UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
__X__ Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996 or
_____ Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from ______ to ______.
Commission file number: (S-1) 333-3084
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
RIFKIN ACQUISITION CAPITAL CORP.
(Exact name of registrants as specified in their respective
charters.)
Colorado 84-1317717
Colorado 84-1341424
(State of Incorporation or organization) (I.R.S. Employer
Identification No.)
360 South Monroe St., Suite 600
Denver, Colorado 80209
(Address of principal executive offices) (zip code)
Registrant's Telephone Number incl area code: (303) 333- 1215
Securities registered pursuant to Section 12(g) of the Act:
11 1/8% Senior Subordinated Notes due 2006
(Title of Class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. __X__
There is no established trading market for any of the
registrants' securities. As of the date of this report, there
were 1,000 shares of common stock of Rifkin Acquisition Capital
Corp. issued and outstanding, all of which were owned by Rifkin
Acquisition Partners, L.L.L.P.
Documents incorporated by reference: None.
<PAGE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
RIFKIN ACQUISITION CAPITAL CORP.
Table of Contents
Page
Part I
Item 1. Business.......................................... 3
Item 2. Properties......................................... 17
Item 3. Legal Proceedings................................. 19
Item 4. Submissiion of Matters to a Vote of Security Holders 19
Part II
Item 5. Market for Registrants' Common Equity and
Related Stockholder Matters..................... 19
Item 6. Selected Financial Data........................... 19
Item 7. Mangement's Discussion and Analysis of Financial
Condition and Results of Operations............. 21
Item 8. Financial Statements and Supplementary Data....... 26
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............. 47
Part III
Item 10. Directors and Executive Officers of the Registrants. 47
Item 11. Executive Compensation............................. 50
Item 12. Security Ownership of Certain Beneficial Owners
and Management................................... 51
Item 13. Certain Relationships and Related Transactions..... 52
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.............................. 54
<PAGE>
PART I
ITEM 1 - BUSINESS
General
Rifkin Acquisition Partners, L.L.L.P., a Colorado limited
liability limited partnership (the "Partnership"), through the
Partnership and its subsidiaries other than Rifkin Acquisition
Capital Corp., a Colorado corporation and a wholly-owned
subsidiary of the Partnership ("RACC") (together the "Company"),
owns, operates and develops cable television systems in Georgia,
Tennessee, Illinois and Michigan (the "Systems"). RACC does not
have any operations, operating history, assets, revenues,
properties or employees, and was formed solely for the purpose as
serving as a corporate co- issuer of 11 1/8% Senior Subordinated
Notes due 2006 issued by the Partnership and RACC in 1996. The
partnership is the successor to a Colorado limited partnership
that was formed in 1988 and reorganized as a Colorado limited
liability limited partnership in August 1995. RACC was formed in
January 1996.
At December 31, 1996, the Systems of the Company passed
approximately 241,300 homes and served approximately 185,200
basic customers, at a basic penetration level of 76.7%. The
Company is one of the largest multiple system operators ("MSO")
in Tennessee based on information provided by the Tennessee Cable
Television Association as of December 31, 1996. All of the
Systems have capacities of 30 or more channels.
For the year ended December 31, 1996, the Company had revenue of
approximately $71.3 million, and Adjusted EBITDA (see footnote
(b) on page 20) of approximately $33.1 million.
The Recapitalization
In August 1995, the Company effected a recapitalization (the
"Recapitalization") in which a group lead by VS&A Communications
Partners II, L.P. ("VS&A"), an investment fund affiliated with
Veronis, Suhler & Associates Inc. (an investment banking firm
specializing in the media and communications industry) and
further comprised of Greenwich Street (RAP) partners I, L.P.
("Greenwich"), IEP Holdings I LLC, an affiliate of ING Equity
Partners L.P. I, and PaineWebber Capital, Inc. (collectively, the
"VS&A Group") acquired the interests of certain limited partners
in RAP L.P. for approximately $39.4 million in cash and invested
approximately $41.6 million in cash as new equity in the
Partnership. In connection with the Recapitalization, Mr.
Rifkin, certain trusts controlled by Mr. Rifkin (the "Rifkin
Trusts") and certain current and former members of management of
Rifkin & Associates (collectively, the "Rifkin Group") exchanged
their then-existing limited partnership interests in RAP L.P.,
which for purposes of the recapitalization were valued at
approximately $9.1 million, for limited partnership interests in
the Partnership (the "Equity Rollover"). In addition, the Rifkin
Trusts invested the VS&A Group and the Rifkin group
(collectively, the "Investor Group") invested $15 million in cash
as additional equity in the Partnership (the "New Equity"). As a
result, the Investor group has invested an aggregate of $57.2
million in cash in addition to the $39.4 million paid to the
prior limited partners of RAP L.P. for their partnership
interests and the Equity Rollover for its ownership interest in
the Partnership. As a result of these transactions, the VS&A
Group and the Rifkin Group hold 89.2% and 9.8% limited
partnership interests in the Partnership, respectively, and the
General Partner continues to hold its 1% general partnership
interest in the Partnership. See "Principal Security Holders"
and "Certain Relationships and Related Transactions." As a
condition to the investment in the Partnership made by VS&A
Group, in connection with the Recapitalization, the Partnership
also assumed from RAP L.P. a subordinated note in the principal
amount of $3 million payable to Monroe M. Rifkin (the "Old Rifkin
Note"). In connection with the Old Notes Offering, the Old
Rifkin Note was amended and restated to rank pari passu with the
Notes (the "New Rifkin Note"). See "Certain Relationships and
Related Transactions--Senior Subordinated Debt Held by Monroe M.
Rifkin." Finally, as part of the Recapitalization, the fee
payable by the Partnership to Rifkin & Associates for management
services was reduced from 5.0% to 3.5% of the Partnership's
revenue.
