----------------
-110-
other Lender (or to Chase Securities Inc.), (vi) in connection with any
litigation to which any one or more of the Lenders or the Administrative Agent
is a party, or in connection with the enforcement of rights or remedies
hereunder or under any other Loan Document, (vii) to a subsidiary or affiliate
of such Lender as provided in paragraph (a) above or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to the respective Lender a Confidentiality Agreement substantially in the form
of Exhibit I hereto (or executes and delivers to such Lender an acknowledgement
to the effect that it is bound by the provisions of this Section 11.12(b), which
acknowledgement may be included as part of the respective assignment or
participation agreement pursuant to which such assignee or participant acquires
an interest in the Loans or Letter of Credit Interest hereunder); provided,
--------
further, that obligations of any assignee that has executed a Confidentiality
- -------
Agreement in the form of Exhibit I hereto shall be superseded by this Section
11.12 upon the date upon which such assignee becomes a Lender hereunder pursuant
to Section 11.06(b) hereof.
Credit Agreement
----------------
-111-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
MEDIACOM SOUTHEAST LLC
By MEDIACOM LLC, a Member
By_______________________________
Title: Manager
Address for Notices:
Mediacom Southeast LLC
c/o Mediacom LLC
100 Crystal Run Road
Middletown, New York 10941
Attention: Rocco B. Commisso
Telecopier No.: (914) 695-2699
Telephone No.: (914) 695-2600
Credit Agreement
----------------
-112-
Lenders
-------
THE CHASE MANHATTAN BANK
By________________________________
Title:
BANK OF MONTREAL
By________________________________
Title:
CIBC INC.
By________________________________
Title:
CREDIT SUISSE FIRST BOSTON
By________________________________
Title:
Credit Agreement
----------------
-113-
FIRST UNION NATIONAL BANK
By________________________________
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By__________________________________
Title:
Address for Notices to
Chase as Administrative Agent:
The Chase Manhattan Bank
Agent Bank Services
1 Chase Manhattan Plaza
New York, New York 10081
Telecopier No.: (212) 552-5700
Telephone No.: (212) 552-7440
Credit Agreement
----------------
-114-
SCHEDULE I
Commitments
-----------
Revolving Term
Lender Credit Commitment Loan Commitment
- ------ ----------------- ---------------
The Chase Manhattan Bank $ 48,666,666.66 $28,333,333.34
Bank of Montreal 28,000,000.00 17,000,000.00
Credit Suisse First Boston 28,000,000.00 17,000,000.00
CIBC Inc. 18,666,666.67 11,333,333.33
First Union National Bank 18,666,666.67 11,333,333.33
--------------- --------------
Total $140,000,000.00 $85,000,000.00
Schedule I
----------
SCHEDULE II
-----------
Material Agreements and Liens
-----------------------------
[See Sections 7.11, 8.06(b) and 8.07(b)]
Part A: Material Agreements
-------------------
As of the closing date, Mediacom Southeast will have outstanding
approximately 146 surety and performance bonds of varied types,
including Franchise Bonds, Pole Lease Bonds, Performance Bonds,
Retailer's Sales Tax Bonds, Pole Attachment Bonds, Construction
Permit Bonds, Encroachment Permit Bonds, Highway Permit Bonds and
Utility Bonds, having an aggregate amount of approximately
$2,300,000.
Part B: Liens
-----
None
SCHEDULE III
------------
Investments
-----------
None
Schedule III
------------
Mediacom Southeast LLC SCHEDULE IV
---------------------- -----------
Franchise Schedule
------------------
CURRENT
ST FRANCHISOR EXPIRATION REGULATED SELLER
- ----------------------------------------------------------------------
AL Ardmore 7/9/10 NO US
- ----------------------------------------------------------------------
AL Atmore 8/7/02 YES ECC
- ----------------------------------------------------------------------
AL Baldwin County 4/9/01 NO US
- ----------------------------------------------------------------------
AL Bayou LaBatre 2/19/05 NO US
- ----------------------------------------------------------------------
AL Brewton 9/5/06 YES US
- ----------------------------------------------------------------------
AL Camden 12/10/00 NO ECC
- ----------------------------------------------------------------------
AL Citronelle 11/13/00 NO US
- ----------------------------------------------------------------------
AL Clarke County 1/28/07 NO ECC
- ----------------------------------------------------------------------
AL Conecun County (Evergreen) 11/28/04 NO ECC
- ----------------------------------------------------------------------
AL Creois 6/17/01 NO ECC
- ----------------------------------------------------------------------
AL Daphne 2/13/06 NO US
- ----------------------------------------------------------------------
AL East Brewton 10/24/06 YES ECC
- ----------------------------------------------------------------------
AL Escambia County (Brewton) 1/7/05 NO ECC
- ----------------------------------------------------------------------
AL Evergreen 6/20/05 NO ECC
- ----------------------------------------------------------------------
AL Excel 2/12/06 NO ECC
- ----------------------------------------------------------------------
AL Frisco City 11/12/05 NO ECC
- ----------------------------------------------------------------------
AL Greensboro 2/13/06 NO ECC
- ----------------------------------------------------------------------
AL Gulf Shores 11/28/00 YES US
- ----------------------------------------------------------------------
AL Hale County 5/30/99 NO ECC
- ----------------------------------------------------------------------
AL Jackson 5/9/07 NO ECC
- ----------------------------------------------------------------------
AL Limestone County 4/30/05 NO US
- ----------------------------------------------------------------------
AL Linden 11/17/01 NO ECC
- ----------------------------------------------------------------------
AL Livingston 3/1/02 NO ECC
- ----------------------------------------------------------------------
AL Loxley 10/18/98 NO US
- ----------------------------------------------------------------------
AL Madison County 11/20/99 NO US
- ----------------------------------------------------------------------
AL McIntosh 4/8/07 NO US
- ----------------------------------------------------------------------
AL Mobile 1/6/02 NO US
- ----------------------------------------------------------------------
AL Mobile County 4/29/02 YES US
- ----------------------------------------------------------------------
AL Monroe County 8/9/06 NO US
- ----------------------------------------------------------------------
AL Monroeville 5/12/04 NO US
- ----------------------------------------------------------------------
AL Mt. Vernon 1/13/08 NO US
- ----------------------------------------------------------------------
AL Orange Beach 2/27/00 YES US
- ----------------------------------------------------------------------
AL Rapton 11/13/04 NO ECC
- ----------------------------------------------------------------------
AL Robertsdale 10/16/98 NO US
- ----------------------------------------------------------------------
AL Saraland 4/30/03 NO ECC
- ----------------------------------------------------------------------
AL Satsuma 9/16/00 NO US
- ----------------------------------------------------------------------
AL Silverhill 12/17/99 NO US
- ----------------------------------------------------------------------
AL Thomasville 1/13/01 NO US
- ----------------------------------------------------------------------
AL Washington County 12/9/07 NO US
- ----------------------------------------------------------------------
AL Wilcox County (Camden) 5/1/07 NO ECC
- ----------------------------------------------------------------------
AL York 5/4/99 NO US
- ----------------------------------------------------------------------
FL Apalachicola 10/3/00 NO ECC
- ----------------------------------------------------------------------
FL Bay County 11/10/01 NO US
- ----------------------------------------------------------------------
FL Bonifay 7/28/02 NO US
- ----------------------------------------------------------------------
FL Carrabelle 12/9/02 NO ECC
- ----------------------------------------------------------------------
FL Escambia County 11/8/04 NO US
- ----------------------------------------------------------------------
Glossary:
- --------
US: U.S. Cable Television Group, L.P.
MO: Missouri Cable Partners, L.P.
EEC: EEC Holding Corp. 1 of 6
Schedule IV
-----------
Medlacom Southeast LLC SCHEDULE IV
---------------------- -----------
Franchise Schedule
------------------
CURRENT
ST FRANCHISOR EXPIRATION REGULATED SELLER
- ----------------------------------------------------------------------
FL Franklin County 6/30/10 NO US
- ----------------------------------------------------------------------
FL Gadsden County (Havana) 6/30/03 NO ECC
- ----------------------------------------------------------------------
FL Greensboro 8/2/97 NO US
- ----------------------------------------------------------------------
FL Gretna 11/4/04 NO US
- ----------------------------------------------------------------------
FL Gulf Breeze 4/13/01 NO US
- ----------------------------------------------------------------------
FL Gulf County 3/24/01 NO ECC
- ----------------------------------------------------------------------
FL Gulf County 5/26/07 NO ECC
- ----------------------------------------------------------------------
FL Havana 2/23/98 NO ECC
- ----------------------------------------------------------------------
FL Holmes Co. (Bonifay) 1/5/07 NO US
- ----------------------------------------------------------------------
FL Mexico Beach 1/27/01 NO US
- ----------------------------------------------------------------------
FL Milton 12/29/07 NO US
- ----------------------------------------------------------------------
FL PensacolaNAS 2/9/05 NO ECC
- ----------------------------------------------------------------------
FL Santa Rosa County 9/14/03 NO US
- ----------------------------------------------------------------------
FL Tyndall AFB 9/30/00 NO US
- ----------------------------------------------------------------------
FL Vernon (Bonifay) 9/24/04 NO US
- ----------------------------------------------------------------------
FL Walton County 8/12/02 NO US
- ----------------------------------------------------------------------
FL Wewahitchka 8/24/98 NO US
- ----------------------------------------------------------------------
FL WhitingNAS 7/1/04 NO US
- ----------------------------------------------------------------------
IL Alto Pass 9/7/12 NO US
- ----------------------------------------------------------------------
IL Bush 1/5/12 NO US
- ----------------------------------------------------------------------
IL Cambria 1/4/12 NO US
- ----------------------------------------------------------------------
IL Cobden 12/7/06 NO US
- ----------------------------------------------------------------------
IL Coulterville 5/17/12 NO US
- ----------------------------------------------------------------------
IL Dowell 4/18/12 NO US
- ----------------------------------------------------------------------
IL Elkville 1/25/12 NO US
- ----------------------------------------------------------------------
IL Franklin County 6/15/12 NO US
- ----------------------------------------------------------------------
IL Hecker 11/17/12 NO US
- ----------------------------------------------------------------------
IL Hurst 11/23/11 NO US
- ----------------------------------------------------------------------
IL Mound City 12/1/06 NO US
- ----------------------------------------------------------------------
IL Mounds 10/5/11 NO US
- ----------------------------------------------------------------------
IL Perry County 1/8/99 NO US
- ----------------------------------------------------------------------
IL Red Bud 10/18/02 NO US
- ----------------------------------------------------------------------
IL Royalton 10/19/06 NO US
- ----------------------------------------------------------------------
IL Smithton 3/1/08 NO US
- ----------------------------------------------------------------------
IL Tilden 5/18/12 NO US
- ----------------------------------------------------------------------
IL Williamson County 3/6/98 NO US
- ----------------------------------------------------------------------
IL Ziegler 6/7/12 NO US
- ----------------------------------------------------------------------
KS Altoona 2/21/04 NO US
- ----------------------------------------------------------------------
KS Baldwin City 1/14/00 YES US
- ----------------------------------------------------------------------
KS Burlingame 7/19/03 NO US
- ----------------------------------------------------------------------
KS Burlington 5/4/01 NO US
- ----------------------------------------------------------------------
KS Carbondale 11/1/03 NO US
- ----------------------------------------------------------------------
KS Edgerton 3/13/00 YES US
- ----------------------------------------------------------------------
KS Eureka 4/11/03 NO US
- ----------------------------------------------------------------------
KS Galena 11/6/99 NO US
- ----------------------------------------------------------------------
KS Gridley 6/1/99 NO US
- ----------------------------------------------------------------------
KS Hamilton 12/5/03 NO US
- ----------------------------------------------------------------------
KS Lobo 5/4/02 YES US
- ----------------------------------------------------------------------
KS Leroy 6/1/99 NO US
- ----------------------------------------------------------------------
KS Lyndon 7/6/02 NO US
- ----------------------------------------------------------------------
KS Madison 1/7/05 NO US
- ----------------------------------------------------------------------
KS Mulberry 12/11/03 NO US
- ----------------------------------------------------------------------
KS New Strawn 8/6/11 YES US
- ----------------------------------------------------------------------
KS Osage City 4/27/01 NO US
- ----------------------------------------------------------------------
Glossary:
US: U.S. Cable Television Group, L.P.
MO: Missouri Cable Partners, L.P.
EEC: EEC Holding Corp. Schedule IV 2 of 6
-----------
Mediacom Southeast LLC SCHEDULE IV
------------------------- -----------
Franchise Schedule
------------------
CURRENT
ST FRANCHISOR EXPIRATION REGULATED SELLER
- ----------------------------------------------------------------------
KS Oswego 8/13/99 NO US
- ----------------------------------------------------------------------
KS Scranton 7/3/09 NO US
- ----------------------------------------------------------------------
KS Thayer 5/13/05 NO US
- ----------------------------------------------------------------------
KS Toronto 12/2/02 NO US
- ----------------------------------------------------------------------
KS Treece 7/13/12 NO US
- ----------------------------------------------------------------------
KS Wellsville 11/29/99 YES US
- ----------------------------------------------------------------------
KY Albany 2/19/05 NO US
- ----------------------------------------------------------------------
KY Bonnieville 10/5/07 NO US
- ----------------------------------------------------------------------
KY Bremen 9/27/00 NO US
- ----------------------------------------------------------------------
KY Burkesville 5/5/11 YES US
- ----------------------------------------------------------------------
KY Cadiz 7/1/01 YES US
- ----------------------------------------------------------------------
KY Caldwell County 10/25/98 NO US
- ----------------------------------------------------------------------
KY Calloway County 5/8/98 NO US
- ----------------------------------------------------------------------
KY Christian County 5/24/98 NO US
- ----------------------------------------------------------------------
KY Clinton County 8/15/09 NO US
- ----------------------------------------------------------------------
KY Crittendon County 8/12/98 NO US
- ----------------------------------------------------------------------
KY Crofton 6/26/01 NO US
- ----------------------------------------------------------------------
KY Cumberland County 12/9/01 YES US
- ----------------------------------------------------------------------
KY Edmonton 5/4/02 NO US
- ----------------------------------------------------------------------
KY Elkton 9/20/07 NO US
- ----------------------------------------------------------------------
KY Fredonia 1/25/13 NO US
- ----------------------------------------------------------------------
KY Gamaliel 1/7/07 NO US
- ----------------------------------------------------------------------
KY Guthrie 1/31/99 NO US
- ----------------------------------------------------------------------
KY Hardin 11/2/98 NO US
- ----------------------------------------------------------------------
KY Hart County 6/19/02 NO US
- ----------------------------------------------------------------------
KY Hopkins County 7/14/01 NO US
- ----------------------------------------------------------------------
KY Marion 4/8/06 NO US
- ----------------------------------------------------------------------
KY Marshall County 8/3/12 NO US
- ----------------------------------------------------------------------
KY Metcalfe County 1/6/00 NO US
- ----------------------------------------------------------------------
KY Monroe County 8/19/07 NO US
- ----------------------------------------------------------------------
KY Munfordville 6/29/02 NO US
- ----------------------------------------------------------------------
KY Nebo 2/7/13 NO US
- ----------------------------------------------------------------------
KY Nortonville 7/14/01 NO US
- ----------------------------------------------------------------------
KY Oak Grove 10/12/11 NO US
- ----------------------------------------------------------------------
KY Pembroke 1/3/13 NO US
- ----------------------------------------------------------------------
KY Princeton 8/22/98 NO US
- ----------------------------------------------------------------------
KY Sacramento 2/19/00 NO US
- ----------------------------------------------------------------------
KY Salem 8/12/98 NO US
- ----------------------------------------------------------------------
KY Todd County 3/12/13 NO US
- ----------------------------------------------------------------------
KY Tompkinsville 8/3/10 NO US
- ----------------------------------------------------------------------
KY Trenton 7/1/01 NO US
- ----------------------------------------------------------------------
KY Trigg County 8/20/01 YES US
- ----------------------------------------------------------------------
MO Airport Drive 12/16/02 NO US
- ----------------------------------------------------------------------
MO Alba 4/9/07 NO US
- ----------------------------------------------------------------------
MO Albany 8/21/04 YES MO
- ----------------------------------------------------------------------
MO Anderson 4/14/04 NO US
- ----------------------------------------------------------------------
MO Appleton City 12/31/99 NO US
- ----------------------------------------------------------------------
MO Archie 12/31/99 NO US
- ----------------------------------------------------------------------
MO Ash Grove 1/13/98 NO US
- ----------------------------------------------------------------------
MO Ave 11/11/09 NO US
- ----------------------------------------------------------------------
MO Bethany 6/15/00 YES MO
- ----------------------------------------------------------------------
MO Billings 9/8/07 NO US
- ----------------------------------------------------------------------
MO Brunswick 7/9/98 NO US
- ----------------------------------------------------------------------
Glossary:
US: U.S. Cable Television Group, L.P.
MO: Missouri Cable Partners, L.P.
EEC: EEC Holding Corp. Schedule IV 3 of 6
-----------
SCHEDULE IV
-----------
Mediacom Southeast LLC
----------------------
Franchise Schedule
------------------
CURRENT
ST FRANCHISOR EXPIRATION REGULATED SELLER
- -----------------------------------------------------------------------
MO Butler 12/17/03 NO US
- -----------------------------------------------------------------------
MO Cabool 11/8/89 NO US
- -----------------------------------------------------------------------
MO Cameron 7/21/02 YES MO
- -----------------------------------------------------------------------
MO Carl Junction 8/1/99 NO US
- -----------------------------------------------------------------------
MO Carrollton 4/19/03 NO US
- -----------------------------------------------------------------------
MO Cassville 11/24/07 NO US
- -----------------------------------------------------------------------
MO Crane 1/12/02 NO US
- -----------------------------------------------------------------------
MO Crystal Lakes 11/11/13 NO MO
- -----------------------------------------------------------------------
MO Diamond 6/7/02 NO US
- -----------------------------------------------------------------------
MO Duenweg 7/2/12 NO US
- -----------------------------------------------------------------------
MO Duquesne 2/8/07 NO US
- -----------------------------------------------------------------------
MO Everton 2/8/10 NO US
- -----------------------------------------------------------------------
MO Excelsior Estates 6/17/12 NO MO
- -----------------------------------------------------------------------
MO Excelsior Springs 2/15/98 NO MO
- -----------------------------------------------------------------------
MO Exeter 12/9/07 NO US
- -----------------------------------------------------------------------
MO Forsyth 11/18/12 NO US
- -----------------------------------------------------------------------
MO Golden City 4/19/02 NO US
- -----------------------------------------------------------------------
MO Goodman 6/20/04 NO US
- -----------------------------------------------------------------------
MO Granby 10/12/01 NO US
- -----------------------------------------------------------------------
MO Greene County 3/30/01 NO US
- -----------------------------------------------------------------------
MO Greenfield 2/16/02 NO US
- -----------------------------------------------------------------------
MO Henrietta 8/8/03 NO MO
- -----------------------------------------------------------------------
MO Homestead Village 11/9/13 NO MO
- -----------------------------------------------------------------------
MO Jasper 3/1/02 NO US
- -----------------------------------------------------------------------
MO Kimbering City 12/6/02 NO US
- -----------------------------------------------------------------------
MO Lawson 7/21/07 NO MO
- -----------------------------------------------------------------------
MO Liberal 7/21/02 NO US
- -----------------------------------------------------------------------
MO Lockwood 3/22/02 NO US
- -----------------------------------------------------------------------
MO Lowry City 9/9/07 NO US
- -----------------------------------------------------------------------
MO Mansfield 11/19/12 NO US
- -----------------------------------------------------------------------
MO Marceline 11/3/00 NO US
- -----------------------------------------------------------------------
MO Marshfield 10/8/95 NO US
- -----------------------------------------------------------------------
MO Miller 9/23/08 NO US
- -----------------------------------------------------------------------
MO Mt. Vernon 11/8/09 NO US
- -----------------------------------------------------------------------
MO Neck City 4/9/05 NO US
- -----------------------------------------------------------------------
MO Norborne 10/26/03 NO US
- -----------------------------------------------------------------------
MO Oronogo 2/6/05 NO US
- -----------------------------------------------------------------------
MO Osceola 5/28/11 YES US
- -----------------------------------------------------------------------
MO Purcell 4/2/05 NO US
- -----------------------------------------------------------------------
MO Purdy 5/8/02 NO US
- -----------------------------------------------------------------------
MO Richmond 12/15/02 NO MO
- -----------------------------------------------------------------------
MO Rogersville 12/4/07 NO US
- -----------------------------------------------------------------------
MO Salisbury 10/8/05 NO US
- -----------------------------------------------------------------------
MO Sarcoxie 10/5/01 NO US
- -----------------------------------------------------------------------
MO Seymour 8/13/11 NO US
- -----------------------------------------------------------------------
MO Stratford 10/20/07 NO US
- -----------------------------------------------------------------------
MO Walnut Grove 5/20/99 NO US
- -----------------------------------------------------------------------
MO Webster County 3/8/07 NO US
- -----------------------------------------------------------------------
MO Willard 6/12/98 NO US
- -----------------------------------------------------------------------
MO Wood Heights 2/13/04 NO MO
- -----------------------------------------------------------------------
MS Bay St. Louis 6/27/98 NO US
- -----------------------------------------------------------------------
MS Beaumont 10/5/98 NO US
- -----------------------------------------------------------------------
Glossary:
- --------
US: U.S. Cable Television Group, L.P.
MO: Missouri Cable Partners, L.P.
EEC: EEC Holding Corp.
Schedule IV 4 of 6
-----------
Mediacom Southeast LLC SCHEDULE IV
---------------------- -----------
Franchise Schedule
------------------
CURRENT
ST FRANCHISOR EXPIRATION REGULATED SELLER
- ----------------------------------------------------------------------
MS Decatur 4/1/99 NO ECC
- ----------------------------------------------------------------------
MS George County 4/6/01 YES US
- ----------------------------------------------------------------------
MS Hancock County 6/19/08 NO US
- ----------------------------------------------------------------------
MS Houston 2/8/14 NO ECC
- ----------------------------------------------------------------------
MS Jackson County 5/12/07 NO US
- ----------------------------------------------------------------------
MS Louisville 12/3/98 NO ECC
- ----------------------------------------------------------------------
MS Lucedale 5/20/95 NO US
- ----------------------------------------------------------------------
MS Newton 4/18/05 NO US
- ----------------------------------------------------------------------
MS Noxepater 7/4/10 NO US
- ----------------------------------------------------------------------
MS Pontotoc City 1/2/09 NO US
- ----------------------------------------------------------------------
MS Pontotoc Count 7/23/04 NO US
- ----------------------------------------------------------------------
MS Stone County 5/1/05 NO US
- ----------------------------------------------------------------------
MS Union 12/2/11 NO US
- ----------------------------------------------------------------------
MS Water Valley 3/18/16 YES ECC
- ----------------------------------------------------------------------
MS Waveland 2/6/06 NO US
- ----------------------------------------------------------------------
MS Wiggins 9/18/03 NO US
- ----------------------------------------------------------------------
NC Arrowhead Beach 5/19/07 NO US
- ----------------------------------------------------------------------
NC Ashe County 6/6/98 NO US
- ----------------------------------------------------------------------
NC Bertie County 12/5/98 NO US
- ----------------------------------------------------------------------
NC Camden County 5/7/99 NO US
- ----------------------------------------------------------------------
NC Chowan County 3/2/06 YES US
- ----------------------------------------------------------------------
NC Colerain 4/6/02 NO US
- ----------------------------------------------------------------------
NC Columbia 5/16/04 NO US
- ----------------------------------------------------------------------
NC Conway 4/2/04 NO US
- ----------------------------------------------------------------------
NC Creswell 5/7/04 NO US
- ----------------------------------------------------------------------
NC Currituck 11/5/99 YES US
- ----------------------------------------------------------------------
NC Dillsboro 10/7/05 NO US
- ----------------------------------------------------------------------
NC Edenton 7/9/06 YES US
- ----------------------------------------------------------------------
NC Flat Rock 7/11/06 YES US
- ----------------------------------------------------------------------
NC Fletcher 5/31/10 YES US
- ----------------------------------------------------------------------
NC Franklin 10/1/99 YES US
- ----------------------------------------------------------------------
NC Henderson County 9/1/06 YES ECC
- ----------------------------------------------------------------------
NC Hendersonville 12/5/06 YES ECC
- ----------------------------------------------------------------------
NC Hartford 2/12/06 YES US
- ----------------------------------------------------------------------
NC Jackson 8/1/04 NO US
- ----------------------------------------------------------------------
NC Jackson County 10/15/10 NO US
- ----------------------------------------------------------------------
NC Jamesville 11/14/98 NO US
- ----------------------------------------------------------------------
NC Jefferson 10/22/05 NO US
- ----------------------------------------------------------------------
NC Kelford 3/5/04 NO US
- ----------------------------------------------------------------------
NC Lansing 11/11/98 NO US
- ----------------------------------------------------------------------
NC Laurel Park 10/5/06 YES ECC
- ----------------------------------------------------------------------
NC Lewiston/Woody 3/5/04 NO US
- ----------------------------------------------------------------------
NC Macon County 9/30/99 YES US
- ----------------------------------------------------------------------
NC Martin County 12/5/98 NO US
- ----------------------------------------------------------------------
NC McDowell County 8/25/07 NO US
- ----------------------------------------------------------------------
NC Northhampton County 9/10/04 NO US
- ----------------------------------------------------------------------
NC Perqulmans County 6/3/06 YES US
- ----------------------------------------------------------------------
NC Plymouth 11/14/98 NO US
- ----------------------------------------------------------------------
NC Powellsville 4/7/02 NO US
- ----------------------------------------------------------------------
NC Rich Square 3/1/04 NO US
- ----------------------------------------------------------------------
NC Roper 3/12/04 No US
- ----------------------------------------------------------------------
NC Roxobel 3/13/04 NO US
- ----------------------------------------------------------------------
NC Seaboard 8/14/04 NO US
- ----------------------------------------------------------------------
Glossary:
US: U.S. Cable Television Group, L.P.
MO: Missouri Cable Partners, L.P.
EEC: EEC Holding Corp. Schedule IV 5 of 6
-----------
SCHEDULE IV
-----------
Mediacom Southeast LLC
----------------------
Franchise Schedule
------------------
CURRENT
ST FRANCHISOR EXPIRATION REGULATED SELLER
- --------------------------------------------------------------------------------
NC Severn 4/2/04 NO US
- --------------------------------------------------------------------------------
NC Sylva 10/12/03 YES US
- --------------------------------------------------------------------------------
NC Tyrell County 4/2/04 NO US
- --------------------------------------------------------------------------------
NC Washington County 5/18/12 NO US
- --------------------------------------------------------------------------------
NC Webster 10/14/05 NO US
- --------------------------------------------------------------------------------
NC West Jefferson 9/2/06 YES ECC
- --------------------------------------------------------------------------------
NC Windsor 12/12/03 NO US
- --------------------------------------------------------------------------------
NC Winfall 10/2/02 NO US
- --------------------------------------------------------------------------------
NC Woodland 5/3/04 NO US
- --------------------------------------------------------------------------------
OK Cardin 2/5/11 NO US
- --------------------------------------------------------------------------------
OK Picher 10/8/05 NO US
- --------------------------------------------------------------------------------
OK Quapaw 10/12/05 NO US
- --------------------------------------------------------------------------------
TN Ardmore 7/6/10 NO US
- --------------------------------------------------------------------------------
TN Dover 3/29/06 NO US
- --------------------------------------------------------------------------------
TN Elkton 1/12/10 NO US
- --------------------------------------------------------------------------------
TN Giles County 1/16/10 NO US
- --------------------------------------------------------------------------------
TN Huntland 7/18/05 NO US
- --------------------------------------------------------------------------------
TN Lincoln County 3/20/10 NO US
- --------------------------------------------------------------------------------
TN Stewart County 11/16/02 NO US
- --------------------------------------------------------------------------------
Total Franchises: 277
Total Regulated: Yes 35
Total Regulated: No 242
Glossary:
- --------
US: U.S. Cable Television Group, L.P.
MO: Missouri Cable Partners, L.P.
EEC:EEC Holding Corp.
Schedule IV 6 of 6
-----------
SCHEDULE V
----------
For purposes of making the representations regarding the CATV Systems contained
at Sections 7.17 and 7.18 of the Credit Agreement, Borrower has relied upon the
representations and warranties made by Sellers in the Cablevision Acquisition
Agreement and by Sellers' FCC counsel in the FCC counsel opinion letter
delivered pursuant to that Acquisition Agreement. In addition Borrower has
relied on its own knowledge acquired to date regarding the operations of the
CATV Systems. However, certain areas covered in Sections 7.17 and 7.18 of the
Credit Agreement are outside the scope of Borrower's actual knowledge or outside
the scope of the representations of Sellers and Sellers' FCC counsel that
Borrower is relying upon for purposes of this Credit Agreement. These
substantive areas are:
1. The necessity to reduce rates or institute rate refunds in most of the
communities served by the CATV Systems. In the communities which have certified
to regulate basic service rates, there are no current decisions ordering rate
reductions or refunds. In certain communities, challenges to cable programming
service tier rate increases have been unsuccessful. The Borrower, however, has
not conducted a detailed review of the rate worksheets for every community
served by the CATV systems. Therefore, Borrower cannot represent that in the
future no community will challenge the rates existing as of the date of this
Agreement.
2. The provision of subscriber privacy notices.
Subject to the limitations on Borrower's knowledge described above, Borrower
is aware of the following exceptions to the representations made in Sections
7.17 and 7.18:
a. Seller (Cablevision) is not authorized to use all the frequencies on the
following Community Antenna Relay Service (CARS) licenses from the Federal
Communications Commission:
Everton, Missouri
Osage City, Kansas
Ardmore, Alabama
Burlington, Kansas
Both Cablevision and Borrower will, prior to closing, file the appropriate
applications to claim temporary authorization to continue using those
frequencies.
b. Cablevision has permitted the lapse of two business radio licenses in
Gulf Breeze and Cape San Blas, Florida. Cablevision has sought reinstatement of
the licenses and will assign the same to Borrower once the FCC authorizes their
reissuance. In the interim Cablevision and Borrower have entered into an
agreement to permit Mediacom to utilize those facilities.
c. Of the 277 franchises being transferred, 35 franchises have been
certified to adopt regulations as provided in the cable rate regulations. These
franchises are listed by state as follows:
ALABAMA KANSAS KENTUCKY
- ------- ------ --------
Atmore Baldwin City Burkesville
Brewton Edgerton Cadiz
East Brewton Lebo Cumberland County
Gulf Shores New Strawn Trigg County
Mobile County Wellsville
Orange Beach
MISSOURI MISSISSIPPI NORTH CAROLINA
- -------- ----------- --------------
Albany George County Chowan County
Bethany Water Valley Currituck
Cameron Edenton
Osceola Flat Rock
Fletcher
Franklin
Henderson County
Hendersonville
Herford
Laural Park
Macon
Perquimans County
Sylva
West Jefferson
2
Mediacom Southeast LLC SCHEDULE VI
---------------------- -----------
Adjusted System Cash Flow (ASCF)
Adjusted Operating Cash Flow (AOCF)
For the Three Months Ending September 30, 1997
Adjusted System Cash Flow (ASCF)
System Cash Flow
U.S. Cable Acquisition $ 7,964,800
--------------
Total System Cash Flow $ 7,964,800
==============
Adjustment to System Cash Flow
Programming Increases $ (855,000)
Operational Savings realized by Buyer $ 1,968,100
--------------
Total Adjustments to SCF $ 1,113,100
==============
ASCF $ 9,077,900
--------------
--------------
Annualized ASCF $ 35,311,600
==============
Adjusted Operating Cash Flow (AOCF)
Revenues/1/ $ 23,171,700
System Cash Flow
U.S. Cable Acquisition $ 7,964,800
--------------
Total System Cash Flow $ 7,964,800
==============
Management Fees $ 1,042,730
--------------
Operating Cash Flow $ 6,922,000
Adjustment to Operating Cash Flow
Programming increases $ (855,000)
Operational Savings realized by Buyer $ 1,968,100
--------------
Total Adjustments to SCF $ 1,113,100
==============
AOCF $ 8,035,100
--------------
--------------
Annualized AOCF $ 32,140,400
==============
/1/ Based on actual financial information provided by Cablevision Systems
Corporation
Schedule VI
-----------
SCHEDULE VII
------------
Regions
-------
Alabama Region
Florida Region
Kentucky Region
Missouri Region
North Carolina Region
Schedule VII
------------
EXHIBIT A
[Form of Assignment and Acceptance]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of January 23, 1998 (as
modified and supplemented and in effect from time to time, the "Credit
------
Agreement"), between Mediacom Southeast LLC, a Delaware limited liability
- ---------
company, the lenders named therein and The Chase Manhattan Bank, as
administrative agent for such lenders. Terms defined in the Credit Agreement
are used herein as defined therein.
____________________ (the "Assignor") and ____________________ (the
--------
"Assignee") agree as follows:
--------
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date as set forth in Schedule 1 hereto (the "Effective Date"), an
--------------
interest (the "Assigned Interest") in and to the Assignor's rights and
-----------------
obligations under the Credit Agreement with respect to those credit facilities
contained in the Credit Agreement as are set forth on Schedule 1 (individually,
an "Assigned Facility"; collectively, the "Assigned Facilities"), in a principal
----------------- -------------------
amount and percentage for each Assigned Facility as set forth on Schedule 1.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, any other Loan Document or
any other instrument or document furnished pursuant thereto, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement, any other Loan Document or any other instrument or document
furnished pursuant thereto, other than that it has not created any adverse claim
upon the interest being assigned by it hereunder and that such interest is free
and clear of any such adverse claim; (ii) makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrower, any of its Subsidiaries or any other obligation or the performance or
observance by the Borrower, any of its Subsidiaries or any other obligor of any
of their respective obligations under the Credit Agreement or any other Loan
Document or any other instrument or document furnished pursuant hereto or
thereto; and (iii) attaches any promissory note(s) held by it evidencing the
Assigned Facilities and requests that the Administrative Agent exchange such
promissory note(s) for a new promissory note or notes payable to the Assignor
(if the Assignor has retained any interest in the Assigned Facility) and a new
promissory note or notes payable to the Assignee in the respective amounts which
reflect the assignment being made hereby (and after giving effect to any other
assignments which have become effective on the Effective Date).
3. The Assignee (i) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (ii) confirms that it has received
a copy of the Credit Agreement, together with copies of the financial statements
referred to in Section 7.02 thereof,
-2-
the financial statements delivered pursuant to Section 8.01 thereof, if any, and
such other documents and information as it has deemed appropriate to make its
own credit analysis and decision to enter into this Assignment and Acceptance;
(iii) agrees that it will, independently and without reliance upon the Assignor,
the Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement, the
other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; (iv) appoints and authorizes the Administrative Agent to take
such action as administrative agent on its behalf and to exercise such powers
and discretion under the Credit Agreement, the other Loan Documents or any other
instrument or document furnished pursuant hereto or thereto as are delegated to
the Administrative Agent by the terms thereof, together with such powers as are
incidental thereto; and (v) agrees that it will be bound by the provisions of
the Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States of America, its obligation pursuant to
Section 5.06 of the Credit Agreement to deliver the forms prescribed by the
Internal Revenue Service of the United States certifying as to the Assignee's
exemption from United States withholding taxes with respect to all payments to
be made to the Assignee under the Credit Agreement, or such other documents as
are necessary to indicate that all such payments are subject to such tax at a
rate reduced by an applicable tax treaty.
4. Upon delivery of this Assignment and Acceptance to the Administrative
Agent (and consent hereto by the Borrower and the Administrative Agent to the
extent required pursuant to Section 11.06(b)), from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignee which accrue subsequent to the Effective Date.
5. From and after the Effective Date, (i) the Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement except as provided in Section 11.07 of the Credit Agreement.
6. This Assignment and Acceptance shall be governed by and construed in
accordance with the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
Schedule 1
to Assignment and Acceptance
relating to the Credit Agreement
dated as of January 23, 1998,
between Mediacom Southeast LLC,
the lenders named therein and
The Chase Manhattan Bank,
as Administrative Agent
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Credit Principal Percentage
Facility Assigned Amount Assigned Assigned
----------------- --------------- --------
Revolving Credit Commitment
Revolving Credit Loans
Term Loan Commitment
Term Loans
[Incremental Term Commitment]
[Incremental Term Loans]
[ASSIGNEE] [ASSIGNOR]
By: By:
------------------------------ -----------------------------
Title: Title:
-2-
Consented to and Accepted:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By:
--------------------------
Title:
Consented to:
MEDIACOM SOUTHEAST LLC
By MEDIACOM LLC, a Member
By:
--------------------------
Title:
EXHIBIT B
[Form of Quarterly Officer's Report]
MEDIACOM SOUTHEAST LLC
Fiscal quarter ended: ______________, 19__
This Report is delivered pursuant to Section 8.01(h) of the Credit
Agreement (the "Credit Agreement") dated as of January 23, 1998, between
----------------
Mediacom Southeast LLC (the "Borrower"), the lenders named therein and The Chase
--------
Manhattan Bank, as Administrative Agent. Terms defined in the Credit Agreement
are used herein as defined therein.
This Report is delivered in respect of the cable television systems of the
Borrower and its Subsidiaries as at the end of the fiscal quarter referred to
above:
Homes passed at end of quarter:
-----------------
Basic Subscribers at beginning of quarter:
-----------------
Basic Subscribers at end of quarter:
-----------------
Pay TV Units at beginning of quarter:
-----------------
Pay TV Units at end of quarter:
-----------------
Revenue per Subscriber per Month for
the quarter:
-----------------
-----------------
Senior Officer
Dated: ,
------------ ----
EXHIBIT C
[Form of Security Agreement]
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of January 23, 1998 between: MEDIACOM SOUTHEAST
LLC, a limited liability company duly organized and validly existing under the
laws of the State of Delaware (the "Borrower"); each of the additional parties,
--------
if any, that becomes a "Securing Party" hereunder as contemplated by Section
6.11 hereof (each a "Subsidiary Guarantor" and together with the Borrower, the
--------------------
"Securing Parties"); and THE CHASE MANHATTAN BANK, as administrative agent for
- -----------------
the lenders or other financial institutions or entities party, as lenders, to
the Credit Agreement referred to below (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
--------------------
The Borrower, certain lenders and the Administrative Agent are parties to a
Credit Agreement dated as of January 23, 1998 (as modified and supplemented and
in effect from time to time, the "Credit Agreement"), providing, subject to the
----------------
terms and conditions thereof, for extensions of credit (by the making of loans
and the issuance of letters of credit) to be made by said lenders to the
Borrower in an aggregate principal or face amount not exceeding $225,000,000
(which amount may, in accordance with the provisions thereof, be increased to
$275,000,000). In addition, the Borrower may from time to time be obligated to
various of said lenders or their affiliates in respect of Interest Rate
Protection Agreements permitted under Section 8.08(e) of the Credit Agreement
(such indebtedness being herein referred to as the "Hedging Indebtedness").
--------------------
To induce said lenders to enter into the Credit Agreement and to extend
credit thereunder and to extend credit to the Borrower that would constitute
Hedging Indebtedness, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Securing Parties have
agreed to pledge and grant a security interest in the Collateral (as hereinafter
defined) as security for the Secured Obligations (as so defined). Accordingly,
the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are used
-----------
herein as defined therein. In addition, as used herein:
"Accounts" shall have the meaning ascribed thereto in Section 3(d) hereof.
--------
"Collateral" shall have the meaning ascribed thereto in Section 3 hereof.
----------
"Collateral Account" shall have the meaning ascribed thereto in Section
------------------
4.01 hereof.
"Documents" shall have the meaning ascribed thereto in Section 3(j) hereof.
---------
-2-
"Equipment" shall have the meaning ascribed thereto in Section 3(h) hereof.
---------
"Instruments" shall have the meaning ascribed thereto in Section 3(e)
-----------
hereof.
"Inventory" shall have the meaning ascribed thereto in Section 3(f) hereof.
---------
"Motor Vehicles" shall mean motor vehicles, tractors, trailers and other
--------------
like property, whether or not the title thereto is governed by a certificate
of title or ownership.
"Pledged Stock" shall have the meaning ascribed thereto in Section 3(a)
-------------
hereof.
"Secured Obligations" shall mean, collectively, (a) in the case of the
-------------------
Borrower, the principal of and interest on the Loans made by the Lenders to
the Borrower, all Reimbursement Obligations and interest thereon and all other
amounts from time to time owing to the Lenders (or, in respect of any Interest
Rate Protection Agreement, any affiliate of a Lender) or the Administrative
Agent by the Borrower under the Loan Documents (including, without limitation,
all Hedging Indebtedness of the Borrower), and all obligations of the Borrower
to the Lenders and the Administrative Agent hereunder and (b) in the case of
each Subsidiary Guarantor, all Guaranteed Obligations of such Subsidiary
Guarantor under and as defined in the Subsidiary Guarantee Agreement executed
by such Subsidiary Guarantor pursuant to Section 6.11 hereof, and all other
obligations of such Subsidiary Guarantor to the Administrative Agent and the
Lenders hereunder.
"Stock Collateral" shall mean, collectively, the Collateral described in
----------------
clauses (a) through (c) of Section 3 hereof and the proceeds of and to any
such property and, to the extent related to any such property or such
proceeds, all books, correspondence, credit files, records, invoices and other
papers.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
-----------------------
effect from time to time in the State of New York.
Section 2. Representations and Warranties. Each Securing Party represents
------------------------------
and warrants to the Lenders and the Administrative Agent that such Securing
Party is the sole beneficial owner of the Collateral which it purports to grant
a security interest pursuant to Section 3 hereof, and no Lien exists or will
exist upon such Collateral at any time (and no right or option to acquire the
same exists in favor of any other Person), except for Liens permitted under
Section 8.06 of the Credit Agreement and except for the pledge and security
interest in favor of the Administrative Agent for the benefit of the Lenders
created or provided for herein, which pledge and security interest will
constitute a first priority perfected pledge and security interest as soon as,
with respect to the Collateral as to which the Uniform Commercial Code
-3-
requires the filing of financing statements to perfect a security interest, all
such financing statements are so filed.
Section 3. Collateral. As collateral security for the prompt payment in
----------
full when due (whether at stated maturity, by acceleration or otherwise) of the
Secured Obligations, each Securing Party hereby pledges and grants to the
Administrative Agent, for the benefit of the Lenders as hereinafter provided, a
security interest in all of such Securing Party's right, title and interest in
the following property, whether now owned by such Securing Party or hereafter
acquired and whether now existing or hereafter coming into existence (all being
collectively referred to herein as "Collateral"):
----------
(a) all shares of capital stock or other ownership interests of any
Subsidiary of the Borrower now or hereafter owned by any Securing Party, in
each case together with the certificates (if any) evidencing the same and all
right, title and interest in, to and under any operating agreement (including
without limitation all of the right, title and interest (if any) as a member
to participate in the operation or management of the such Subsidiary and all
of its ownership interests under such operating agreement), and all present
and future rights of such Securing Party to receive payment of money or other
distribution of payments arising out of or in connection with its ownership
interests and its rights under such operating agreement, now or hereafter
owned by such Securing Party, in each case together with any certificates
evidencing the same (collectively, the "Pledged Stock");
-------------
(b) all shares, securities, moneys or property representing a dividend on
any of the Pledged Stock, or representing a distribution or return of capital
upon or in respect of the Pledged Stock, or resulting from a split-up,
revision, reclassification or other like change of the Pledged Stock or
otherwise received in exchange therefor, and any subscription warrants, rights
or options issued to the holders of, or otherwise in respect of, the Pledged
Stock;
(c) without affecting the obligations of the Borrower under any provision
prohibiting such action hereunder or under the Credit Agreement, in the event
of any consolidation or merger in which any issuer of any Pledge Stock is not
the surviving corporation, all shares of each class of the capital stock of
the successor corporation formed by or resulting from such consolidation or
merger (the Pledged Stock, together with all other certificates, shares,
securities, properties or moneys as may from time to time be pledged hereunder
pursuant to clause (a) or (b) above and this clause (c) being herein
collectively called the "Stock Collateral");
----------------
(d) all accounts and general intangibles (each as defined in the Uniform
Commercial Code) of such Securing Party constituting any right to the payment
of money, including (but not limited to) all moneys due and to become due to
such Securing Party in respect of any loans or advances or for Inventory or
Equipment or other goods
-4-
sold or leased or for services rendered, all moneys due and to become due to
such Securing Party under any guarantee (including a letter of credit) of the
purchase price of Inventory or Equipment sold by such Securing Party and all
tax refunds (such accounts, general intangibles and moneys due and to become
due being herein called collectively "Accounts");
--------
(e) all instruments, chattel paper or letters of credit (each as defined
in the Uniform Commercial Code) of such Securing Party evidencing,
representing, arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including (but not
limited to) promissory notes, drafts, bills of exchange and trade acceptances
(herein collectively called "Instruments");
-----------
(f) all inventory (as defined in the Uniform Commercial Code) of such
Securing Party, including Motor Vehicles held by such Securing Party for
lease, fuel, tires and other spare parts, all goods obtained by such Securing
Party in exchange for such inventory, and any products made or processed from
such inventory including all substances, if any, commingled therewith or added
thereto (herein collectively called "Inventory");
---------
(g) all other accounts or general intangibles of such Securing Party not
constituting Accounts, including, without limitation, all right, title and
interest of any Securing Party in, to and under the Acquisition Agreements,
any escrow agreements entered into by such Securing Party in connection
therewith, any Retained Franchise Management Agreement and any other document
or instrument executed in connection with the Acquisition Agreements;
(h) all equipment (as defined in the Uniform Commercial Code) of such
Securing Party, including all Motor Vehicles, all cables, receivers,
amplifiers, test equipment, descramblers, satellite dishes and mounts,
modulators, head-end equipment, towers, taps, traps, pedestals, conduits,
converters, spare parts and tools (herein collectively called "Equipment");
---------
(i) each contract and other agreement of such Securing Party relating to
the sale or other disposition of Inventory or Equipment;
(j) all documents of title (as defined in the Uniform Commercial Code) or
other receipts of such Securing Party covering, evidencing or representing
Inventory or Equipment (herein collectively called "Documents");
---------
(k) all rights, claims and benefits of such Securing Party against any
Person arising out of, relating to or in connection with Inventory or
Equipment purchased by such Securing Party, including, without limitation, any
such rights, claims or benefits against any Person storing or transporting
such Inventory or Equipment;
-5-
(l) all Franchises and all pole attachment agreements, licenses, railroad
or highway crossing agreements, property access agreements, private cable
agreements and permits and all other contracts, agreements and permits used in
connection with or relating to the CATV Systems of the Securing Parties
(except that any such Franchise, agreement or other contract or permit that
would by its terms or under applicable law become void, voidable, terminable
or revocable by being subjected to the lien of this Agreement or in which a
Lien is not permitted to be granted is hereby excluded from such Lien to the
extent necessary so as to avoid such voidness, avoidability, terminability or
revocability);
(m) all of such Securing Party's rights under or relating to any licenses
issued by the FCC and the proceeds of any such licenses, provided that such
--------
security interest does not include at any time any such licenses to the extent
(but only to the extent) that at such time the Administrative Agent may not
validly possess a security interest therein pursuant to the Communications Act
of 1934, as amended, and the regulations promulgated thereunder, as in effect
at such time, but such security interest does include, to the maximum extent
permitted by law, all rights incident or appurtenant to such licenses and the
right to receive all proceeds derived from or in connection with the sale,
assignment or transfer of such licenses; and
(n) the balance from time to time in the Collateral Account; and
(o) all other tangible and intangible personal property and fixtures of
such Securing Party, including, without limitation, all proceeds, products,
offspring, accessions, rents, profits, income, benefits, substitutions and
replacements of and to any of the property of such Securing Party described in
the preceding clauses of this Section 3 (including, without limitation, any
proceeds of insurance thereon and all causes of action, claims and warranties
now or hereafter held by such Securing Party in respect of any of the items
listed above) and, to the extent related to any property described in said
clauses or such proceeds, products and accessions, all books, correspondence,
credit files, records, invoices and other papers, including without limitation
all tapes, cards, computer runs and other papers and documents in the
possession or under the control of such Securing Party or any computer bureau
or service company from time to time acting for such Securing Party.
Section 4. Cash Proceeds of Collateral.
---------------------------
4.01 Collateral Account. The Administrative Agent will cause to be
------------------
established, or has caused to be established, with The Chase Manhattan Bank a
"securities account" as defined in Section 8-501 of the Uniform Commercial Code
(herein, the "Collateral Account") in the name of the Administrative Agent as
------------------
"entitlement holder" (as defined in Section 8-102-(a)(7)
-6-
of the Uniform Commercial Code) into which there shall be deposited from time to
time the cash proceeds of any of the Collateral (including proceeds of insurance
thereon) required to be delivered to the Administrative Agent pursuant hereto
and into which any Securing Party may from time to time deposit any additional
amounts that it wishes to pledge to the Administrative Agent for the benefit of
the Lenders as additional collateral security hereunder. Property from time to
time standing to the credit of the Collateral Account shall constitute part of
the Collateral hereunder and shall not constitute payment of the Secured
Obligations until applied as hereinafter provided. Except as expressly provided
in the next sentence, the Administrative Agent shall remit any collected cash
standing to the credit of the Collateral Account to or upon the order of any
Securing Party as such Securing Party through the Borrower shall from time to
time instruct. However, at any time following the occurrence and during the
continuance of an Event of Default, the Administrative Agent may (and, if
instructed by the Majority Lenders as specified in Section 10.03 of the Credit
Agreement, shall) in its (or their) discretion apply or cause to be applied the
collected cash from time to time standing to the credit of the Collateral
Account to the payment of the Secured Obligations in the manner specified in
Section 5.09 hereof. Property from time to time standing to the credit of the
Collateral Account shall be subject to withdrawal only as provided herein.
Notwithstanding the foregoing, to the extent that the Administrative Agent is
not a "qualified intermediary" within the meaning of Section 1.1031(k)-
1(g)(4)(iii) of the Treasury Department regulations promulgated under the Code
(a "Qualified Intermediary"), the cash proceeds held in the Collateral Account
--------- ------------
may be held by a Qualified Intermediary selected by the Borrower (and
satisfactory to the Administrative Agent) acting as a sub-agent of the
Administrative Agent for the benefit of the Lenders as collateral security
hereunder.
4.02 Investment of Balance in Collateral Account. Amounts on deposit in
-------------------------------------------
the Collateral Account shall be invested from time to time in such Permitted
Investments as the Borrower (or, after the occurrence and during the continuance
of a Default, the Administrative Agent) shall determine, which Permitted
Investments shall be held in the name and be under the control of the
Administrative Agent and the Borrower may at any time and from time to time (so
long as no Event of Default shall have occurred and be continuing) instruct the
Administrative to liquidate any such Permitted Investment and reinvest or
withdraw the proceeds thereof as it shall in its discretion determine.
Notwithstanding the forgoing, at any time after the occurrence and during the
continuance of an Event of Default, the Administrative Agent may (and, if
instructed by the Lenders as specified in Section 10.03 of the Credit Agreement,
shall) in its (or their) discretion at any time and from time to time elect to
liquidate any such Permitted Investments and to apply or cause to be applied the
proceeds thereof to the payment of the Secured Obligations in the manner
specified in Section 5.09 hereof. All interest, dividends and other earnings in
respect of Investments in the Collateral Account and, all proceeds of such
Investments shall be retained in the Collateral Account or (so long as no Event
of Default shall have occurred and be continuing) be withdrawn by the Borrower
as it shall in its discretion determine.
-7-
4.03 Cover for Letter of Credit Liabilities. Cash standing to the
--------------------------------------
credit of the Collateral Account as cover for Letter of Credit Liabilities under
the Credit Agreement pursuant to Section 2.10(f) or Section 9.01 thereof shall
be held by the Agent in a separate sub-account (designated "Letter of Credit
Liabilities Sub-Account") and all amounts held in such sub-account shall
constitute collateral security first for the Letter of Credit Liabilities
-----
outstanding from time to time and second as collateral security for the other
------
Secured Obligations hereunder.
Section 5. Further Assurances; Remedies. In furtherance of the grant of
----------------------------
the pledge and security interest pursuant to Section 3 hereof, the Securing
Parties hereby jointly and severally agree with each Lender and the
Administrative Agent as follows:
5.01 Delivery and Other Perfection. Each Securing Party shall:
-----------------------------
(a) if any of the shares, securities, moneys or property required to be
pledged by such Securing Party under clauses (a), (b) and (c) of Section 3
hereof are received by such Securing Party, forthwith either (x) transfer
and deliver to the Administrative Agent such shares or securities or other
ownership interests so received by such Securing Party (together with the
certificates for any such shares and securities or other ownership
interests duly endorsed in blank or accompanied by undated stock powers or
other powers duly executed in blank), all of which thereafter shall be held
by the Administrative Agent, pursuant to the terms of this Agreement, as
part of the Collateral or (y) take such other action as the Administrative
Agent shall deem necessary or appropriate to duly record the Lien created
hereunder in such shares, securities, other ownership interests, moneys or
property in said clauses (a), (b) and (c);
(b) deliver and pledge to the Administrative Agent any and all
Instruments, endorsed and/or accompanied by such instruments of assignment
and transfer in such form and substance as the Administrative Agent may
request; provided, that so long as no Default shall have occurred and be
--------
continuing, such Securing Party may retain for collection in the ordinary
course any Instruments received by it in the ordinary course of business
and the Administrative Agent shall, promptly upon request of such Securing
Party, make appropriate arrangements for making any Instrument pledged by
it available to such Securing Party for purposes of presentation,
collection or renewal (any such arrangement to be effected, to the extent
deemed appropriate by the Administrative Agent, against trust receipt or
like document);
(c) give, execute, deliver, file and/or record any financing statement,
notice, instrument, document, agreement or other papers that may be
necessary or desirable (in the judgment of the Administrative Agent) to
create, preserve, perfect or validate the security interest granted
pursuant hereto or to enable the Administrative Agent to exercise and
enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, causing any or all of the Stock
Collateral to be transferred of record into the name of the Administrative
Agent or its nominee (and the
-8-
Administrative Agent agrees that if any Stock Collateral is transferred
into its name or the name of its nominee, the Administrative Agent will
thereafter promptly give to the respective Securing Party copies of any
notices and communications received by it with respect to the Stock
Collateral pledged by such Security Party hereunder), provided that notices
--------
to account debtors in respect of any Accounts or Instruments shall be
subject to the provisions of clause (g) below;
(d) upon the request of the Administrative Agent, cause the
Administrative Agent to be listed as the lienholder on any certificate of
title covering any Motor Vehicle owned by such Securing Party and within
120 days of the acquisition thereof deliver evidence of the same to the
Administrative Agent;
(e) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement;
(f) permit representatives of the Administrative Agent, upon reasonable
notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, and
permit representatives of the Administrative Agent to be present at such
Securing Party's place of business to receive copies of all communications
and remittances relating to the Collateral, and forward copies of any
notices or communications received by such Securing Party with respect to
the Collateral, all in such manner as the Administrative Agent may require;
and
(g) upon the occurrence and during the continuance of any Default, upon
request of the Administrative Agent, promptly notify (and each Securing
Party hereby authorizes the Administrative Agent so to notify) each account
debtor in respect of any Accounts or Instruments that such Collateral has
been assigned to the Administrative Agent hereunder, and that any payments
due or to become due in respect of such Collateral are to be made directly
to the Administrative Agent.
5.02 Other Financing Statements and Liens. Except as otherwise
------------------------------------
permitted under Section 8.06 of the Credit Agreement, without the prior written
consent of the Administrative Agent (granted with the authorization of the
Lenders as specified in Section 10.09 of the Credit Agreement), the Securing
Parties shall not file or suffer to be on file, or authorize or permit to be
filed or to be on file, in any jurisdiction, any financing statement or like
instrument with respect to the Collateral in which the Administrative Agent is
not named as the sole secured party for the benefit of the Lenders.
5.03 Preservation of Rights. The Administrative Agent shall not be
----------------------
required to take steps necessary to preserve any rights against prior parties to
any of the Collateral.
-9-
5.04 Special Provisions Relating to Stock Collateral.
-----------------------------------------------
(a) The Securing Parties will cause the Stock Collateral to constitute
at all times 100% of the total number of shares of each class of capital stock
or other ownership interests of each Subsidiary of the Borrower then
outstanding.
(b) So long as no Event of Default shall have occurred and be
continuing, the Securing Parties shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Stock Collateral for
all purposes not inconsistent with the terms of this Agreement, the Credit
Agreement or any other instrument or agreement referred to herein or therein,
provided that the Securing Parties jointly and severally agree that they will
- --------
not vote the Stock Collateral in any manner that is inconsistent with the terms
of this Agreement, the Credit Agreement or any such other instrument or
agreement; and the Administrative Agent shall execute and deliver to the
Securing Parties or cause to be executed and delivered to the Securing Parties
all such proxies, powers of attorney, dividend and other orders, and all such
instruments, without recourse, as the Securing Parties may reasonably request
for the purpose of enabling the Securing Parties to exercise the rights and
powers that they are entitled to exercise pursuant to this Section 5.04(b).
(c) Unless and until an Event of Default has occurred and is
continuing, the Securing Parties shall be entitled to receive and retain any
dividends on the Stock Collateral paid in cash out of earned surplus.
(d) If any Event of Default shall have occurred, then so long as such
Event of Default shall continue, and whether or not the Administrative Agent or
any Lender exercises any available right to declare any Secured Obligation due
and payable or seeks or pursues any other relief or remedy available to it under
applicable law or under this Agreement, the Credit Agreement or any other
agreement relating to such Secured Obligation, all dividends and other
distributions on the Stock Collateral shall be paid directly to the
Administrative Agent and retained by it in the Collateral Account as part of the
Stock Collateral, subject to the terms of this Agreement, and, if the
Administrative Agent shall so request in writing, each Securing Party agrees to
execute and deliver to the Administrative Agent appropriate additional dividend,
distribution and other orders and documents to that end, provided that if such
--------
Event of Default is cured, any such dividend or distribution theretofore paid to
the Administrative Agent shall, upon request of the Securing Parties (except to
the extent theretofore applied to the Secured Obligations), be returned by the
Administrative Agent to the Securing Parties.
-10-
5.05 Events of Default, Etc. During the period during which an Event of
----------------------
Default shall have occurred and be continuing:
(a) each Securing Party shall, at the request of the Administrative
Agent, assemble the Collateral owned by it at such place or places,
reasonably convenient to both the Administrative Agent and such Securing
Party, designated in its request;
(b) the Administrative Agent may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and may
extend the time of payment, arrange for payment in installments, or
otherwise modify the terms of, any of the Collateral;
(c) the Administrative Agent shall have all of the rights and remedies
with respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the jurisdiction
where the rights and remedies are asserted) and such additional rights and
remedies to which a secured party is entitled under the laws in effect in
any jurisdiction where any rights and remedies hereunder may be asserted,
including, without limitation, the right, to the maximum extent permitted
by law, to exercise all voting, consensual and other powers of ownership
pertaining to the Collateral as if the Administrative Agent were the sole
and absolute owner thereof (and each Securing Party agrees to take all such
action as may be appropriate to give effect to such right);
(d) the Administrative Agent in its discretion may, in its name or in
the name of the Securing Parties or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable on account
of or in exchange for any of the Collateral, but shall be under no
obligation to do so; and
(e) the Administrative Agent may, upon ten business days' prior written
notice to the Securing Parties of the time and place, with respect to the
Collateral or any part thereof that shall then be or shall thereafter come
into the possession, custody or control of the Administrative Agent, the
Lenders or any of their respective agents, sell, lease, assign or otherwise
dispose of all or any part of such Collateral, at such place or places as
the Administrative Agent deems best, and for cash or for credit or for
future delivery (without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of intention to
effect any such disposition or of the time or place thereof (except such
notice as is required above or by applicable statute and cannot be waived),
and the Administrative Agent or any Lender or anyone else may be the
purchaser, lessee, assignee or recipient of any or all of the Collateral so
disposed of at any public sale (or, to the extent permitted by law, at any
private sale) and thereafter hold the same absolutely, free from any claim
or right of whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Securing Parties, any such demand,
-11-
notice and right or equity being hereby expressly waived and released. The
Administrative Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale may be
made at any time or place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05 shall be applied in accordance with Section 5.09 hereof.
The Securing Parties recognize that, by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, and applicable state
securities laws, the Administrative Agent may be compelled, with respect to any
sale of all or any part of the Collateral, to limit purchasers to those who will
agree, among other things, to acquire the Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. The
Securing Parties acknowledge that any such private sales may be at prices and on
terms less favorable to the Administrative Agent than those obtainable through a
public sale without such restrictions, and, notwithstanding such circumstances,
agree that any such private sale shall be deemed to have been made in a
commercially reasonable manner and that the Administrative Agent shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the respective issuer
thereof to register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Securing Parties shall remain jointly
and severally liable for any deficiency.
5.07 Removals, Etc. Without at least 30 days' prior written notice to
-------------
the Administrative Agent, no Securing Party shall (i) maintain any of its books
and records with respect to the Collateral at any office or maintain its
principal place of business at any place, or permit any Inventory or Equipment
to be located anywhere, other than at the address indicated beneath the
signature of such Securing Party to the Credit Agreement or at one of the
locations identified in Annex 1 hereto (including as supplemented pursuant to
any Subsidiary Guarantee Agreement) or in transit from one of such locations to
another or (ii) change its name, or the name under which it does business, from
the name shown on the signature pages hereto (or, as the case may be, on the
respective Subsidiary Guarantee Agreement pursuant to which such Securing Party
became a party hereto).
5.08 Private Sale. The Administrative Agent and the Lenders shall incur
------------
no liability as a result of the sale of the Collateral, or any part thereof, at
any private sale pursuant to Section 5.05 hereof conducted in a commercially
reasonable manner. Each Securing Party hereby waives any claims against the
Administrative Agent or any Lender arising by reason of the fact that the price
at which the Collateral may have been sold at such a private sale was less
-12-
than the price that might have been obtained at a public sale or was less than
the aggregate amount of the Secured Obligations, even if the Administrative
Agent accepts the first offer received and does not offer the Collateral to more
than one offeree.
5.09 Application of Proceeds. Except as otherwise herein expressly
-----------------------
provided and except as provided below in this Section 5.09, the proceeds of any
collection, sale or other realization of all or any part of the Collateral
pursuant hereto, and any other cash at the time held by the Administrative Agent
under Section 4 hereof or this Section 5, shall be applied by the Administrative
Agent:
First, to the payment of the costs and expenses of such collection, sale
-----
or other realization, including reasonable out-of-pocket costs and expenses
of the Administrative Agent and the fees and expenses of its agents and
counsel, and all expenses incurred and advances made by the Administrative
Agent in connection therewith;
Next, to the payment in full of the Secured Obligations, in each case
----
equally and ratably in accordance with the respective amounts thereof then
due and owing or as the Lenders holding the same may otherwise agree; and
Finally, after payment in full of the Secured Obligations, to the
-------
payment to the respective Securing Parties, or their successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining.
Notwithstanding the foregoing, the proceeds of any cash or other amounts held in
the "Letter of Credit Liabilities Sub-Account" of the Collateral Account
pursuant to Section 4.03 hereof shall be applied first to the Letter of Credit
-----
Liabilities outstanding from time to time and second to the other Secured
------
Obligations in the manner provided above in this Section 5.09.
As used in this Section 5, "proceeds" of Collateral shall mean cash,
--------
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any thereof received under any reorganization,
liquidation or adjustment of debt of the Securing Parties or any issuer of or
obligor on any of the Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers granted by
----------------
this Agreement to the Administrative Agent while no Event of Default has
occurred and is continuing, upon the occurrence and during the continuance of
any Event of Default the Administrative Agent is hereby appointed the attorney-
in-fact of each Securing Party for the purpose of carrying out the provisions of
this Section 5 and taking any action and executing any instruments that the
Administrative Agent may deem necessary or advisable to accomplish the purposes
hereof, which appointment as attorney-in-fact is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, so long as the
Administrative Agent shall be entitled under this Section 5 to make collections
in respect of the Collateral, the Administrative Agent shall have the right and
power to receive, endorse and collect all checks
-13-
made payable to the order of any Securing Party representing any dividend,
payment or other distribution in respect of the Collateral or any part thereof
and to give full discharge for the same.
5.11 Perfection. Prior to or concurrently with the execution and
----------
delivery of this Agreement, each Securing Party shall (i) file such financing
statements and other documents in such offices as the Administrative Agent may
request to perfect the security interests granted by Section 3 of this Agreement
and (ii) deliver to the Administrative Agent any certificates representing any
of the Pledged Stock, in each case accompanied by undated stock powers duly
executed in blank.
5.12 Termination. When all Secured Obligations shall have been paid in
-----------
full and the Commitments of the Lenders under the Credit Agreement and all
Letter of Credit Liabilities shall have expired or been terminated, this
Agreement shall terminate, and the Administrative Agent shall forthwith cause to
be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect thereof, including without limitation, the balance
(including any Investments) in the Collateral Account, to or on the order of the
respective Securing Parties. The Administrative Agent shall also execute and
deliver to the respective Securing Parties upon such termination such Uniform
Commercial Code termination statements, certificates for terminating the Liens
on the Motor Vehicles and such other documentation as shall be reasonably
requested by the Securing Parties to effect the termination and release of the
Liens on the Collateral.
5.13 Further Assurances. The Securing Parties jointly and severally
------------------
agree that, from time to time upon the written request of the Administrative
Agent, they will execute and deliver such further documents and do such other
acts and things as the Administrative Agent may reasonably request in order
fully to effect the purposes of this Agreement.
5.14 Release of Motor Vehicles. So long as no Default shall have
-------------------------
occurred and be continuing, upon the request of the Securing Parties, the
Administrative Agent shall execute and deliver to the Securing Parties such
instruments as the Securing Parties shall reasonably request to remove the
notation of the Administrative Agent as lienholder on any certificate of title
for any Motor Vehicle; provided that any such instruments shall be delivered,
--------
and the release effective only upon receipt by the Administrative Agent of a
certificate from the respective Securing Party stating that the Motor Vehicle
the lien on which is to be released is to be sold or has suffered a casualty
loss.
Section 6. Miscellaneous.
-------------
6.01 No Waiver. No failure on the part of the Administrative Agent or
---------
any Lender to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Administrative Agent or
any Lender of any right, power or remedy hereunder
-14-
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not exclusive
of any remedies provided by law.
6.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at its
"Address for Notices" specified pursuant to Section 11.02 of the Credit
Agreement and shall be deemed to have been given at the times specified in said
Section 11.02, it being understood that any such notice to a Subsidiary
Guarantor shall be given to the Borrower in accordance with said Section 11.02.
6.03 Expenses. The Securing Parties jointly and severally agree to
--------
reimburse each of the Lenders and the Administrative Agent for all reasonable
costs and expenses of the Lenders and the Administrative Agent (including,
without limitation, the reasonable fees and expenses of legal counsel) in
connection with (i) any Default and any enforcement or collection proceeding
resulting therefrom, including, without limitation, all manner of participation
in or other involvement with (w) performance by the Administrative Agent of any
obligations of the Securing Parties in respect of the Collateral that the
Securing Parties have failed or refused to perform, (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, or any actual
or attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Administrative
Agent in respect thereof, by litigation or otherwise, including expenses of
insurance, (y) judicial or regulatory proceedings and (z) workout, restructuring
or other negotiations or proceedings (whether or not the workout, restructuring
or transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 6.03, and all such costs and expenses shall be Secured Obligations
entitled to the benefits of the collateral security provided pursuant to Section
3 hereof.
6.04 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by each
Securing Party and the Administrative Agent (with the consent of the Lenders as
specified in Section 10.09 of the Credit Agreement). Any such amendment or
waiver shall be binding upon the Administrative Agent and each Lender, each
holder of any of the Secured Obligations and each Securing Party.
6.05 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the respective successors and assigns of the Securing
Parties, the Administrative Agent, the Lenders and each holder of any of the
Secured Obligations (provided, however, that no Securing Party shall assign or
--------
transfer its rights hereunder without the prior written consent of the
Administrative Agent).
6.06 Captions. The captions and section headings appearing herein are
--------
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
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6.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.08 Governing Law. This Agreement shall be governed by, and construed
-------------
in accordance with, the law of the State of New York.
6.09 Certain Regulatory Requirements. Any provision contained herein to
-------------------------------
the contrary notwithstanding, no action shall be taken hereunder by the
Administrative Agent or any Lender with respect to any item of Collateral unless
and until all applicable requirements (if any) of the FCC under the Federal
Communications Act of 1934, as amended, and the respective rules and regulations
thereunder and thereof, as well as any other federal, state or local laws, rules
and regulations of other regulatory or governmental bodies (including, without
limitation, any municipality that has issued any Franchise to a Securing Party
or any of its Subsidiaries) applicable to or having jurisdiction over such
Securing Party (or any entity under the control of such Securing Party), have
been satisfied with respect to such action and there have been obtained such
consents, approvals and authorizations (if any) as may be required to be
obtained from the FCC, any operating municipality and any other governmental
authority under the terms of any Franchise, any license or similar operating
right held by such Securing Party (or any entity under the control of such
Securing Party). It is the intention of the parties hereto that the Liens in
favor of the Administrative Agent on the Collateral shall in all relevant
aspects be subject to and governed by said statutes, rules and regulations and
the Franchise(s) and that nothing in this Agreement shall be construed to
diminish the control exercised by any Securing Party except in accordance with
the provisions of such statutory requirements, rules and regulations and the
Franchises. Each Secured Party agrees that upon request from time to time by the
Administrative Agent it will use its best efforts to obtain any governmental,
regulatory or third party consents, approvals or authorizations referred to in
this Section 6.09.
6.10 Agents and Attorneys-in-Fact. The Administrative Agent may employ
----------------------------
agents and attorneys-in-fact in connection herewith and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith.
6.11. Additional Securing Parties. As contemplated by Section 8.18(a)
---------------------------
of the Credit Agreement, new Subsidiaries of the Borrower formed by the Borrower
after the date hereof may become a "Subsidiary Guarantor" under a Subsidiary
Guarantee Agreement and a "Securing Party" under this Agreement, by executing
and delivering to the Administrative Agent a Subsidiary Guarantee Agreement in
the form of Exhibit D to the Credit Agreement. Accordingly, upon the execution
and delivery of any such Subsidiary Guarantee Agreement by any such new
Subsidiary, such new Subsidiary shall automatically and immediately, and without
any further action on the part of any Person, become a "Securing Party" for all
purposes of this Agreement, and Annex 1 hereto shall be deemed to be
supplemented in the manner specified in said Subsidiary Guarantee Agreement.
-16-
6.12 Severability. If any provision hereof is invalid and unenforceable
------------
in any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Administrative Agent and the
Lenders in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
-17-
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to
be duly executed and delivered as of the day and year first above written.
MEDIACOM SOUTHEAST LLC
By MEDIACOM LLC, a Member
By__________________________
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By_________________________
Title:
ANNEX 1
LIST OF LOCATIONS
[See Section 5.07]
EXHIBIT D
[Form of Guarantee and Pledge Agreement]
GUARANTEE AND PLEDGE AGREEMENT
GUARANTEE AND PLEDGE AGREEMENT dated as of January 23, 1998 between MEDIACOM
LLC, a limited liability company duly organized and validly existing under the
laws of New York (the "Parent Guarantor") and THE CHASE MANHATTAN BANK, as
----------------
administrative agent for the lenders or other financial institutions or entities
party, as lenders, to the Credit Agreement referred to below (in such capacity,
together with its successors in such capacity, the "Administrative Agent").
--------------------
Mediacom Southeast LLC, a Delaware limited liability company (the "Borrower"),
--------
certain lenders and the Administrative Agent are parties to a Credit Agreement
dated as of January 23, 1998 (as modified and supplemented and in effect from
time to time, the "Credit Agreement"), providing, subject to the terms and
----------------
conditions thereof, for extensions of credit (by the making of loans and the
issuance letters of credit) to be made by said lenders to the Borrower in an
aggregate principal or face amount not exceeding $225,000,000 (which amount may,
in accordance with the provisions thereof, be increased to $275,000,000). In
addition, the Borrower may from time to time be obligated to various of said
lenders or their affiliates in respect of Interest Rate Protection Agreements
permitted under Section 8.08(e) of the Credit Agreement (such indebtedness being
herein referred to as the "Hedging Indebtedness").
--------------------
To induce said lenders to enter into the Credit Agreement and to extend credit
thereunder and to extend credit to the Borrower that would constitute Hedging
Indebtedness, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parent Guarantor has agreed to
guarantee the Guaranteed Obligations (as hereinafter defined), and to pledge and
grant a security interest in the Collateral (as so defined) as security for the
Secured Obligations (as so defined). Accordingly, the parties hereto agree as
follows:
Section 1. Definitions. Terms defined in the Credit Agreement are used
-----------
herein as defined therein. In addition, as used herein:
"Collateral" shall have the meaning ascribed thereto in Section 4 hereof.
----------
"Guaranteed Obligations" shall have the meaning ascribed thereto in Section
----------------------
2.01 hereof.
"Instrument" shall have the meaning ascribed thereto in Section 4(b) hereof.
----------
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"Pledged LLC Interest" shall have the meaning ascribed thereto in
--------------------
Section 4(a) hereof.
"Secured Obligations" shall mean, collectively, (a) all obligations
-------------------
of the Parent Guarantor in respect of its Guarantee under Section 2
hereof and (b) all other obligations of the Parent Guarantor to the
Lenders and the Administrative Agent hereunder.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
-----------------------
in effect from time to time in the State of New York.
Section 2. The Guarantee.
-------------
2.01 The Guarantee. Subject to Section 7.13 hereof, the Parent
-------------
Guarantor hereby guarantees to each Lender and the Administrative Agent and
their respective successors and assigns the prompt payment in full when due
(whether at stated maturity, by acceleration or otherwise) of the principal of
and interest on the Loans made by the Lenders to the Borrower, all Reimbursement
Obligations and interest thereon and all other amounts from time to time owing
to the Lenders (or, in respect of any Interest Rate Protection Agreement, any
affiliate of a Lender) or the Administrative Agent by the Borrower under the
Credit Agreement, and all Hedging Indebtedness of the Borrower, in each case
strictly in accordance with the terms thereof (such obligations being herein
collectively called the "Guaranteed Obligations"). Subject to Section 7.13
----------------------
hereof, the Parent Guarantor hereby further agrees that if the Borrower shall
fail to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Guaranteed Obligations, the Parent Guarantor will promptly
pay the same, without any demand or notice whatsoever, and that in the case of
any extension of time of payment or renewal of any of the Guaranteed
Obligations, the same will be promptly paid in full when due (whether at
extended maturity, by acceleration or otherwise) in accordance with the terms of
such extension or renewal.
2.02 Obligations Unconditional. Subject to Section 7.13 hereof, the
-------------------------
obligations of the Parent Guarantor under Section 2.01 hereof are absolute and
unconditional, irrespective of the value, genuineness, validity, regularity or
enforceability of the Credit Agreement or any other agreement or instrument
referred to herein or therein, or any substitution, release or exchange of any
other guarantee of or security for any of the Guaranteed Obligations, and, to
the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 2.02 that the obligations of the Parent Guarantor hereunder shall be
absolute and unconditional under any and all circumstances. Without limiting
the generality of the foregoing, it is agreed that the occurrence of any one or
more of the following shall not alter or impair the liability of the Parent
Guarantor hereunder which shall remain absolute and unconditional as described
above:
-3-
(i) at any time or from time to time, without notice to the
Parent Guarantor, the time for any performance of or compliance with any of
the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of the
Credit Agreement or any other agreement or instrument referred to herein or
therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of,
the Administrative Agent or any Lender or Lenders as security for any of
the Guaranteed Obligations shall fail to be perfected.
The Parent Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that the
Administrative Agent or any Lender exhaust any right, power or remedy or proceed
against the Borrower under the Credit Agreement or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.
2.03 Reinstatement. The obligations of the Parent Guarantor under this
-------------
Section 2 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the Borrower in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise, and the Parent Guarantor agrees that it will
indemnify the Administrative Agent and each Lender on demand for all reasonable
costs and expenses (including, without limitation, fees of counsel) incurred by
the Administrative Agent or such Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
2.04 Subrogation. The Parent Guarantor hereby waives all rights of
-----------
subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Federal
Bankruptcy Code) or otherwise by reason of any payment by it pursuant to the
provisions of this Section 2 and further agrees with the Borrower for the
benefit of each of its creditors (including, without limitation, each Lender and
the
-4-
Administrative Agent) that any such payment by it shall constitute a
contribution of capital by the Parent Guarantor to the Borrower (or an
investment in the equity capital of the Borrower by the Parent Guarantor).
2.05 Remedies. The Parent Guarantor agrees that, as between the Parent
--------
Guarantor and the Lenders, the obligations of the Borrower under the Credit
Agreement may be declared to be forthwith due and payable as provided in Section
9 of the Credit Agreement (and shall be deemed to have become automatically due
and payable in the circumstances provided in said Section 9) for purposes of
Section 2.01 hereof notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically due
and payable) as against the Borrower and that, in the event of such declaration
(or such obligations being deemed to have become automatically due and payable),
such obligations (whether or not due and payable by the Borrower) shall
forthwith become due and payable by the Parent Guarantor for purposes of said
Section 2.01.
2.06 Instrument for the Payment of Money. The Parent Guarantor hereby
-----------------------------------
acknowledges that the guarantee in this Section 2 constitutes an instrument for
the payment of money, and consents and agrees that any Lender or the
Administrative Agent, at its sole option, in the event of a dispute by the
Parent Guarantor in the payment of any moneys due hereunder, shall have the
right to bring motion-action under New York CPLR Section 3213.
2.07 Continuing Guarantee. The guarantee in this Section 2 is a continuing
--------------------
guarantee, and shall apply to all Guaranteed Obligations whenever arising.
Section 3. Representations and Warranties. The Parent Guarantor represents
------------------------------
and warrants to the Lenders and the Administrative Agent that:
3.01 Corporate Existence. The Parent Guarantor (a) is a limited liability
-------------------
company duly organized and validly existing under the laws of the State of
Delaware; (b) has all requisite limited liability company power and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary and
where failure so to qualify could (either individually or in the aggregate) have
a Material Adverse Effect.
3.02 No Breach. None of the execution and delivery of this Agreement, the
---------
consummation of the transactions herein contemplated or compliance with the
terms and provisions hereof will conflict with or result in a breach of, or
require any consent under the its operating agreement or other organizational
documents, or any applicable law or regulation, or any order, writ, injunction
or decree of any court or governmental authority or agency, or any
-5-
agreement or instrument to which the Parent Guarantor or any of its Subsidiaries
is a party or by which any of them is bound or to which any of them is subject,
or constitute a default under any such agreement or instrument, or (except for
the Liens created pursuant hereto) result in the creation or imposition of any
Lien upon any of the revenues or assets of the Parent Guarantor or any of its
Subsidiaries pursuant to the terms of any such agreement or instrument.
3.03 Action. The Parent Guarantor has all necessary limited liability
------
company power and authority to execute, deliver and perform its obligations
under this Agreement; the execution, delivery and performance by the Parent
Guarantor of this Agreement have been duly authorized by all necessary limited
liability company action on its part; and this Agreement has been duly and
validly executed and delivered by the Parent Guarantor and constitutes its
legal, valid and binding obligation, enforceable against the Parent Guarantor in
accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws or
general applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether considered in
a proceeding in equity or at law).
3.04 Approvals. No authorizations, approvals or consents of, and no filings
---------
or registrations with, any governmental or regulatory authority or agency, or
any securities exchange are necessary for the execution, delivery or performance
by the Parent Guarantor of this Agreement or for the validity or enforceability
hereof except for the filings and recordings in respect of the Liens created
hereby, except for (i) filings and recordings in respect of the Liens created
pursuant hereto and (ii) the exercise of remedies hereunder the Security
Documents may require the prior approval of the FCC or the issuing
municipalities or States under one or more of the Franchises.
3.05 Collateral.
----------
(a) The Parent Guarantor has all right, title and interest in, to and under,
the Collateral in which it purports to grant a security interest pursuant to
Section 4 hereof, and is the record owner of the Pledged LLC Interest, and no
Lien exists or will exist upon such Collateral at any time (and no right or
option to acquire the same exists in favor of any other Person), except for the
pledge and security interest in favor of the Administrative Agent for the
benefit of the Lenders created or provided for herein, which pledge and security
interest constitute a first priority perfected pledge and security interest in
and to all of such Collateral.
(b) The Pledged LLC Interest, and all other Pledged LLC Interest in which the
Parent Guarantor shall hereafter grant a security interest pursuant to Section 4
hereof will be, duly authorized, validly existing, fully paid and non-assessable
and none of such Pledged LLC Interest is or will be subject to any contractual
restriction upon the transfer of such Pledged LLC Interest (except for any such
restriction contained herein or under the Operating Agreement).
-6-
(c) The Pledged LLC Interest constitutes all of the ownership interests of
the Borrower beneficially owned by the Parent Guarantor on the date hereof
(whether or not registered in the name of the Parent Guarantor), and the Parent
Guarantor is the registered owner of all such ownership interests.
3.06 Investment Company Act. The Parent Guarantor is not an "investment
----------------------
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
3.07 Public Utility Holding Company Act. The Parent Guarantor is not a
----------------------------------
"holding company", or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
Section 4. The Pledge. As collateral security for the prompt payment in full
----------
when due (whether at stated maturity, by acceleration or otherwise) of the
Secured Obligations, the Parent Guarantor hereby pledges and grants to the
Administrative Agent, for the benefit of the Lenders as hereinafter provided, a
security interest in all of the Parent Guarantor's right, title and interest in
the following property, whether now owned by the Parent Guarantor or hereafter
acquired and whether now existing or hereafter coming into existence (all being
collectively referred to herein as "Collateral"):
----------
(a) all the ownership interests of the Parent Guarantor in the Borrower, all
certificates, (if any) representing or evidencing such ownership interests
and all right, title and interest in, to and under the Operating Agreement
(including without limitation all of the right, title and interest (if any)
as a member to participate in the operation or management of the Borrower
and all of its ownership interests under the Operating Agreement), and all
present and future rights of the Parent Guarantor to receive payment of
money or other distribution of payments arising out of or in connection
with its ownership interests and its rights under the Operating Agreement,
now or hereafter owned by the Parent Guarantor (including, without
limitation, any rights relating to Preferred Membership Interests), in each
case together with any certificates evidencing the same (collectively, the
"Pledged LLC Interest");
--------------------
(b) all Affiliate Subordinated Indebtedness held by the Parent Guarantor, and
all instruments (as defined in the Uniform Commercial Code) evidencing such
Affiliate Subordinated Indebtedness (herein collectively called
"Instruments"); and
-----------
(c) all proceeds of and to any of the foregoing (including, without limitation,
all causes of action, claims and warranties now or hereafter held by the
Parent Guarantor in respect of any of the items listed above) and, to the
extent related to any property
-7-
described in said clauses or such proceeds, all books, correspondence,
credit files, records, invoices and other papers.
Section 5. Covenants. The Parent Guarantor agrees that, until the payment
---------
and satisfaction in full of the Secured Obligations and the expiration or
termination of the Commitments of the Lenders under the Credit Agreement and all
Letter of Credit Liabilities:
5.01 Financial Statements Etc.
-------------------------
The Parent Guarantor shall deliver to each of the Lenders:
(a) promptly upon their becoming available, copies of all registration
statements and regular periodic reports, if any, that the Parent Guarantor
shall have filed with the Securities and Exchange Commission (or any
governmental agency substituted therefor) or any national securities
exchange;
(b) promptly upon the mailing thereof to the members of the Parent Guarantor
generally, or to holders of any debt securities of the Parent Guarantor,
copies of all financial statements, reports and proxy statements so mailed;
and
(c) from time to time such other information regarding the financial condition,
operations, business or prospects of the Guarantor or any of its
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Administrative Agent may reasonably request.
5.02 Covenant Restrictions. The Parent Guarantor will not enter into, after
---------------------
the date of this Agreement, any indenture, agreement, instrument or other
arrangement that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon the Borrower or any of its Subsidiaries with respect to (i) the incurrence
or payment of Indebtedness, (ii) the granting of Liens, (iii) the declaration or
payment of dividends, (iv) the making of loans, advances or Investments or (v)
the sale, assignment, transfer or other disposition of Property, provided that
--------
the foregoing shall not apply to (x) any indenture, agreement or other
instrument entered into in connection with the issuance of the Senior Notes
(subject to such indenture, agreement or other instrument being satisfactory in
form and substance to the Majority Lenders) and (y) any other indenture,
agreement or other instrument containing covenants not more restrictive in any
instance than those applicable to the Senior Notes.
-8-
5.03 Indebtedness. The Parent Guarantor will not create,
------------
incur or suffer to exist any secured Indebtedness other than
(i) Indebtedness hereunder,
(ii) Indebtedness in an aggregate amount up to but not exceeding
$20,000,000, the proceeds of which are applied to make an equity
contribution to the Borrower, so long as (x) such Indebtedness is repaid
with the proceeds of the Senior Notes and (y) such Indebtedness is secured
only by the right of the Parent Guarantor to receive additional equity
investments,
(iii) Indebtedness incurred by the Parent Guarantor as an
account party in respect of letters of credit issued in connection with
acquisitions, so long as the obligations of the Parent Guarantor in respect
of such letters of credit are secured by assets of the Parent Guarantor
other than equity interests in the Borrower and
(iv) the Guarantee by the Parent Guarantor of Indebtedness
incurred by any Subsidiary of the Parent Guarantor, so long as (x) the
obligations of the Parent Guarantor in respect of such Guarantee is limited
in recourse in a manner consistent with the provisions of Section 7.13
hereof (i.e. limited in recourse to a pledge by the Parent Guarantor of its
equity interests in such Subsidiary, and subordinated indebtedness issued
by such Subsidiary, as provided herein) and (y) such Indebtedness shall not
be entitled, directly or indirectly, to the benefits of mandatory payment,
prepayment or redemption provisions based upon the issuance or incurrence
by the Parent Guarantor of additional Indebtedness or equity securities.
5.04 Modifications of Certain Documents. The Parent Guarantor will not
----------------------------------
consent to any modification, supplement or waiver of any of the provisions of
the Acquisition Agreements without the prior consent of the Administrative Agent
(with the approval of the Majority Lenders).
5.05 Allocation of Intercompany Expenses. The Parent Guarantor will allocate
-----------------------------------
to its Subsidiaries any expenses or other items incurred by it on behalf of more
than one of its Subsidiaries (such as data processing, accounting, legal and
other corporate overhead items) for any period ratably in accordance with the
gross operating revenue (excluding extraordinary and unusual items and all non-
cash items) of its Subsidiaries for such period.
5.06 Issuance of Senior Notes. Any proceeds of the issuance of the Senior
------------------------
Notes advanced or contributed to the Borrower shall be advanced as additional
equity capital to the Borrower in respect of the issuance of Preferred
Membership Interests to the Parent Guarantor.
-9-
Section 6. Further Assurances; Remedies. In furtherance of the
----------------------------
grant of the pledge and security interest pursuant to Section 4 hereof, the
Parent Guarantor hereby agrees with each Lender and the Administrative Agent as
follows:
6.01 Delivery and Other Perfection. The Parent Guarantor shall:
-----------------------------
(a) with respect to the ownership interests in the Borrower held
by the Parent Guarantor, execute and deliver written instructions to such
Borrower to register the Lien created hereunder in such ownership
interests in the registration books maintained by such Borrower for such
purpose and cause the Parent Guarantor to execute and deliver to the
Administrative Agent a written confirmation to the effect that the Lien
created hereunder in such ownership interests has been duly registered in
such registration books;
(b) deliver and pledge to the Administrative Agent any and all
Instruments, endorsed and/or accompanied by such instruments of
assignment and transfer in such form and substance as the Administrative
Agent may request;
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Administrative
Agent) to create, preserve, perfect or validate the security interest
granted pursuant hereto or to enable the Administrative Agent to exercise
and enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, causing any or all of the
Collateral to be transferred of record into the name of the
Administrative Agent or its nominee (and the Administrative Agent agrees
that if any Collateral is transferred into its name or the name of its
nominee, the Administrative Agent will thereafter promptly give to the
Parent Guarantor copies of any notices and communications received by it
with respect to the Collateral pledged by the Parent Guarantor
hereunder);
(d) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Administrative Agent may reasonably require in order to
reflect the security interests granted by this Agreement; and
(e) permit representatives of the Administrative Agent, upon
reasonable notice, at any time during normal business hours to inspect
and make abstracts from its books and records pertaining to the
Collateral, and permit representatives of the Administrative Agent to be
present at the Parent Guarantor's place of business to receive copies of
all communications and remittances relating to the Collateral, and
forward copies of any notices or communications received by the Parent
Guarantor with respect to the Collateral, all in such manner as the
Administrative Agent may require.
-10-
6.02 Other Financing Statements and Liens. Without the prior
------------------------------------
written consent of the Administrative Agent (granted with the authorization of
the Lenders as specified in Section 10.09 of the Credit Agreement), the Parent
Guarantor shall not file or suffer to be on file, or authorize or permit to be
filed or to be on file, in any jurisdiction, any financing statement or like
instrument with respect to the Collateral in which the Administrative Agent is
not named as the sole secured party for the benefit of the Lenders.
6.03 Preservation of Rights. The Administrative Agent shall not
----------------------
be required to take steps necessary to preserve any rights against prior parties
to any of the Collateral.
6.04 Collateral.
----------
(a) The Parent Guarantor will cause the Pledged LLC Interest to
constitute at all times 100% of the aggregate ownership interests of the
Borrower then outstanding.
(b) So long as no Event of Default shall have occurred and be
continuing, the Parent Guarantor shall have the right to exercise all
voting, consensual and other powers of ownership pertaining to the
Pledged LLC Interest for all purposes not inconsistent with the terms of
this Agreement, the Credit Agreement or any other instrument or agreement
referred to herein or therein, provided that the Parent Guarantor agrees
--------
that it will not vote the Pledged LLC Interest in any manner that is
inconsistent with the terms of this Agreement, the Credit Agreement or
any such other instrument or agreement; and the Administrative Agent
shall execute and deliver to the Parent Guarantor or cause to be executed
and delivered to the Parent Guarantor all such proxies, powers of
attorney, dividend and other orders, and all such instruments, without
recourse, as the Parent Guarantor may reasonably request for the purpose
of enabling the Parent Guarantor to exercise the rights and powers that
it is entitled to exercise pursuant to this Section 6.04(b).
(c) Unless and until an Event of Default has occurred and is
continuing, the Parent Guarantor shall be entitled to receive and retain
any payments in respect of the Pledged LLC Interest permitted under the
Credit Agreement.
(d) If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the
Administrative Agent or any Lender exercises any available right to
declare any Secured Obligation due and payable or seeks or pursues any
other relief or remedy available to it under applicable law or under this
Agreement, the Credit Agreement or any other agreement relating to such
Secured Obligation, all dividends and other distributions on the
Collateral shall be paid directly to the Administrative Agent and
retained by it in the Collateral Account as part of the Collateral,
subject to the terms of this Agreement, and, if the Administrative Agent
shall so request in writing, the Parent Guarantor agrees to execute and
deliver to the Administrative Agent appropriate additional dividend,
distribution and other
-11-
orders and documents to that end, provided that if such Event of Default
--------
is cured, any such dividend or distribution theretofore paid to the
Administrative Agent shall, upon request of the Parent Guarantor (except
to the extent theretofore applied to the Secured Obligations), be
returned by the Administrative Agent to the Parent Guarantor.
6.05 Events of Default, Etc. During the period during which an
-----------------
Event of Default shall have occurred and be continuing:
(a) the Administrative Agent shall have all of the rights and
remedies with respect to the Collateral of a secured party under the
Uniform Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled under
the laws in effect in any jurisdiction where any rights and remedies
hereunder may be asserted, including, without limitation, the right, to
the maximum extent permitted by law, to exercise all voting, consensual
and other powers of ownership pertaining to the Collateral as if the
Administrative Agent were the sole and absolute owner thereof (and the
Parent Guarantor agrees to take all such action as may be appropriate to
give effect to such right);
(b) the Administrative Agent in its discretion may, in its name
or in the name of the Parent Guarantor or otherwise, demand, sue for,
collect or receive any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral, but
shall be under no obligation to do so; and
(c) the Administrative Agent may, upon ten business days' prior
written notice to the Parent Guarantor of the time and place, with
respect to the Collateral or any part thereof that shall then be or shall
thereafter come into the possession, custody or control of the
Administrative Agent, the Lenders or any of their respective agents,
sell, lease, assign or otherwise dispose of all or any part of such
Collateral, at such place or places as the Administrative Agent deems
best, and for cash or for credit or for future delivery (without thereby
assuming any credit risk), at public or private sale, without demand of
performance or notice of intention to effect any such disposition or of
the time or place thereof (except such notice as is required above or by
applicable statute and cannot be waived), and the Administrative Agent or
any Lender or anyone else may be the purchaser, lessee, assignee or
recipient of any or all of the Collateral so disposed of at any public
sale (or, to the extent permitted by law, at any private sale) and
thereafter hold the same absolutely, free from any claim or right of
whatsoever kind, including any right or equity of redemption (statutory
or otherwise), of the Parent Guarantor, any such demand, notice and right
or equity being hereby expressly waived and released. The Administrative
Agent may, without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by announcement
at the time
-12-
and place fixed for the sale, and such sale may be made at any time or
place to which the sale may be so adjourned.
The proceeds of each collection, sale or other disposition under this Section
6.05 shall be applied in accordance with Section 6.09 hereof.
The Parent Guarantor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and applicable
state securities laws, the Administrative Agent may be compelled, with respect
to any sale of all or any part of the Collateral, to limit purchasers to those
who will agree, among other things, to acquire the Collateral for their own
account, for investment and not with a view to the distribution or resale
thereof. The Parent Guarantor acknowledges that any such private sales may be at
prices and on terms less favorable to the Administrative Agent than those
obtainable through a public sale without such restrictions, and, notwithstanding
such circumstances, agree that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that the Administrative Agent
shall have no obligation to engage in public sales and no obligation to delay
the sale of any Collateral for the period of time necessary to permit the
Borrower or issuer thereof to register it for public sale.
6.06 Deficiency. If the proceeds of sale, collection or other
----------
realization of or upon the Collateral pursuant to Section 6.05 hereof are
insufficient to cover the costs and expenses of such realization and the payment
in full of the Secured Obligations, the Parent Guarantor shall remain liable for
any deficiency.
6.07 Removals, Etc. Without at least 30 days' prior written
-------------
notice to the Administrative Agent, the Parent Guarantor shall not (i) maintain
any of its books and records with respect to the Collateral at any office or
maintain its principal place of business at any place other than at the address
indicated beneath its signature hereto or (ii) change its corporate name, or the
name under which it does business, from the name shown on the signature pages
hereto.
6.08 Private Sale. The Administrative Agent and the Lenders
------------
shall incur no liability as a result of the sale of the Collateral, or any part
thereof, at any private sale pursuant to Section 6.05 hereof conducted in a
commercially reasonable manner. The Parent Guarantor hereby waives any claims
against the Administrative Agent or any Lender arising by reason of the fact
that the price at which the Collateral may have been sold at such a private sale
was less than the price that might have been obtained at a public sale or was
less than the aggregate amount of the Secured Obligations, even if the
Administrative Agent accepts the first offer received and does not offer the
Collateral to more than one offeree.
6.09 Application of Proceeds. Except as otherwise herein
-----------------------
expressly provided, the proceeds of any collection, sale or other realization of
all or any part of the Collateral pursuant
-13-
hereto, and any other cash at the time held by the Administrative Agent
under this Section 6, shall be applied by the Administrative Agent:
First, to the payment of the costs and expenses of such
-----
collection, sale or other realization, including reasonable out-of-pocket
costs and expenses of the Administrative Agent and the fees and expenses
of its agents and counsel, and all expenses incurred and advances made by
the Administrative Agent in connection therewith;
Next, to the payment in full of the Secured Obligations, in each
----
case equally and ratably in accordance with the respective amounts
thereof then due and owing or as the Lenders holding the same may
otherwise agree; and
Finally, to the payment to the Parent Guarantor, or its
-------
successors or assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining.
As used in this Section 6, "proceeds" of Collateral shall mean
--------
cash, securities and other property realized in respect of, and
distributions in kind of, Collateral, including any thereof received
under any reorganization, liquidation or adjustment of debt of the Parent
Guarantor or any issuer of or obligor on any of the Collateral.
6.10 Attorney-in-Fact. Without limiting any rights or powers
----------------
granted by this Agreement to the Administrative Agent while no Event of Default
has occurred and is continuing, upon the occurrence and during the continuance
of any Event of Default the Administrative Agent is hereby appointed the
attorney-in-fact of the Parent Guarantor for the purpose of carrying out the
provisions of this Section 6 and taking any action and executing any instruments
that the Administrative Agent may deem necessary or advisable to accomplish the
purposes hereof, which appointment as attorney-in-fact is irrevocable and
coupled with an interest. Without limiting the generality of the foregoing, so
long as the Administrative Agent shall be entitled under this Section 6 to make
collections in respect of the Collateral, the Administrative Agent shall have
the right and power to receive, endorse and collect all checks made payable to
the order of the Parent Guarantor representing any dividend, payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
6.11 Perfection. Prior to or concurrently with the execution
----------
and delivery of this Agreement, the Parent Guarantor shall (i) file such
financing statements and other documents in such offices as the Administrative
Agent may request to perfect the security interests granted in Section 3 of this
Agreement, (ii) register the pledge of its ownership interests in the Borrower
hereunder for purposes of Article 8 of the Uniform Commercial Code and (iii)
deliver to the Administrative Agent any Instruments and any certificates
representing the Pledged LLC Interest, accompanied by undated stock powers duly
executed in blank.
-14-
6.12 Termination. When all Secured Obligations shall have been
-----------
paid in full and the Commitments of the Lenders under the Credit Agreement shall
have expired or been terminated, this Agreement shall terminate, and the
Administrative Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, any remaining Collateral and money received in respect thereof, to
or on the order of the Parent Guarantor.
6.13 Further Assurances. The Parent Guarantor agrees that,
------------------
from time to time upon the written request of the Administrative Agent, the
Parent Guarantor will execute and deliver such further documents and do such
other acts and things as the Administrative Agent may reasonably request in
order fully to effect the purposes of this Agreement.
Section 7. Miscellaneous.
-------------
7.01 No Waiver. No failure on the part of the Administrative
---------
Agent or any Lender to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any Lender of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
7.02 Notices. All notices, requests, consents and demands
-------
hereunder shall be in writing and telecopied or delivered to the intended
recipient at the "Address for Notices" specified beneath its name on the
signature pages hereof or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
7.03 Expenses. The Parent Guarantor agrees to reimburse each of
--------
the Lenders and the Administrative Agent for all reasonable costs and expenses
of the Lenders and the Administrative Agent (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (i) any
Default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (w) performance by the Administrative Agent of any obligations
of the Parent Guarantor in respect of the Collateral that the Parent Guarantor
has failed or refused to perform, (x) bankruptcy, insolvency, receivership,
foreclosure, winding up or liquidation proceedings, or any actual or attempted
sale, or any exchange, enforcement, collection, compromise or settlement in
respect of any of the Collateral, and for the care of the Collateral and
defending or asserting rights and claims of the Administrative Agent in respect
thereof, by litigation or otherwise, (y) judicial or regulatory proceedings and
(z) workout, restructuring or other
-15-
negotiations or proceedings (whether or not the workout, restructuring or
transaction contemplated thereby is consummated) and (ii) the enforcement of
this Section 7.03, and all such costs and expenses shall be Secured Obligations
entitled to the benefits of the collateral security provided pursuant to Section
3 hereof.
7.04 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by the Parent
Guarantor and the Administrative Agent (with the consent of the Lenders as
specified in Section 10.09 of the Credit Agreement). Any such amendment or
waiver shall be binding upon the Administrative Agent and each Lender, each
holder of any of the Secured Obligations and the Parent Guarantor.
7.05 Successors and Assigns. This Agreement shall be binding up
----------------------
on and inure to the benefit of the respective successors and assigns of the
Parent Guarantor, the Administrative Agent, the Lenders and each holder of any
of the Secured Obligations (provided, however, that the Parent Guarantor shall
--------
not assign or transfer its rights hereunder without the prior written consent of
the Administrative Agent).
7.06 Captions. The captions and section headings appearing
--------
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
7.07 Counterparts. This Agreement may be executed in any number
------------
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
7.08 Governing Law; Submission to Jurisdiction. This Agreement
-----------------------------------------
shall be governed by, and construed in accordance with, the law of the State of
New York. The Parent Guarantor hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
the Supreme Court of the State of New York sitting in New York County (including
its Appellate Division), and of any other appellate court in the State of New
York, for the purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. The Parent Guarantor
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any objection that it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
7.09 Waiver of Jury Trial. EACH OF THE PARENT GUARANTOR AND THE
--------------------
ADMINISTRATIVE AGENT (FOR ITSELF AND ON BEHALF OF THE LENDERS) HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY
-16-
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
7.10 Certain Regulatory Requirements. Any provision contained
-------------------------------
herein to the contrary notwithstanding, no action shall be taken hereunder by
the Administrative Agent or any Lender with respect to any item of Collateral
unless and until all applicable requirements (if any) of the FCC under the
Federal Communications Act of 1934, as amended, and the respective rules and
regulations thereunder and thereof, as well as any other federal, state or local
laws, rules and regulations of other regulatory or governmental bodies
(including, without limitation, any municipality that has issued any Franchise
to the Borrower or any of its Subsidiaries) applicable to or having jurisdiction
over the Parent Guarantor (or any entity under the control of the Parent
Guarantor), have been satisfied with respect to such action and there have been
obtained such consents, approvals and authorizations (if any) as may be required
to be obtained from the FCC, any operating municipality and any other
governmental authority under the terms of any Franchise, any license or similar
operating right held by the Parent Guarantor (or any entity under the control of
the Parent Guarantor). It is the intention of the parties hereto that the Liens
in favor of the Administrative Agent on the Collateral shall in all relevant
aspects be subject to and governed by said statutes, rules and regulations and
the Franchise(s) and that nothing in this Agreement shall be construed to
diminish the control exercised by the Parent Guarantor except in accordance with
the provisions of such statutory requirements, rules and regulations and the
Franchises. The Parent Guarantor agrees that upon request from time to time by
the Administrative Agent it will use its best efforts to obtain any
governmental, regulatory or third party consents, approvals or authorizations
referred to in this Section 7.10.
7.11 Agents and Attorneys-in-Fact. The Administrative Agent may
----------------------------
employ agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or attorneys-in-
fact selected by it in good faith.
7.12 Severability. If any provision hereof is invalid and
------------
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in favor of the Administrative
Agent and the Lenders in order to carry out the intentions of the parties hereto
as nearly as may be possible and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction.
7.13 Limitation of Liability. It is understood that, except for
-----------------------
the representations and warranties made by the Parent Guarantor herein, the sole
recourse of the Administrative Agent and the Lenders in respect of the
obligations of the Parent Guarantor hereunder shall be to the Collateral
hereunder and that nothing contained herein shall create any obligation of or
right to look to the Parent Guarantor or its assets individually for the
satisfaction of such obligations.
-17-
IN WITNESS WHEREOF, the parties hereto have caused this Guarantee and
Pledge Agreement to be duly executed and delivered as of the day and year first
above written.
MEDIACOM LLC
By
-------------------------------
Title:
Address for Notices:
Mediacom LLC
100 Crystal Run Road
Middletown, New York 10941
-18-
THE CHASE MANHATTAN BANK,
as Administrative Agent
By
------------------------
Title:
Address for Notices:
The Chase Manhattan Bank, as
Administrative Agent
Agent Bank Services
1 Chase Manhattan Plaza
New York, New York 10081
with a copy to:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Ann B. Kerns
Vice President
Telecopier No.: (212) 270-4584
Telephone No.: (212) 270-9320
EXHIBIT E
[Form of Subsidiary Guarantee Agreement]
SUBSIDIARY GUARANTEE AGREEMENT
SUBSIDIARY GUARANTEE AGREEMENT dated as of ____________, 199__ by [NAME
OF SUBSIDIARY GUARANTOR], a
___________ corporation (the "Subsidiary Guarantor") in favor of THE CHASE
--------------------
MANHATTAN BANK, as administrative agent for the banks or other financial
institutions or entities party, as lenders, to the Credit Agreement referred to
below (in such capacity, together with its successors in such capacity, the
"Administrative Agent").
--------------------
Mediacom Southeast LLC, a Delaware limited liability company (the
"Borrower"), certain lenders and the Administrative Agent are parties to a
--------
Credit Agreement dated as of January 23, 1998 (as modified and supplemented and
in effect from time to time, the "Credit Agreement"), providing, subject to the
----------------
terms and conditions thereof, for extensions of credit (by the making of loans
and the issuance of letters of credit) to be made by said lenders to the
Borrower in an aggregate principal or face amount not exceeding $225,000,000
(which amount may, in accordance with the provisions thereof, be increased to
$275,000,000). In addition, the Borrower may from time to time be obligated to
various of said lenders or their affiliates in respect of Interest Rate
Protection Agreements permitted under Section 8.08(e) of the Credit Agreement
(such indebtedness being herein referred to as the "Hedging Indebtedness").
--------------------
To induce said lenders to enter into the Credit Agreement and to extend
credit thereunder and to extend credit to the Borrower that would constitute
Hedging Indebtedness, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Subsidiary Guarantor has
agreed to guarantee the Guaranteed Obligations (as hereinafter defined) and to
become a Securing Party under the Security Agreement (as so defined) and to
pledge and grant a security interest in the Collateral (as so defined) as
security for the Secured Obligations (as so defined). Accordingly, the parties
hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are used
-----------
herein as defined therein. In addition, the terms "Collateral" and "Securing
Party" shall have the respective meanings assigned to such terms in the Security
Agreement.
Section 2. The Guarantee.
-------------
2.01 The Guarantee. The Subsidiary Guarantor hereby guarantees to each
-------------
Lender and the Administrative Agent and their respective successors and assigns
the prompt payment in full when due (whether at stated maturity, by acceleration
or otherwise) of the principal of and interest on the Loans made by the Lenders
to the Borrower, all Reimbursement Obligations and interest thereon and all
other amounts from time to time owing to the Lenders (or, in respect of
-2-
any Interest Rate Protection Agreement, any affiliate of a Lender) or the
Administrative Agent by the Borrower under the Credit Agreement, and all Hedging
Indebtedness of the Borrower, in each case strictly in accordance with the terms
thereof (such obligations being herein collectively called the "Guaranteed
----------
Obligations"). The Subsidiary Guarantor hereby further agrees that if the
- -----------
Borrower shall fail to pay in full when due (whether at stated maturity, as a
mandatory prepayment, by acceleration or otherwise) any of the Guaranteed
Obligations, the Subsidiary Guarantor will promptly pay the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
2.02 Obligations Unconditional. The obligations of the Subsidiary
-------------------------
Guarantor under Section 2.01 hereof are absolute and unconditional irrespective
of the value, genuineness, validity, regularity or enforceability of the Credit
Agreement or any other agreement or instrument referred to herein or therein, or
any substitution, release or exchange of any other guarantee of or security for
any of the Guaranteed Obligations, and, to the fullest extent permitted by
applicable law, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
guarantor, it being the intent of this Section 2.02 that the obligations of the
Subsidiary Guarantor hereunder shall be absolute and unconditional under any and
all circumstances. Without limiting the generality of the foregoing, it is
agreed that the occurrence of any one or more of the following shall not alter
or impair the liability of the Subsidiary Guarantor hereunder which shall remain
absolute and unconditional as described above:
(i) at any time or from time to time, without notice to the
Subsidiary Guarantor, the time for any performance of or compliance with
any of the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of the Credit
Agreement or any other agreement or instrument referred to herein or
therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Credit
Agreement or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of, the
Administrative Agent or any Lender or Lenders as security for any of the
Guaranteed Obligations shall fail to be perfected.
-3-
The Subsidiary Guarantor hereby expressly waives diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that the
Administrative Agent or any Lender exhaust any right, power or remedy or proceed
against the Borrower under the Credit Agreement or any other agreement or
instrument referred to herein or therein, or against any other Person under any
other guarantee of, or security for, any of the Guaranteed Obligations.
2.03 Reinstatement. The obligations of the Subsidiary Guarantor under
-------------
this Section 2 shall be automatically reinstated if and to the extent that for
any reason any payment by or on behalf of the Borrower in respect of the
Guaranteed Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise, and the Subsidiary Guarantor agrees
that it will indemnify the Administrative Agent and each Lender on demand for
all reasonable costs and expenses (including, without limitation, fees of
counsel) incurred by the Administrative Agent or such Lender in connection with
such rescission or restoration, including any such costs and expenses incurred
in defending against any claim alleging that such payment constituted a
preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law.
2.04 Subrogation. The Subsidiary Guarantor hereby waives all rights of
-----------
subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Federal
Bankruptcy Code) or otherwise by reason of any payment by it pursuant to the
provisions of this Section 2 and further agrees with the Borrower for the
benefit of each of its creditors (including, without limitation, each Lender and
the Administrative Agent) that any such payment by it shall constitute a
contribution of capital by the Subsidiary Guarantor to such Borrower (or an
investment in the equity capital of such Borrower by the Subsidiary Guarantor).
2.05 Remedies. The Subsidiary Guarantor agrees that, as between the
--------
Subsidiary Guarantor and the Lenders, the obligations of the Borrower under the
Credit Agreement may be declared to be forthwith due and payable as provided in
Section 9 of the Credit Agreement (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9)
for purposes of Section 2.01 hereof notwithstanding any stay, injunction or
other prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by the
Borrower) shall forthwith become due and payable by the Subsidiary Guarantor for
purposes of said Section 2.01.
2.06 Instrument for the Payment of Money. The Subsidiary Guarantor
-----------------------------------
hereby acknowledges that the guarantee in this Section 2 constitutes an
instrument for the payment of money, and consents and agrees that any Lender or
the Administrative Agent, at its sole option, in the event of a dispute by the
Subsidiary Guarantor in the payment of any moneys due hereunder, shall have the
right to bring motion-action under New York CPLR Section 3213.
-4-
2.07 Continuing Guarantee. The guarantee in this Section 2 is a
--------------------
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
2.08 General Limitation on Guarantee Obligations. In any action or
-------------------------------------------
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of the Subsidiary Guarantor under
Section 2.01 hereof would otherwise be held or determined to be void, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under said Section 2.01, then, notwithstanding
any other provision hereof to the contrary, the amount of such liability shall,
without any further action by the Subsidiary Guarantor, the Administrative
Agent, the Lenders or any other Person, be automatically limited and reduced to
the highest amount that is valid and enforceable and not subordinated to the
claims of other creditors as determined in such action or proceeding.
2.09 Obligations Joint and Several. The obligations of the Subsidiary
-----------------------------
Guarantor hereunder shall be joint and several with the obligations of each
other Securing Party under each other Subsidiary Guarantee Agreement or under
the Credit Agreement, as the case may be.
Section 3. Grant of Security. The Subsidiary Guarantor hereby agrees to
-----------------
become a "Securing Party" under and for all purposes of the Security Agreement
and hereby undertakes all of the obligations of a Securing Party thereunder as
if it had been an original signatory thereto. Without limiting the foregoing,
the Subsidiary Guarantor hereby pledges and grants to the Administrative Agent,
for the benefit of the Lenders as provided in the Security Agreement, a security
interest in all of the Subsidiary Guarantor's right, title and interest in all
Collateral, whether now owned by the Subsidiary Guarantor or hereafter acquired
and whether now existing or hereafter coming into existence, and wherever
located. In addition, (x) the Subsidiary Guarantor hereby makes the
representations and warranties set forth in Section 2 of the Security Agreement
and (y) Annex 1 to the Security Agreement shall be deemed to be supplemented in
respect of the Subsidiary Guarantor as specified in Appendix A hereto.
Section 4. Representations and Warranties. The Subsidiary Guarantor
------------------------------
represents and warrants to the Lenders and the Administrative Agent that:
4.01 Corporate Existence. The Subsidiary Guarantor: (a) is a
-------------------
corporation, partnership, limited liability company or other entity duly
organized and validly existing under the laws of its jurisdiction of
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such
-5-
qualification necessary and where failure so to qualify would (either
individually or in the aggregate) have a Material Adverse Effect.
4.02 No Breach. None of the execution and delivery of this Agreement,
---------
the consummation of the transactions herein contemplated or compliance with the
terms and provisions hereof will conflict with or result in a breach of, or
require any consent under, the charter, by-laws or other organizational
instrument of the Subsidiary Guarantor, or any applicable law or regulation, or
any order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which the Subsidiary Guarantor is a
party or by which it is bound or to which it is subject, or constitute a default
under any such agreement or instrument, or result in the creation or imposition
of any Lien upon any of the revenues or assets of the Subsidiary Guarantor
pursuant to the terms of any such agreement or instrument.
4.03 Action. The Subsidiary Guarantor has all necessary corporate or
------
other power and authority to execute, deliver and perform its obligations under
this Agreement; the execution, delivery and performance by the Subsidiary
Guarantor of this Agreement have been duly authorized by all necessary corporate
or other action on its part; and this Agreement has been duly and validly
executed and delivered by the Subsidiary Guarantor and constitutes its legal,
valid and binding obligation, enforceable against the Subsidiary Guarantor in
accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws or
general applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether considered in
a proceeding in equity or at law).
4.04 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange are necessary for the execution, delivery or
performance by the Subsidiary Guarantor of this Agreement or for the validity or
enforceability hereof, except for filings and recordings in respect of the Liens
created pursuant to the Security Agreement (as supplemented hereby), and except
that the exercise of remedies under the Security Agreement (and the creation of
a valid security interest in the Franchises as described to Section 8.19 of the
Credit Agreement) may require the prior approval of the FCC, or of the issuing
municipalities or States under one or more of the Franchises.
Section 5. Miscellaneous.
-------------
5.01 No Waiver. No failure on the part of the Administrative Agent or
---------
any Lender to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Administrative Agent or
any Lender of any right, power or remedy hereunder
-6-
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not exclusive
of any remedies provided by law.
5.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the Subsidiary Guarantor at
the "Address for Notices" specified for the Borrower pursuant to the Credit
Agreement and, to the Administrative Agent, at its "Address for Notices"
specified pursuant to the Credit Agreement or, as to either party, at such other
address as shall be designated by such party in a notice to the other party.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopier or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.
5.03 Expenses. The Subsidiary Guarantor agrees to reimburse each of the
--------
Lenders and the Administrative Agent for all reasonable costs and expenses of
the Lenders and the Administrative Agent (including, without limitation, the
reasonable fees and expenses of legal counsel) in connection with (i) any
Default and any enforcement or collection proceeding resulting therefrom,
including, without limitation, all manner of participation in or other
involvement with (x) bankruptcy, insolvency, receivership, foreclosure, winding
up or liquidation proceedings, (y) judicial or regulatory proceedings and (z)
workout, restructuring or other negotiations or proceedings (whether or not the
workout, restructuring or transaction contemplated thereby is consummated) and
(ii) the enforcement of this Section 5.03.
5.04 Amendments, Etc. The terms of this Agreement may be waived,
----------------
altered or amended only by an instrument in writing duly executed by the
Subsidiary Guarantor and the Administrative Agent (with the consent of the
Lenders as specified in Section 10.09 of the Credit Agreement). Any such
amendment or waiver shall be binding upon the Administrative Agent and each
Lender, each holder of any of the Guaranteed Obligations and the Subsidiary
Guarantor.
5.05 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the respective successors and assigns of the Subsidiary
Guarantor, the Administrative Agent, the Lenders and each holder of any of the
Guaranteed Obligations (provided, however, that the Subsidiary Guarantor shall
--------
not assign or transfer its rights hereunder without the prior written consent of
the Administrative Agent).
5.06 Captions. The captions and section headings appearing herein are
--------
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
5.07 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
-7-
5.08 Governing Law; Submission to Jurisdiction. This Agreement shall be
-----------------------------------------
governed by, and construed in accordance with, the law of the State of New York.
The Subsidiary Guarantor hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of the
Supreme Court of the State of New York sitting in New York County (including its
Appellate Division), and of any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Subsidiary Guarantor
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any objection that it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
5.09 Waiver of Jury Trial. EACH OF THE SUBSIDIARY GUARANTOR AND THE
--------------------
ADMINISTRATIVE AGENT (FOR ITSELF AND ON BEHALF OF THE LENDERS) HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
5.10. Opinion of Counsel. The Subsidiary Guarantor hereby instructs its
------------------
counsel to deliver the opinions referred to in Section 8.18(a)(iii) of the
Credit Agreement to the Lenders and the Administrative Agent.
5.11 Agents and Attorneys-in-Fact. The Administrative Agent may employ
----------------------------
agents and attorneys-in-fact in connection herewith and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith.
5.12 Severability. If any provision hereof is invalid and unenforceable
------------
in any jurisdiction, then, to the fullest extent permitted by law, (i) the other
provisions hereof shall remain in full force and effect in such jurisdiction and
shall be liberally construed in favor of the Administrative Agent and the
Lenders in order to carry out the intentions of the parties hereto as nearly as
may be possible and (ii) the invalidity or unenforceability of any provision
hereof in any jurisdiction shall not affect the validity or enforceability of
such provision in any other jurisdiction.
-8-
IN WITNESS WHEREOF, the Subsidiary Guarantor has caused this Subsidiary
Guarantee Agreement to be duly executed and delivered as of the day and year
first above written.
[NAME OF SUBSIDIARY GUARANTOR]
By
----------------------------
Title:
Accepted and agreed:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By
------------------------
Title:
Appendix A
to
Subsidiary Guarantee
Agreement
Supplement to Annex 1:
[to be completed]
EXHIBIT F
[Form of Management Fee Subordination Agreement]
MANAGEMENT FEE SUBORDINATION AGREEMENT
MANAGEMENT FEE SUBORDINATION AGREEMENT dated as of January 23, 1998, between:
(i) MEDIACOM MANAGEMENT CORPORATION, a corporation duly
organized and validly existing under the laws of the State of Delaware
("Manager Entity");
----------------
(ii) MEDIACOM SOUTHEAST LLC, a limited liability company duly
organized and validly existing under the laws of the State of Delaware (the
"Borrower"); and
--------
(iii) THE CHASE MANHATTAN BANK, a New York banking corporation,
as administrative agent for the lenders or other financial institutions or
entities party, as lenders, to the Credit Agreement referred to below (in
such capacity, together with its successors in such capacity, the
"Administrative Agent").
---------------------
The Borrower, certain lenders and the Administrative Agent are
parties to a Credit Agreement dated as of January 23, 1998 (as modified and
supplemented and in effect from time to time, the "Credit Agreement"),
----------------
providing, subject to the terms and conditions thereof, for extensions of credit
(by the making of loans and the issuance of letters of credit) to be made by
said lenders to the Borrower in an aggregate principal or face amount not
exceeding $225,000,000 (which amount may, in accordance with the provisions
thereof, be increased to $275,000,000). In addition, the Borrower may from time
to time be obligated to various of said lenders in respect of Interest Rate
Protection Agreements permitted under Section 8.08(e) of the Credit Agreement
(such indebtedness being herein referred to as the "Hedging Indebtedness").
--------------------
To induce said lenders to enter into the Credit Agreement and to
extend credit thereunder and to extend credit to the Borrower that would
constitute Hedging Indebtedness, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Manager Entity
has agreed to subordinate the Subordinated Debt (as hereinafter defined) to the
Senior Debt (as so defined) all in the manner and to the extent hereinafter
provided. Accordingly, the parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement
-----------
are used herein as defined therein. In addition, as used herein:
-2-
"Obligor Entity" shall mean, collectively, the Borrower and,
--------------
effective upon execution and delivery of any Subsidiary Guarantee Agreement, any
Subsidiary of the Borrower so executing and delivering such Subsidiary Guarantee
Agreement.
"Senior Debt" shall mean, collectively, the following
-----------
indebtedness and obligations:
(a) all indebtedness or other obligations of the Borrower under
the Credit Agreement and the other Loan Documents, including
all interest, expenses, indemnities and penalties and all
commitment and agency fees payable from time to time under
the Credit Agreement and the other Loan Documents;
(b) all Hedging Indebtedness;
(c) all obligations of any Subsidiary of the Borrower in respect
of any Subsidiary Guarantee Agreement executed and delivered
by such Subsidiary; and
(d) any deferrals, renewals, extensions or refinancings of any
of the foregoing.
The term "Senior Debt" shall include any interest, and any expenses of the type
described in Section 11.03 of the Credit Agreement (or comparable provisions of
any other Loan Document), accruing or arising after the date of any filing by
any Obligor Entity of any petition in bankruptcy or the commencing of any
bankruptcy, insolvency or similar proceedings with respect to any Obligor
Entity, whether or not such interest or expenses are allowable as a claim in any
such proceeding.
"Subordinated Debt" shall mean all obligations of the Borrower
-----------------
or its Subsidiaries with respect to any Management Fee payable by the Borrower
or any of its Subsidiaries to the Manager Entity.
Section 2. Subordination.
-------------
2.01 Subordination of Subordinated Debt. The Manager Entity,
----------------------------------
on its own behalf and on behalf of each subsequent holder of Subordinated Debt,
hereby covenants and agrees, that, to the extent and in the manner set forth in
this Agreement, the Subordinated Debt, and the payment from whatever source of
the Subordinated Debt, are hereby expressly made subordinate and subject in
right of payment to the prior payment in full in cash of all Senior Debt and in
that connection hereby agrees that, except and to the extent permitted under
Section 2.03 hereof, (a) no payment on account of the Subordinated Debt or any
judgment with respect thereto shall be made by or on behalf of the Obligor
Entities and (b) the Manager Entity shall not (i) ask, demand, sue for, take or
receive from the Obligor Entities, by set-off or in any other manner, or
-3-
(ii) seek any other remedy allowed at law or in equity against the Obligor
Entities for breach of any Obligor Entity's obligations under the instruments
representing such Subordinated Debt.
In the event that, notwithstanding the foregoing provisions of
this Section 2.01, the Manager Entity shall have received any payment not
permitted by the provisions of Section 2.03 hereof, including, without
limitation, any such payment arising out of the exercise by the Manager Entity
of a right of set-off or counterclaim and any such payment received by reason of
other indebtedness of any Obligor Entity being subordinated to the Subordinated
Debt, then, and in any such event, such payment shall be held in trust for the
benefit of, and shall be immediately paid over or delivered to, the
Administrative Agent, to be paid to the Lenders, ratably according to the
aggregate amounts remaining unpaid on account of the principal of, and interest
and premium (if any) on, the Senior Debt held or represented by each Lender, for
application to such Senior Debt remaining unpaid, whether or not then due and
payable.
2.02 Payment of Proceeds Upon Dissolution. Without limiting
------------------------------------
the generality of the provisions of Section 2.01 hereof, in the event of (a) any
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith,
relative to any Obligor Entity or to its creditors, as such, or to its assets,
or (b) any liquidation, dissolution or other winding up of any Obligor Entity,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of any Obligor Entity, then and in any
such event:
(1) the Lenders shall be entitled to receive payment in full
in cash of all amounts due or to become due on or in respect of all
Senior Debt, or provision shall be made for such payment, before the
Manager Entity shall be entitled to receive any payment on account of the
Subordinated Debt;
(2) any payment or distribution of assets of any Obligor
Entity of any kind or character, whether in cash, property or securities,
by set-off or otherwise, to which the Manager Entity would be entitled
but for the provisions of this Agreement, including any such payment or
distribution that may be payable or deliverable by reason of the payment
of any other indebtedness of any Obligor Entity being subordinated to the
payment of the Subordinated Debt, shall be paid by the liquidating
trustee or agent or other Person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating trustee or
otherwise, directly to the Administrative Agent, to be paid to the
Lenders, ratably according to the aggregate amounts remaining unpaid on
account of the principal of, and interest and premium (if any) on, the
Senior Debt held or represented by each Lender, to the extent necessary
to make payment in full in cash of all Senior Debt remaining unpaid,
after giving effect to any concurrent payment or distribution to the
Lenders;
-4-
(3) in the event that, notwithstanding the foregoing
provisions of this Section 2.02, the Manager Entity shall have received,
before all Senior Debt is paid in full in cash or payment thereof
provided for, any such payment or distribution of assets of any Obligor
Entity of any kind or character, whether in cash, property or securities,
including any such payment or distribution arising out of the exercise by
the Manager Entity of a right of set-off or counterclaim and any such
payment or distribution received by reason of any other indebtedness of
any Obligor Entity being subordinated to the Subordinated Debt, then, and
in such event, such payment or distribution shall be held in trust for
the benefit of, and shall be immediately paid over or delivered to, the
Administrative Agent, to be paid to the Lenders, ratably according to the
aggregate amounts remaining unpaid on account of the principal of, and
interest and premium (if any) on, the Senior Debt held or represented by
each Lender, to the extent necessary to make payment in full in cash of
all Senior Debt remaining unpaid, after giving effect to any concurrent
payment or distribution to the Lenders; and
(4) if the Manager Entity shall have failed to file claims or
proofs of claim with respect to the Subordinated Debt earlier than 30
days prior to the deadline for any such filing, the Manager Entity shall
execute and deliver to the Administrative Agent such powers of attorney,
assignments or other instruments as the Administrative Agent may
reasonably request to file such claims or proofs of claim.
2.03 Certain Payments Permitted. Notwithstanding the fore-
--------------------------
going, the Manager Entity shall be entitled to receive and retain any payment of
Management Fees either (i) permitted under Section 8.11 of the Credit Agreement
or (ii) made after all Senior Debt shall have been paid in full and the
Commitments of the Lenders under the Credit Agreement shall have expired or been
terminated.
2.04 Subrogation. Subject to the payment in full in cash of
-----------
all Senior Debt, the Manager Entity shall be subrogated (equally and ratably
with the holders of all indebtedness of the Obligor Entities that by its express
terms is subordinated to Senior Debt of the Obligor Entities to the same extent
as the Subordinated Debt is subordinated and that is entitled to like rights of
subrogation) to the rights of the Lenders to receive payments and distributions
of cash, property and securities applicable to the Senior Debt until the
Subordinated Debt shall be paid in full in cash. For purposes of such
subrogation, no payments or distributions to the Lenders of any cash, property
or securities to which the Manager Entity would be entitled except for the
provisions of this Section 2, and no payments over pursuant to the provisions of
this Section 2 to the Lenders by the Manager Entity, shall, as between the
Obligor Entities, their creditors other than the Lenders, and the Manager
Entity, be deemed to be a payment or distribution by the Obligor Entities to or
on account of the Senior Debt.
2.05 Provisions Solely to Define Relative Rights. The
-------------------------------------------
provisions of this Section 2 are and are intended solely for the purpose of
defining the relative rights of the
-5-
Manager Entity on the one hand and the Lenders on the other hand. Nothing
contained in this Section 2 or elsewhere in this Agreement is intended to or
shall:
(a) impair, as among the Obligor Entities, their creditors other
than the Lenders and the Manager Entity, the obligation of the Obligor
Entities to pay to the Manager Entity the Subordinated Debt as and when
the same shall become due and payable in accordance with its terms; or
(b) affect the relative rights against the Obligor Entities of
the Manager Entity and creditors of the Obligor Entities other than the
Lenders.
2.06 No Waiver of Subordination Provisions. No right of the
-------------------------------------
Administrative Agent or any Lender to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Obligor Entities or by any act or failure to act, in good
faith, by the Administrative Agent or any Lender, or by any non-compliance by
any Obligor Entity with the terms, provisions and covenants of this Agreement,
regardless of any knowledge thereof the Administrative Agent or any Lender may
have or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the Lenders may, at any time and from time to time, without the
consent of or notice to the Manager Entity, without incurring responsibility to
the Manager Entity and without impairing or releasing the subordination provided
in this Section 2 or the obligations hereunder of the Manager Entity to the
holders of Senior Debt, do any one or more of the following: (a) change the
time, manner or place of payment of Senior Debt, or otherwise modify or
supplement in any respect any of the provisions of the Credit Agreement or any
other instrument evidencing or relating to any of the Senior Debt; (b) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (c) release any Person liable in any manner for
the collection of Senior Debt; and (d) exercise or refrain from exercising any
rights against the Obligor Entities and any other Person.
Section 3. Representations and Warranties. The Manager Entity
------------------------------
represents and warrants to the Administrative Agent and each Lender that:
3.01 Existence. The Manager Entity is a corporation duly
---------
organized and validly existing under the laws of the State of Delaware.
3.02 No Breach. None of the execution and delivery of this
---------
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the charter or by-laws or other
organizational instrument of the Manager Entity, any applicable law
-6-
or regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which the
Manager Entity is a party or by which the Manager Entity is bound or to which
the Manager Entity is subject, or constitute a default under any such agreement
or instrument, or result in the creation or imposition of any Lien upon any of
the revenues or assets of the Manager Entity pursuant to the terms of any such
agreement or instrument.
3.03 Action. The Manager Entity has all necessary corporate
------
or other power, authority and legal right to execute, deliver and perform its
obligations under this Agreement; the execution, delivery and performance by the
Manager Entity of this Agreement have been duly authorized by all necessary
corporate or other action on its part; and this Agreement has been duly and
validly executed and delivered by the Manager Entity and constitutes the legal,
valid and binding obligation of the Manager Entity, enforceable in accordance
with its terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affecting the enforcement of creditors' rights and (b) the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.04 Approvals. No authorizations, approvals or consents of,
---------
and no filings or registrations with, any governmental or regulatory authority
or agency are necessary for the execution, delivery or performance by the
Manager Entity of this Agreement or for the validity or enforceability hereof.
Section 4. Miscellaneous.
-------------
4.01 No Waiver. No failure on the part of the Administrative
---------
Agent or any Lender to exercise, and no course of dealing with respect to, and
no delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise by the Administrative
Agent or any Lender of any right, power or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or remedy.
The remedies herein are cumulative and are not exclusive of any remedies
provided by law.
4.02 Notices. All notices, requests, consents and demands
-------
hereunder shall be in writing and telecopied or delivered to the intended
recipient at the "Address for Notices" specified beneath its name on the
signature pages hereof or, as to either party, at such other address as shall be
designated by such party in a notice to the other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
-7-
4.03 Amendments, Etc. The terms of this Agreement may be
---------------
waived, altered or amended only by an instrument in writing duly executed by the
Manager Entity and (as to the Administrative Agent and the Lenders) by the
Administrative Agent with the consent of the Lenders as specified in Section
10.09 of the Credit Agreement. Any such amendment or waiver shall be binding
upon the Administrative Agent and each Lender (and each other holder of Senior
Debt) and the Manager Entity.
4.04 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the respective successors and assigns of the
Manager Entity and the Administrative Agent and each Lender (and each other
holder of Senior Debt).
4.05 Captions. The captions and section headings appearing
--------
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
4.06 Counterparts. This Agreement may be executed in any
------------
number of counterparts, all of which taken together shall constitute one and the
same instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
4.07 Governing Law; Submission to Jurisdiction. This
-----------------------------------------
Agreement shall be governed by, and construed in accordance with, the law of the
State of New York. The Manager Entity hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of the Supreme Court of the State of New York sitting in New York
County (including its Appellate Division), and of any other appellate court in
the State of New York, for the purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby. The
Manager Entity hereby irrevocably waives, to the fullest extent permitted by
applicable law, any objection that it may now or hereafter have to the laying of
the venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum.
4.08 Waiver of Jury Trial. EACH OF THE MANAGER ENTITY AND THE
--------------------
ADMINISTRATIVE AGENT (FOR ITSELF AND ON BEHALF OF THE LENDERS) HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
-8-
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amended and Restated Management Fee Subordination Agreement to be duly executed
and delivered as of the day and year first above written.
MEDIACOM MANAGEMENT CORPORATION
By
--------------------
Title:
Address for Notices:
Mediacom Management Corporation
100 Crystal Road
Middletown, New York 10941
Attention: Rocco B. Commisso
Telecopier No.: (914) 695-2699
Telephone No.: (914) 692-2600
-9-
MEDIACOM SOUTHEAST LLC
By MEDIACOM LLC, a Member
By
-----------------
Title:
Address for Notices:
Mediacom Southeast LLC
c/o Mediacom LLC
100 Crystal Road
Middletown, New York 10941
Attention: Rocco B. Commisso
Telecopier No.: (914) 695-2699
Telephone No.: (914) 696-2600
-10-
THE CHASE MANHATTAN BANK,
as Administrative Agent
By
--------------------
Title:
Address for Notices:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Ann B. Kerns
Vice President
Telecopier No.: (212) 270-4584
Telephone No.: (212) 270-9320
EXHIBIT G
[Form of Opinion of Counsel to the Obligors]
_______, 199_
To the Lenders party to the
Credit Agreement referred to
below and The Chase Manhattan
Bank, as Administrative Agent
Ladies and Gentlemen:
We have acted as counsel to Mediacom Southeast LLC (the "Borrower"),
--------
Mediacom LLC ("Mediacom") and Mediacom Management Corporation (the "Manager
-------- -------
Entity") in connection with (i) the Credit Agreement (the "Credit Agreement")
- ------- ----------------
dated as of January 23, 1998, between the Borrower, the lenders party thereto
and The Chase Manhattan Bank, as Administrative Agent, providing for extensions
of credit in an aggregate principal or face amount not exceeding $225,000,000
(which amount may, in accordance with the provisions thereof, be increased to
$275,000,000) and (ii) the various other agreements, instruments and other
documents referred to in the next following paragraph. All capitalized terms
used but not defined herein have the respective meanings given to such terms in
the Credit Agreement or, if not defined in the Credit Agreement, in Annex 1
hereto. This opinion letter is being delivered pursuant to Section 6.01(c) of
the Credit Agreement.
In rendering the opinions expressed below, we have examined the
following agreements, instruments and other documents:
(a) the Credit Agreement;
(b) any promissory notes being executed and delivered to the Lenders
on the date hereof (herein, the "Notes);
-----
(c) the Security Agreement;
(d) the Guarantee and Pledge Agreement;
(e) the Management Fee Subordination Agreement executed and delivered
by the Manager Entity;
(f) financing statements being executed and delivered pursuant to
Section 6.01 of the Credit Agreement concurrently with the delivery
of this opinion (collectively, the "Financing Statements"); and
--------------------
-2-
(g) such records of the Borrower and such other documents as we have
deemed necessary as a basis for the opinions expressed below.
The agreements, instruments and other documents referred to in the foregoing
lettered clauses (other than clauses (f) and (g) above) are collectively
referred to as the "Credit Documents"; the Borrower, Mediacom and the Manager
----------------
Entity are herein collectively referred to as the "Relevant Parties".
----------------
We have also examined originals, or copies certified to our
satisfaction, of such corporate records, certificates of public officials of
pertinent states, certificates of corporate officers of the Relevant Parties and
such other instruments or documents as we have deemed necessary as a basis for
the opinions hereinafter set forth. As to questions of fact, we have, to the
extent that such facts were not independently established by us, relied upon
such certificates and we have assumed that any such certificates or other
evidence which was given or dated earlier than the date of this letter has
remained accurate, as far as relevant to the opinions contained herein, from
such earlier date through and including the date of this letter. In rendering
the opinions hereinafter set forth as to factual matters, we have also relied
upon, and assumed the accuracy of, the representations and warranties made in
the Credit Documents by the Relevant Parties. Whenever any statement herein is
qualified by our knowledge, it is intended to indicate that, during the course
of our representation of the Relevant Parties no information that would give us
actual knowledge of the inaccuracy of such statement has come to the attention
of the attorneys presently in this firm and who are actively engaged in the
representation of the Relevant Parties.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity with authentic original documents of all documents submitted to us as
copies.
In rendering the opinions expressed below, we have assumed, with respect
to all of the documents referred to in this opinion letter, that (except, to the
extent set forth in the opinions expressed below, as to the Relevant Parties):
(i) such documents have been duly authorized by, have been duly
executed and delivered by, and constitute legal, valid, binding
and enforceable obligations of, all of the parties to such
documents;
(ii) all signatories to such documents have been duly authorized; and
(iii) all of the parties to such documents are duly organized and
validly existing and have the power and authority (corporate,
limited liability company, partnership or other) to execute,
deliver and perform such documents.
-3-
We have further assumed for purposes of paragraph 10 below, that the
Financing Statements will be filed in the appropriate office(s) no later than 10
days after the initial Loans under the Credit Agreement.
Based upon and subject to the foregoing and subject also to the comments
and qualifications set forth below, and having considered such questions of law
as we have deemed necessary as a basis for the opinions expressed below, we are
of the opinion that:
1. The Borrower is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Mediacom is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of New York. The Manager
Entity is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Delaware.
2. Each Relevant Party has all requisite power to execute and deliver,
and to perform its obligations under, the Credit Documents to which it is a
party. The Borrower has all requisite power to borrow under the Credit
Agreement.
3. The execution, delivery and performance by each Relevant Party of
each Credit Document to which it is a party, and the borrowings by the
Borrower under the Credit Agreement, have been duly authorized by all
necessary corporate or other action (as the case may be) on the part of
such Relevant Party.
4. Each Credit Document has been duly executed and delivered by each
Relevant Party party thereto.
5. Each of the Credit Documents constitutes the legal, valid and
binding obligation of each Relevant Party party thereto, enforceable
against such Relevant Party in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and except as the enforceability of the Credit
Documents is subject to the application of general principles of equity
(regardless of whether considered in a proceeding in equity or at law),
including, without limitation, (a) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy and (b)
concepts of materiality, reasonableness, good faith and fair dealing.
6. No authorization, approval or consent of, and no filing or
registration with, any governmental or regulatory authority or agency of
the United States of America or the State of New York is required on the
part of any Relevant Party for the execution, delivery or performance by
any Relevant Party of any of the Credit Documents or for the
-4-
borrowings by the Borrower under the Credit Agreement, except for (i)
filings and recordings in respect of the Liens created pursuant to the
Security Documents, (ii) the authorizations, approvals, consents, filings
and registrations contemplated by the Acquisition Agreements (each of which
has been made or obtained on or before the date hereof to the extent
required under the Acquisition Agreements to be obtained before the date
hereof) and (iii) the exercise of remedies under the Security Documents
(and the creation of a valid security interest in Franchises and the other
Collateral as described in Sections 6.01(f) and 8.18 of the Credit
Agreement) may require the prior approval of the FCC or the issuing
municipalities or States under one or more of the Franchises.
7. The execution, delivery and performance by each Relevant Party, and
the consummation by each Relevant Party of the transactions contemplated
by, the Credit Documents to which such Relevant Party is a party do not and
will not (a) violate any provision of the limited liability company
agreement, articles of organization, certificate of formation or the
charter or by-laws or other organizational instrument of any Relevant
Party, (b) violate any applicable law, rule or regulation, (c) violate any
order, writ, injunction or decree of any court or governmental authority or
agency or any arbitral award applicable to the Relevant Parties of which we
have knowledge (after due inquiry) or (d) result in a breach of, constitute
a default under, require any consent under, or result in the acceleration
or required prepayment of any indebtedness pursuant to the terms of, any
agreement or instrument of which we have knowledge to which any Relevant
Party is a party or by which any of them is bound or to which any of them
is subject, or (except for the Liens created pursuant to the Security
Documents) result in the creation or imposition of any Lien upon any
Property of any Relevant Party pursuant to, the terms of any such agreement
or instrument.
8. We have no knowledge of any legal or arbitral proceedings, or any
proceedings by or before any governmental or regulatory authority or
agency, pending or threatened against or affecting the Relevant Parties or
any of their respective Properties that, if adversely determined, could
have a Material Adverse Effect.
9. The Security Agreement and the Guarantee and Pledge Agreement
(collectively, the "Collateral Documents") are each effective to create, in
--------------------
favor of the Administrative Agent for the benefit of the Administrative
Agent and the Lenders, a valid security interest under the Uniform
Commercial Code as in effect in the State of New York (the "Uniform
-------
Commercial Code"), but only to the extent the Uniform Commercial Code is
---------------
applicable thereto, in all of the right, title and interest of each Obligor
in, to and under the Collateral (as defined in each Collateral Document)
owned by such Obligor as collateral security for the payment of the Secured
Obligations (as defined in each Collateral Document) of such Obligor,
except that (a) such security interest will continue in Collateral after
its sale, exchange or other disposition only to the extent provided in
Sections 9-306 and 9-307 of the Uniform Commercial Code, (b) the security
interest in
-5-
Collateral in which an Obligor acquires rights after the commencement of a
case under the Bankruptcy Code in respect of such Obligor may be limited by
Section 552 of the Bankruptcy Code, and (c) the creation of a security
interest in any portion of the Collateral constituting a right to receive
proceeds of a letter of credit requires that the action contemplated by
paragraph 10(a) below.
10. The security interests referred to in paragraph 9 above in the
types of Collateral described below will be perfected as described below:
(a) such security interest in that portion of the Collateral
consisting of an Instrument, a letter of credit or a Certificated
Security represented by a Security Certificate in bearer form or in
registered form Indorsed to the Administrative Agent or in blank by an
effective Indorsement or registered in the name of the Administrative
Agent will, upon the creation of such security interest, be perfected by
the Administrative Agent taking possession in the State of New York of
such Instrument, letter of credit or Security Certificate, and such
perfected security interest will remain perfected thereafter so long as
such Instrument, letter of credit or Security Certificate is retained by
the Administrative Agent in its possession in the State of New York; and
(b) such security interest in that portion of the Collateral
consisting of an ownership interest in a limited liability company will,
upon the creation of such security interest, to the extent constituting
a General Intangible, be perfected by filing the Financing Statements in
the appropriate filing offices.
The foregoing opinions are subject to the following comments and
qualifications:
(A) The enforceability of Section 11.03 of the Credit Agreement (and
any similar provisions in any of the other Credit Documents) may be limited by
(i) laws rendering unenforceable indemnification contrary to Federal or state
securities laws and the public policy underlying such laws and (ii) laws
limiting the enforceability of provisions exculpating or exempting a party, or
requiring indemnification of a party for, liability for its own action or
inaction, to the extent the action or inaction involves gross negligence,
recklessness, willful misconduct or unlawful conduct.
(B) The enforceability of provisions in the Credit Documents to the
effect that terms may not be waived or modified except in writing may be limited
under certain circumstances.
(C) Clause (iii) of the second sentence of Section 2.02 of the
Guarantee and Pledge Agreement (and any similar provisions in any of the other
Credit Documents)
-6-
may not be enforceable to the extent that the Guaranteed Obligations under and
as defined therein are materially modified.
(D) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Lender is located (other than the State of New York)
that limit the interest, fees or other charges such Lender may impose, (ii)
Section 4.07(c) of the Credit Agreement, (iii) the second sentence of Section
11.10 of the Credit Agreement (and any similar provisions in any of the other
Credit Documents), insofar as such sentence relates to the subject matter
jurisdiction of the United States District Court for the Southern District of
New York to adjudicate any controversy related to any of the Credit Documents
and (iv) the applicability to the obligations of the Subsidiary Guarantors (or
the enforceability of such obligations) of Section 548 of the Bankruptcy Code,
Article 10 of the New York Debtor Creditor Law, or any provision of law relating
to fraudulent conveyances, transfers or obligations.
(E) We wish to point out that the obligations of the Obligors, and the
rights and remedies of the Administrative Agent and the Lenders, under the
Collateral Documents may be subject to possible limitations upon the exercise of
remedial or procedural provisions contained in the Collateral Documents,
provided that such limitations do not, in our opinion (but subject to the other
comments and qualifications set forth in this opinion letter), make the remedies
and procedures that will be afforded to the Administrative Agent and the Lenders
inadequate for the practical realization of the substantive benefits purported
to be provided to the Administrative Agent and the Lenders by the Collateral
Documents.
(F) With respect to our opinion in paragraphs 9 or 10 above, (i) we
express no opinion as to the creation, perfection or priority of any security
interest in (or other lien on) any portion of the Collateral (x) to the extent
that, pursuant to Section 9-104 of the Uniform Commercial Code, Article 9 of the
Uniform Commercial Code does not apply thereto or (y) consisting of goods that
are or will be commingled with or processed into other goods or are or will
become accessions to other goods; (ii) we express no opinion as to the
perfection or priority of any security interest in (or other lien on) Collateral
(as defined in the Security Agreement) consisting of fixtures, consumer goods,
timber to be cut, minerals or the like (including oil and gas), accounts arising
from the sale of minerals or the like (including oil and gas), equipment used in
farming operations, farm products, accounts or general intangibles arising from
or relating to the sale of farm products by a farmer or consumer goods or in
Collateral covered by a certificate of title; and (iii) we have assumed that
each Indorsement referred to therein is effective in accordance with Section 8-
107 of the Uniform Commercial Code.
(G) We wish to point out that the acquisition by an Obligor after the
initial Loan under the Credit Agreement of an interest in Property that becomes
subject to the Lien of
any Collateral Document may constitute a voidable preference under Section
547 of the Bankruptcy Code.
(H) We express no opinion as to the existence of, or the right, title
or interest of the Obligors in, to or under, any of the Collateral (as
defined in each Collateral Document).
(I) Except as expressly provided in paragraphs 9 and 10 above, we
express no opinion as to the creation, perfection or priority of any
security interest in, or other Lien on, the Collateral (as defined in each
Collateral Document).
We express no opinion (a) as to the, and the effect of, compliance or
non-compliance by the Lenders or the Administrative Agent with any law, rule or
regulation applicable because of the legal or regulatory status or the specific
nature of the business of such Lender or Administrative Agent and (b) regarding
any law, rule or regulation to which any of the Relevant Parties may be subject,
or any approval which any of the Relevant Parties may be required to obtain,
because of the legal or regulatory status of the Lenders or the Administrative
Agent or because of any facts specifically pertaining to the Lenders or the
Administrative Agent.
Our opinions are limited to the specific issues addressed and are
limited in all respects to laws and facts existing on the date hereof. By
rendering our opinions, we do not undertake to advise you of any changes in such
laws or facts which may occur after the date hereof.
The foregoing opinions are limited to matters involving the Federal laws
of the United States, the Delaware General Corporation Law, the Delaware Limited
Liability Company Act and the law of the State of New York, and we do not
express any opinion as to the laws of any other jurisdiction (nor do we express
any opinion as to the applicability to, or the effect upon, the transactions
contemplated by the Credit Documents of the Federal Communications Act of 1934,
as amended, and the rules and regulations promulgated thereunder or the policies
of the FCC).
At the request of our clients, this opinion letter is, pursuant to
Section 6.01(c) of the Credit Agreement, provided to you by us in our capacity
as counsel to the Relevant Parties and may not be relied upon by any Person for
any purpose other than in connection with the transactions contemplated by the
Credit Agreement without, in each instance, our prior written consent.
Very truly yours,
Annex 1
DEFINED TERMS
"bearer form", when used with respect to a Certificated Security, means
-----------
a form in which the Security is payable to the bearer of the Security
Certificate according to its terms but not by reason of an Indorsement.
"Certificated Security" means a Security that is represented by a
---------------------
certificate.
"General Intangibles" has the meaning given to such term in Section 9-
-------------------
106 of the Uniform Commercial Code.
"Indorsement" has the meaning given to such term in Section 8-102(a)(11)
-----------
of the Uniform Commercial Code. The term "Indorsed" has a correlative meaning.
--------
"Instrument" has the meaning given to such term in Section 9-105 of the
----------
Uniform Commercial Code.
"registered form", when used with respect to a Certificated Security,
---------------
means a form in which: (a) the Security Certificate specifies a Person entitled
to the Security; and (b) a transfer of the Security may be registered upon books
maintained for that purpose by or on behalf of the issuer of such Security, or
the Security Certificate so states.
"Security Certificate" means a certificate representing a Security.
--------------------
"Security", except as otherwise provided in Section 8-103 of the Uniform
--------
Commercial Code, means an obligation of an issuer or a share, participation or
other interest in an issuer or in property or an enterprise of an issuer: (a)
which is represented by a Security Certificate in bearer or registered form, or
the transfer of which may be registered upon books maintained for that purpose
by or on behalf of the issuer; (b) which is one of a class or series or by its
terms is divisible into a class or series of shares, participations, interests
or obligations; and (c) which either (i) is, or is of a type, dealt in or traded
on securities exchanges or securities markets; or (ii) is a medium for
investment and by its terms expressly provides that it is a security governed by
Article 8 of the Uniform Commercial Code.
EXHIBIT H
[Form of Opinion of Special New York Counsel to Chase]
_______, 1997
To the Lenders party to the
Credit Agreement referred to
below and The Chase Manhattan
Bank, as Administrative Agent
Ladies and Gentlemen:
We have acted as special New York counsel to The Chase Manhattan Bank
("Chase") in connection with (i) the Credit Agreement dated as of January 23,
-----
1998 (the "Credit Agreement") between Mediacom Southeast LLC (the "Borrower"),
---------------- --------
the lenders party thereto, and Chase, as Administrative Agent, providing for
extensions of credit in an aggregate principal or face amount not exceeding
$225,000,000 (which amount may, in accordance with the provisions thereof, be
increased to $275,000,000) and (ii) the various other agreements, instruments
and other documents referred to in the next following paragraph. All
capitalized terms used but not defined herein have the respective meanings given
to such terms in the Credit Agreement or, if not defined in the Credit
Agreement, in Annex 1 hereto. This opinion letter is being delivered pursuant
to Section 6.01(d) of the Credit Agreement.
In rendering the opinions expressed below, we have examined the
following agreements, instruments and other documents:
(a) the Credit Agreement;
(b) any promissory notes being executed and delivered to the Lenders
on the date hereof (herein, the "Notes);
-----
(c) the Security Agreement;
(d) the Guarantee and Pledge Agreement; and
(e) the Management Fee Subordination Agreement executed and delivered
by Mediacom Management Corporation (the "Manager Entity").
--------------
The agreements, instruments and other documents referred to in the foregoing
lettered clauses are collectively referred to as the "Credit Documents"; the
----------------
Borrower, the Parent Guarantor and the Manager Entity are herein collectively
referred to as the "Relevant Parties".
----------------
-2-
In our examination, we have assumed the authenticity of all documents
submitted to us as originals and the conformity with authentic original
documents of all documents submitted to us as copies. When relevant facts were
not independently established, we have relied upon representations made in or
pursuant to the Credit Documents.
In rendering the opinions expressed below, we have assumed, with
respect to the Credit Documents, that:
(i) the Credit Documents have been duly authorized by, have been duly
executed and delivered by, and (except to the extent set forth in
the opinions below as to the Relevant Parties) constitute legal,
valid, binding and enforceable obligations of, all of the parties
thereto;
(ii) all signatories to the Credit Documents have been duly
authorized; and
(iii) all of the parties to the Credit Documents are duly organized
and validly existing and have the power and authority (corporate,
limited liability company, partnership or other) to execute,
deliver and perform the Credit Documents.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. Each of the Credit Documents constitutes the legal, valid and
binding obligation of each Relevant Party party thereto, enforceable
against such Relevant Party in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or transfer or other similar laws relating to or affecting the
rights of creditors generally and except as the enforceability of the
Credit Documents is subject to the application of general principles of
equity (regardless of whether considered in a proceeding in equity or at
law), including, without limitation, (a) the possible unavailability of
specific performance, injunctive relief or any other equitable remedy and
(b) concepts of materiality, reasonableness, good faith and fair dealing.
2. The Security Agreement and the Guarantee and Pledge Agreement
(collectively, the "Collateral Documents") are each effective to create, in
--------------------
favor of the Administrative Agent for the benefit of the Administrative
Agent and the Lenders, a valid security interest under the Uniform
Commercial Code as in effect in the State of New York (the "Uniform
-------
Commercial Code") in all of the right, title and interest of each Obligor
---------------
in, to and under the Collateral (as defined in each Collateral Document) as
collateral security for the payment of the Secured Obligations (as defined
in each
-3-
Collateral Document) of such Obligor, except that (a) such security
interest will continue in Collateral after its sale, exchange or other
disposition only to the extent provided in Sections 9-306 and 9-307 of the
Uniform Commercial Code, (b) the security interest in Collateral in which
an Obligor acquires rights after the commencement of a case under the
Bankruptcy Code in respect of such Obligor may be limited by Section 552 of
the Bankruptcy Code, and (c) the creation of a security interest in any
portion of the Collateral constituting a right to receive proceeds of a
letter of credit requires that the action contemplated by paragraph 3
below.
3. The security interest referred to in paragraph 2 above in that
portion of the Collateral consisting of an Instrument, a letter of credit
or a Certificated Security represented by a Security Certificate in bearer
form or in registered form Indorsed to the Administrative Agent or in blank
by an effective Indorsement or registered in the name of the Administrative
Agent will, upon the creation of such security interest, be perfected by
the Administrative Agent taking possession in the State of New York of such
Instrument, letter of credit or Security Certificate, and such perfected
security interest will remain perfected thereafter so long as such
Instrument, letter of credit or Security Certificate is retained by the
Administrative Agent in its possession in the State of New York; and
The foregoing opinions are subject to the following comments and
qualifications:
(A) The enforceability of Section 11.03 of the Credit Agreement (and
any similar provisions in any of the other Credit Documents) may be limited
by (i) laws rendering unenforceable indemnification contrary to Federal or
state securities laws and the public policy underlying such laws and (ii)
laws limiting the enforceability of provisions exculpating or exempting a
party, or requiring indemnification of a party for, liability for its own
action or inaction, to the extent the action or inaction involves gross
negligence, recklessness, willful misconduct or unlawful conduct.
(B) The enforceability of provisions in the Credit Documents to the
effect that terms may not be waived or modified except in writing may be
limited under certain circumstances.
(C) Clause (iii) of the second sentence of Section 2.02 of the
Guarantee and Pledge Agreement may not be enforceable to the extent that
the Guaranteed Obligations under and as defined therein are materially
modified.
(D) We express no opinion as to (i) the effect of the laws of any
jurisdiction in which any Lender is located (other than the State of New
York) that limit the interest, fees or other charges such Lender may
impose, (ii) Section 4.07(c) of the Credit Agreement and (iii) the second
sentence of Section 11.10 of the Credit Agreement (and any similar
provisions in any of the other Credit Documents), insofar as such sentence
-4-
relates to the subject matter jurisdiction of the United States District
Court for the Southern District of New York to adjudicate any controversy
related to any of the Credit Documents.
(E) We wish to point out that the obligations of the Obligors, and the
rights and remedies of the Administrative Agent and the Lenders, under the
Collateral Documents may be subject to possible limitations upon the
exercise of remedial or procedural provisions contained in the Collateral
Documents, provided that such limitations do not, in our opinion (but
subject to the other comments and qualifications set forth in this opinion
letter), make the remedies and procedures that will be afforded to the
Administrative Agent and the Lenders inadequate for the practical
realization of the substantive benefits purported to be provided to the
Administrative Agent and the Lenders by the Collateral Documents.
(F) With respect to our opinion in paragraphs 2 and 3 above, (i) we
express no opinion as to the creation, perfection or priority of any
security interest in (or other lien on) any portion of the Collateral (x)
to the extent that, pursuant to Section 9-104 of the Uniform Commercial
Code, Article 9 of the Uniform Commercial Code does not apply thereto or
(y) consisting of goods that are or will be commingled with or processed
into other goods or are or will become accessions to other goods and (ii)
we have assumed that each Indorsement referred to therein is effective in
accordance with Section 8-107 of the Uniform Commercial Code.
(G) We wish to point out that the acquisition by an Obligor after the
initial Loan under the Credit Agreement of an interest in Property that
becomes subject to the Lien of any Collateral Document may constitute a
voidable preference under Section 547 of the Bankruptcy Code.
(H) We express no opinion as to the existence of, or the right, title
or interest of the Obligors in, to or under, any of the Collateral (as
defined in each Collateral Document).
(I) Except as expressly provided in paragraphs 2 and 3 above, we
express no opinion as to the creation, perfection or priority of any
security interest in, or other Lien on, the Collateral (as defined in each
Collateral Document).
The foregoing opinions are limited to matters involving the Federal laws
of the United States and the law of the State of New York, and we do not express
any opinion as to the laws of any other jurisdiction (nor do we express any
opinion as to the applicability to, or the effect upon, the transactions
contemplated by the Credit Documents of the Federal Communications Act of 1934,
as amended, the rules and regulations promulgated thereunder or the policies of
the FCC).
-5-
At the request of our client, this opinion letter is, pursuant to
Section 6.01(d) of the Credit Agreement, provided to you by us in our capacity
as special New York counsel to Chase and may not be relied upon by any Person
for any purpose other than in connection with the transactions contemplated by
the Credit Agreement without, in each instance, our prior written consent.
Very truly yours,
RJW/CDP
Annex 1
DEFINED TERMS
"bearer form", when used with respect to a Certificated Security, means
-----------
a form in which the Security is payable to the bearer of the Security
Certificate according to its terms but not by reason of an Indorsement.
"Certificated Security" means a Security that is represented by a
---------------------
certificate.
"General Intangibles" has the meaning given to such term in Section 9-
-------------------
106 of the Uniform Commercial Code.
"Indorsement" has the meaning given to such term in Section 8-102(a)(11)
-----------
of the Uniform Commercial Code. The term "Indorsed" has a correlative meaning.
--------
"Instrument" has the meaning given to such term in Section 9-105 of the
----------
Uniform Commercial Code.
"registered form", when used with respect to a Certificated Security,
---------------
means a form in which: (a) the Security Certificate specifies a Person entitled
to the Security; and (b) a transfer of the Security may be registered upon books
maintained for that purpose by or on behalf of the issuer of such Security, or
the Security Certificate so states.
"Security Certificate" means a certificate representing a Security.
--------------------
"Security", except as otherwise provided in Section 8-103 of the Uniform
--------
Commercial Code, means an obligation of an issuer or a share, participation or
other interest in an issuer or in property or an enterprise of an issuer: (a)
which is represented by a Security Certificate in bearer or registered form, or
the transfer of which may be registered upon books maintained for that purpose
by or on behalf of the issuer; (b) which is one of a class or series or by its
terms is divisible into a class or series of shares, participations, interests
or obligations; and (c) which either (i) is, or is of a type, dealt in or traded
on securities exchanges or securities markets; or (ii) is a medium for
investment and by its terms expressly provides that it is a security governed by
Article 8 of the Uniform Commercial Code.
EXHIBIT I
[Form of Confidentiality Agreement]
CONFIDENTIALITY AGREEMENT
[Date]
[Insert Name and
Address of Prospective
Participant or Assignee]
Re: Credit Agreement dated as of January 23, 1998 (the "Credit
------
Agreement"), between Mediacom Southeast LLC (the "Borrower"), the
--------- --------
lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent
Dear Ladies and Gentlemen:
As a Lender party to the Credit Agreement, we have agreed with the
Borrower pursuant to Section 11.12 of the Credit Agreement to use reasonable
precautions to keep confidential, except as otherwise provided therein, all non-
public information identified by the Borrower as being confidential at the time
the same is delivered to us pursuant to the Credit Agreement.
As provided in said Section 11.12, we are permitted to provide you, as a
prospective [holder of a participation in the Loans (as defined in the Credit
Agreement)] [assignee Lender], with certain of such non-public information
subject to the execution and delivery by you, prior to receiving such non-public
information, of a Confidentiality Agreement in this form. Such information will
not be made available to you until your execution and return to us of this
Confidentiality Agreement.
Accordingly, in consideration of the foregoing, you agree (on behalf of
yourself and each of your affiliates, directors, officers, employees and
representatives and for the benefit of us and the Borrower) that (A) such
information will not be used by you except in connection with the proposed
[participation] [assignment] mentioned above and (B) you shall use reasonable
precautions, in accordance with your customary procedures for handling
confidential information and in accordance with safe and sound banking
practices, to keep such information confidential, provided that nothing herein
--------
shall limit the disclosure of any such information (i) after such information
shall have become public (other than through a violation of Section 11.12 of the
Credit Agreement), (ii) to the extent required by statute, rule, regulation or
judicial process, (iii) to your counsel or to counsel for any of the Lenders or
the Administrative Agent, (iv) to
-2-
bank examiners (or any other regulatory authority having jurisdiction over any
Lender or the Administrative Agent), or to auditors or accountants, (v) to the
Administrative Agent or any other Lender (or to Chase Securities Inc.), (vi) in
connection with any litigation to which you or any one or more of the Lenders or
the Administrative Agent are a party, or in connection with the enforcement of
rights or remedies under the Credit Agreement or under any other Loan Document,
(vii) to a subsidiary or affiliate of yours as provided in Section 11.12(a) of
the Credit Agreement or (viii) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective
assignee or participant) first executes and delivers to you a Confidentiality
Agreement substantially in the form hereof; provided, further, that in no event
-------- -------
shall you be obligated to return any materials furnished to you pursuant to this
Confidentiality Agreement.
If you are a prospective assignee, your obligations under this
Confidentiality Agreement shall be superseded by Section 11.12 of the Credit
Agreement on the date upon which you become a Lender under the Credit Agreement
pursuant to Section 11.06(b) thereof.
Please indicate your agreement to the foregoing by signing as provided
below the enclosed copy of this Confidentiality Agreement and returning the same
to us.
Very truly yours,
[INSERT NAME OF LENDER]
By
---------------------------
The foregoing is agreed to
as of the date of this letter.
[INSERT NAME OF PROSPECTIVE
PARTICIPANT OR ASSIGNEE]
By ]
-------------------------
EXHIBIT J
[Form of Affiliate Subordinated Indebtedness Subordination Agreement]
AFFILIATE SUBORDINATED INDEBTEDNESS SUBORDINATION AGREEMENT
AFFILIATE SUBORDINATED INDEBTEDNESS SUBORDINATION AGREEMENT dated as of
__________ __, ____, between:
(i) [NAME OF AFFILIATE], a ____________ duly organized and validly
existing under the laws of the State of ___________ (the "Subordinated
------------
Lender");
------
(ii) MEDIACOM SOUTHEAST LLC, a limited liability company duly
organized and validly existing under the laws of the State of Delaware (the
"Borrower"); and
--------
(iii) THE CHASE MANHATTAN BANK, a New York banking corporation, as
administrative agent for the lenders or other financial institutions or
entities party, as lenders, to the Credit Agreement referred to below (in
such capacity, together with its successors in such capacity, the
"Administrative Agent").
---------------------
The Borrower, certain lenders and the Administrative Agent are parties
to a Credit Agreement dated as of January 23, 1998 (as modified and supplemented
and in effect from time to time, the "Credit Agreement"), providing, subject to
----------------
the terms and conditions thereof, for extensions of credit (by the making of
loans and the issuance of letters of credit) to be made by said lenders to the
Borrower in an aggregate principal or face amount not exceeding $225,000,000
(which amount may, in accordance with the provisions thereof, be increased to
$275,000,000). In addition, the Borrower may from time to time be obligated to
various of said lenders in respect of Interest Rate Protection Agreements
permitted under Section 8.08(e) of the Credit Agreement (such indebtedness being
herein referred to as the "Hedging Indebtedness").
--------------------
To induce said lenders to extend credit under the Credit Agreement and
to extend credit to the Borrower that would constitute Hedging Indebtedness, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Subordinated Lender has agreed to subordinate the
Subordinated Debt (as hereinafter defined) to the Senior Debt (as so defined)
all in the manner and to the extent hereinafter provided. Accordingly, the
parties hereto agree as follows:
Section 1. Definitions. Terms defined in the Credit Agreement are used
-----------
herein as defined therein. In addition, as used herein:
-2-
"Obligor Entity" shall mean, collectively, the Borrower and, effective
--------------
upon execution and delivery of any Subsidiary Guarantee Agreement, any
Subsidiary of the Borrower so executing and delivering such Subsidiary Guarantee
Agreement.
"Senior Debt" shall mean, collectively, the following indebtedness and
-----------
obligations:
(a) all indebtedness or other obligations of the Borrower under the
Credit Agreement and the other Loan Documents, including all interest,
expenses, indemnities and penalties and all commitment and agency fees
payable from time to time under the Credit Agreement and the other Loan
Documents;
(b) all Hedging Indebtedness;
(c) all obligations of any Subsidiary of the Borrower in respect of any
Subsidiary Guarantee Agreement executed and delivered by such Subsidiary;
and
(d) any deferrals, renewals, extensions or refinancings of any of the
foregoing.
The term "Senior Debt" shall include any interest, and any expenses of the type
described in Section 11.03 of the Credit Agreement (or comparable provisions of
any other Loan Document), accruing or arising after the date of any filing by
any Obligor Entity of any petition in bankruptcy or the commencing of any
bankruptcy, insolvency or similar proceedings with respect to any Obligor
Entity, whether or not such interest or expenses are allowable as a claim in any
such proceeding.
"Subordinated Debt" shall mean all indebtedness, liabilities, and
-----------------
obligations of each Borrower to the Subordinated Lender whether now existing or
hereafter arising in respect of Affiliate Subordinated Indebtedness incurred in
accordance with Section 8.14 of the Credit Agreement.
Section 2. Subordination.
-------------
2.01 Subordination of Subordinated Debt. The Borrower, for itself and
----------------------------------
its successors and assigns, covenants and agrees, and the Subordinated Lender,
on its own behalf and on behalf of each subsequent holder of Subordinated Debt,
likewise covenants and agrees, that, to the extent and in the manner set forth
in this Agreement, the Subordinated Debt, and the payment from whatever source
of the principal of, and interest and premium (if any) on, the Subordinated
Debt, are hereby expressly made subordinate and subject in right of payment to
the prior payment in full in cash of all Senior Debt.
-3-
2.02 Payment of Proceeds Upon Dissolution. In the event of (a) any
------------------------------------
insolvency or bankruptcy case or proceeding, or any receivership, liquidation,
reorganization or other similar case or proceeding in connection therewith,
relative to any Obligor Entity or to its creditors, as such, or to its assets,
or (b) any liquidation, dissolution or other winding up of any Obligor Entity,
whether voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or any other
marshalling of assets and liabilities of any Obligor Entity, then and in any
such event:
(1) the Lenders shall be entitled to receive payment in full in cash of
all amounts due or to become due on or in respect of all Senior Debt, or
provision shall be made for such payment, before the Subordinated Lender
shall be entitled to receive any payment on account of principal of, or
interest or premium (if any) on, the Subordinated Debt;
(2) any payment or distribution of assets of any Obligor Entity of any
kind or character, whether in cash, property or securities, by set-off or
otherwise, to which the Subordinated Lender would be entitled but for the
provisions of this Agreement, including any such payment or distribution
that may be payable or deliverable by reason of the payment of any other
indebtedness of any Obligor Entity being subordinated to the payment of the
Subordinated Debt, shall be paid by the liquidating trustee or agent or
other Person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to the
Administrative Agent, to be paid to the Lenders, ratably according to the
aggregate amounts remaining unpaid on account of the principal of, and
interest and premium (if any) on, the Senior Debt held or represented by
each Lender, to the extent necessary to make payment in full in cash of all
Senior Debt remaining unpaid, after giving effect to any concurrent payment
or distribution to the Lenders;
(3) in the event that, notwithstanding the foregoing provisions of this
Section 2.02, the Subordinated Lender shall have received, before all
Senior Debt is paid in full in cash or payment thereof provided for, any
such payment or distribution of assets of any Obligor Entity of any kind or
character, whether in cash, property or securities, including any such
payment or distribution arising out of the exercise by the Subordinated
Lender of a right of set-off or counterclaim and any such payment or
distribution received by reason of any other indebtedness of any Obligor
Entity being subordinated to the Subordinated Debt, then, and in such
event, such payment or distribution shall be held in trust for the benefit
of, and shall be immediately paid over or delivered to, the Administrative
Agent, to be paid to the Lenders, ratably according to the aggregate
amounts remaining unpaid on account of the principal of, and interest and
premium (if any) on, the Senior Debt held or represented by each Lender, to
the extent necessary to make payment in full in cash of all Senior Debt
remaining unpaid, after giving effect to any concurrent payment or
distribution to the Lenders; and
-4-
(4) if the Subordinated Lender shall have failed to file claims or
proofs of claim with respect to the Subordinated Debt earlier than 30 days
prior to the deadline for any such filing, the Subordinated Lender shall
execute and deliver to the Administrative Agent such powers of attorney,
assignments or other instruments as the Administrative Agent may reasonably
request to file such claims or proofs of claim.
2.03 Certain Payments Permitted. Notwithstanding the foregoing, the
--------------------------
Subordinated Lender shall be entitled to receive and retain any payment in
respect of Affiliate Subordinated Indebtedness either (i) permitted under
Sections 8.09(c) or (e) of the Credit Agreement or (ii) made after all Senior
Debt shall have been paid in full and the Commitments of the Lenders under the
Credit Agreement shall have expired or been terminated.
2.04 Subrogation. Subject to the payment in full in cash of all Senior
-----------
Debt, the Subordinated Lender shall be subrogated (equally and ratably with the
holders of all indebtedness of the Obligor Entities that by its express terms is
subordinated to Senior Debt of the Obligor Entities to the same extent as the
Subordinated Debt is subordinated and that is entitled to like rights of
subrogation) to the rights of the Lenders to receive payments and distributions
of cash, property and securities applicable to the Senior Debt until the
principal of, and interest and premium (if any) on, the Subordinated Debt shall
be paid in full in cash. For purposes of such subrogation, no payments or
distributions to the Lenders of any cash, property or securities to which the
Subordinated Lender would be entitled except for the provisions of this Section
2, and no payments over pursuant to the provisions of this Section 2 to the
Lenders by the Subordinated Lender, shall, as between the Subordinated Lender,
its creditors other than the Lenders, and the Subordinated Lender, be deemed to
be a payment or distribution by the Subordinated Lender to or on account of the
Senior Debt.
2.05 Provisions Solely to Define Relative Rights. The provisions of
-------------------------------------------
this Section 2 are and are intended solely for the purpose of defining the
relative rights of the Subordinated Lender on the one hand and the Lenders on
the other hand. Nothing contained in this Section 2 or elsewhere in this
Agreement is intended to or shall:
(a) impair, as among the Obligor Entities, their creditors other than
the Lenders and the Subordinated Lender, the obligation of the Obligor
Entities to pay to the Subordinated Lender the principal and of and
interest on the Subordinated Debt as and when the same shall become due and
payable in accordance with its terms; or
(b) affect the relative rights against the Obligor Entities of the
Subordinated Lender and creditors of the Obligor Entities other than the
Lenders.
2.06 No Waiver of Subordination Provisions. No right of the
-------------------------------------
Administrative Agent or any Lender to enforce subordination as herein provided
shall at any time in any way be
-5-
prejudiced or impaired by any act or failure to act on the part of the Obligor
Entities or by any act or failure to act, in good faith, by the Administrative
Agent or any Lender, or by any non-compliance by any Obligor Entity with the
terms, provisions and covenants of this Agreement, regardless of any knowledge
thereof the Administrative Agent or any Lender may have or be otherwise charged
with.
Without in any way limiting the generality of the foregoing paragraph,
the Lenders may, at any time and from time to time, without the consent of or
notice to the Subordinated Lender, without incurring responsibility to the
Subordinated Lender and without impairing or releasing the subordination
provided in this Section 2 or the obligations hereunder of the Subordinated
Lender to the holders of Senior Debt, do any one or more of the following: (a)
change the time, manner or place of payment of Senior Debt, or otherwise modify
or supplement in any respect any of the provisions of the Credit Agreement or
any other instrument evidencing or relating to any of the Senior Debt; (b) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (c) release any Person liable in any manner for
the collection of Senior Debt; and (d) exercise or refrain from exercising any
rights against the Obligor Entities and any other Person.
Section 3. Representations and Warranties. The Subordinated Lender
------------------------------
represents and warrants to the Administrative Agent and each Lender that:
3.01 Existence. The Subordinated Lender is a _____________ duly
---------
organized and validly existing under the laws of the State of ___________.
3.02 No Breach. None of the execution and delivery of this Agreement,
---------
the consummation of the transactions herein contemplated or compliance with the
terms and provisions hereof will conflict with or result in a breach of, or
require any consent under, the charter or by-laws or other organizational
instrument of the Subordinated Lender, any applicable law or regulation, or any
order, writ, injunction or decree of any court or governmental authority or
agency, or any agreement or instrument to which the Subordinated Lender is a
party or by which the Subordinated Lender is bound or to which the Subordinated
Lender is subject, or constitute a default under any such agreement or
instrument, or result in the creation or imposition of any Lien upon any of the
revenues or assets of the Subordinated Lender pursuant to the terms of any such
agreement or instrument.
3.03 Action. The Subordinated Lender has all necessary corporate or
------
other power, authority and legal right to execute, deliver and perform its
obligations under this Agreement; the execution, delivery and performance by the
Subordinated Lender of this Agreement have been duly authorized by all necessary
corporate or other action on its part; and this Agreement has been duly and
validly executed and delivered by the Subordinated Lender and constitutes the
legal, valid and binding obligation of the Subordinated Lender, enforceable in
-6-
accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.04 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency are necessary for the execution, delivery or performance by the
Subordinated Lender of this Agreement or for the validity or enforceability
hereof.
Section 4. Miscellaneous.
-------------
4.01 No Waiver. No failure on the part of the Administrative Agent or
---------
any Lender to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Administrative Agent or
any Lender of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided by
law.
4.02 Notices. All notices, requests, consents and demands hereunder
-------
shall be in writing and telecopied or delivered to the intended recipient at the
"Address for Notices" specified beneath its name on the signature pages hereof
or, as to either party, at such other address as shall be designated by such
party in a notice to the other party. Except as otherwise provided in this
Agreement, all such communications shall be deemed to have been duly given when
transmitted by telecopier or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
4.03 Amendments, Etc. The terms of this Agreement may be waived,
---------------
altered or amended only by an instrument in writing duly executed by the
Subordinated Lender and (as to the Administrative Agent and the Lenders) by the
Administrative Agent with the consent of the Lenders as specified in Section
10.09 of the Credit Agreement. Any such amendment or waiver shall be binding
upon the Administrative Agent and each Lender (and each other holder of Senior
Debt) and the Subordinated Lender.
4.04 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the respective successors and assigns of the
Subordinated Lender and the Administrative Agent and each Lender (and each other
holder of Senior Debt).
4.05 Captions. The captions and section headings appearing herein are
--------
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
-7-
4.06 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties hereto may execute this Agreement by
signing any such counterpart.
4.07 Governing Law; Submission to Jurisdiction. This Agreement shall be
-----------------------------------------
governed by, and construed in accordance with, the law of the State of New York.
The Subordinated Lender hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of the
Supreme Court of the State of New York sitting in New York County (including its
Appellate Division), and of any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Subordinated Lender
hereby irrevocably waives, to the fullest extent permitted by applicable law,
any objection that it may now or hereafter have to the laying of the venue of
any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
4.08 Waiver of Jury Trial. EACH OF THE SUBORDINATED LENDER AND THE
--------------------
ADMINISTRATIVE AGENT (FOR ITSELF AND ON BEHALF OF THE LENDERS) HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
-8-
IN WITNESS WHEREOF, the parties hereto have caused this Second Amended
and Restated Management Fee Subordination Agreement to be duly executed and
delivered as of the day and year first above written.
[NAME OF AFFILIATE]
By
--------------------------
Title:
Address for Notices:
MEDIACOM SOUTHEAST LLC
By MEDIACOM LLC, a Member
By
--------------------------
Title:
Address for Notices:
Mediacom Southeast LLC
c/o Mediacom LLC
100 Crystal Road
Middletown, New York 10941
Attention: Rocco B. Commisso
Telecopier No.: (914) 695-2699
Telephone No.: (914) 696-2600
-9-
THE CHASE MANHATTAN BANK,
as Administrative Agent
By
--------------------------
Title:
Address for Notices:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attention: Ann B. Kerns
Vice President
Telecopier No.: (212) 270-9320
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated April 4, 1998 on the consolidated financial statements of Mediacom LLC and
subsidiaries for the year ended December 31, 1997 and for the period from
commencement of operations (March 12, 1996) to December 31, 1996 and the
statement of operations and cash flows for the period January 1, 1996 through
March 11, 1996 and the financial statement of Mediacom Capital Corporation as of
March 31, 1998 (and to all references to our Firm) included in or made part of
this Form S-4.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
New York, New York
August 7, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the registration statement of Mediacom LLC and
Mediacom Capital Corporation on Form S-4 of our report dated February 28, 1996,
except Note 3, as to which the date is March 12, 1996, on our audit of the
statements of operations and cash flows of Benchmark Acquisition Fund II Limited
Partnership. We also consent to the reference to our firm under the caption
"Experts."
/s/ Keller Bruner & Company, L.L.C.
Bethesda, Maryland
August 6, 1998
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
The Board of Directors
U.S. Cable Television Group, L.P.
We consent to the inclusion of our report dated March 20, 1998, on the
consolidated balance sheets of U.S. Cable Television Group, L.P. and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations and partners capital (deficiency) and cash flows for
the year ended December 31, 1997, and for the periods from January 1, 1996 to
August 12, 1996, and August 13, 1996 to December 31, 1996, in the registration
statement on Amendment No. 1 to Form S-4 of Mediacom LLC and Mediacom Capital
Corporation. We also consent to the inclusion of our report dated April 1, 1997,
except as to Note 11 which is as of January 23, 1998, on the consolidated
balance sheets of U.S. Cable Television Group, L.P. and subsidiaries as of
December 31, 1996 and 1995 and the related consolidated statements of operations
and partners capital (deficiency) and cash flows for the periods from January 1,
1996 to August 12, 1996, and August 13, 1996 to December 31, 1996, and for the
years ended December 31, 1995 and 1994, in the registration statement on
Amendment No. 1 to Form S-4 of Mediacom LLC and Mediacom Capital Corporation and
to the reference to our firm under the heading "Experts" in the prospectus and
the registration statement. Such reports include an explanatory paragraph
related to a change in cost basis of the consolidated financial information as a
result of a redemption of certain limited and general partnership interests
effective August 13, 1996.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Jericho, New York
August 10, 1998
EXHIBIT 23.4
Consent of Independent Auditors
-------------------------------
The Partners
American Cable TV Investors 5, Ltd.:
We consent to the incorporation by reference in the Registration Statement (No.
333-57285), as amended, being filed by Mediacom LLC and Mediacom Capital
Corporation, of our report, dated April 30, 1998, relating to the combined
statements of operations and partnership's investment and cash flows of the
Lower Delaware System (as defined in Note 1 to the combined statements of
operations and partnership's investment and cash flows) for the period from
January 1, 1997 to June 23, 1997 and for the year ended December 31, 1996, and
to the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
August 7, 1998
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
August 7, 1998
To the Partners
Saguaro Cable TV Investors Limited Partnership
(A Limited Partnership)
Castle Rock, Colorado
We consent to the incorporation by reference in the Registration Statement being
filed by Mediacom LLC and Mediacom Capital Corporation, of our report, dated
February 10, 1997, relating to the Balance Sheet of Saguaro Cable TV Investors
Limited Partnership (A Limited Partnership) as of December 26, 1996, and the
related Statements of Operations and Partners' Capital and Cash Flows for the
period from January 1, 1996 to December 26, 1996, and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ Gustafson, Crandall & Christensen, Inc.
Certified Public Accountants
Colorado Springs, Colorado