In January 1996, the Partnership and RACC issued and sold
$125,000,000 in aggregate principal amount of their 11 1/8%
Senior Subordinated Notes due 2006 (the "Old Notes") in order to
fund certain acquisitions of cable systems and the repayment of
borrowings under a Credit Agreement. Such sales were not
registered under the Securities Act of 1933, as amended (the
"Securities Act") in reliance upon the exemption provided by
Section 4(2) of the Securities Act and Rule 144A promulgated
under the Securities Act. In connection with the sale of the Old
Notes, the Partnership and RACC agreed to file with the
Securities and Exchange Commission (the "Commission") a
registration statement relating to an exchange offer pursuant to
which the Issuers would exchange new 11 1/8% Senior Subordinated
Notes due 2006, registered under the Securities Act and on terms
substantially similar to the Old Notes (the "New Notes" and
together with the Old Notes, the "Notes"), for the Old Notes
tendered at the option of the holders. In June 1996, the
Partnership and RACC exchanged the New Notes for the Old Notes.
The Notes are the joint and several general unsecured obligations
of the Partnership and RACC and are fully and unconditionally
guaranteed on a Senior Subordinated basis by all of the
subsidiaries of the Partnership other than RACC (the "Subsidiary
Guarantors" or the "Guarantors").
Acquisitions
Mid-Tennessee Systems
On March 1, 1996, the Company acquired certain operating assets
comprising eleven cable television systems located in Tennessee
(the "Mid-Tennessee Systems"). The purchase price for the Mid-
Tennessee Systems was approximately $61.9 million including
approximately $32,000 of net working capital assumed. Upon
acquisition (the "Mid-Tennessee Acquisition"), the Mid-Tennessee
Systems passed approximately 42,700 homes with approximately
1,260 miles of plant, and served approximately 33,500 basic
service customers. The revenues related to the Mid-Tennessee
Systems acquisition included in the year ended December 31, 1996
results were approximately $10.8 million.
RCT Systems
On April 1, 1996, the Company acquired all of the operating
assets comprising three cable television systems located in
Tennessee (the "RCT Systems"). The purchase price for the RCT
Systems was approximately $10.2 million, including approximately
$377,000 of assumed liabilities. Upon acquisition (the "RCT
Acquisition"), the RCT Systems passed approximately 14,300 homes
with approximately 272 miles of plant, and served approximately
12,200 basic service customers. The revenues related to the RCT
Systems acquisition included in the year ended December 31, 1996
results were approximately $3.2 million.
Other Systems
During 1996 the Company also acquired the operating assets of
three other cable television systems all located in Tennessee,
and purchased from three separate cable companies. The aggregate
purchase price for these systems was approximately $2 million.
The revenues related to these other systems included in the year
ended December 31, 1996 were approximately $200,000.
Pending Acquisitions
On November 29, 1996, the Company entered into a definitive
agreement to purchase certain assets comprising two cable systems
of American Cable TV Investors 5, Ltd. serving the Tennessee
communities of Shelbyville and Manchester (the "Manchester
Systems"). The purchase price is $19,750,000 subject to the
normal closing adjustments and is expected to close in the second
quarter of 1997. At December 31, 1996, the Manchester Systems
passed approximately 14,500 homes with 361 miles of plant and
served approximately 11,500 basic customers.
Business Strategy
The Company's business strategy focuses on enhancing operational
and financial performance by: (i) consolidating operations of
existing clustered systems through strategic acquisitions; (ii)
applying aggressive and innovative customer acquisition and
retention marketing techniques; (iii) upgrading systems with
state- of-the-art technology to enhance existing service and to
develop, on a cost-effective basis, new ancillary revenue
streams; and (iv) enhancing customer value by providing
exceptional customer service.
Consolidating OperationsIStrategic Acquisitions. The Company
believes that consolidating operations will increase Adjusted
EBITDA by allowing for operating efficiencies in such areas as
administration, marketing, customer service and advertising
sales. The Company will also explore opportunities to
consolidate headends in order to reduce maintenance costs, as
well as the cost of adding new channels and implementing new
technologies and services. The Company is consolidating certain
of the operations of the acquired Mid-Tennessee Systems and RCT
Systems with certain of the operations of the existing Tennessee
Systems. Future acquisition efforts are expected to focus on
acquiring systems in close proximity to existing systems or on
systems of sufficient size to serve as cores for new operating
clusters. The Company will also consider divestiture of systems
on an opportunistic basis.
In determining whether to acquire a particular system, the
Company evaluates, among other things, (i) the size and strategic
fit with the Company's existing operations, (ii) the technical
quality and anticipated capital expenditure requirements, (iii)
the potential for upgrading and improving operations, (iv) the
demographics of the market and (v) the existing and potential
competitive environment. Other potential acquisitions may arise
at any time; however, there can be no assurance, in any case,
that the Company will reach an agreement to acquire any
additional systems or that it will consummate any such
acquisitions.
Innovative Marketing. The Company aggressively markets and
promotes its cable television systems with the objective of
increasing penetration and average revenue per customer. The
Company actively markets its basic and premium program packages
through innovative marketing tactics that include direct mail and
telemarketing efforts targeted to specific customer and non-
customer demographic profiles, newspaper and television
advertising and door-to-door sales. In selected markets, the
Company is also expanding its sources of revenue from services
such as pay-per-view and new services such as the Sega Channel, a
digital premium subscription service providing 50 different Sega
brand games delivered through cable to individual customers' Sega
Genesis game units.
System specific marketing plans and marketing budgets are
developed jointly between Rifkin & Associates and the Company's
regional marketing staff. In addition, the Company incorporates
into marketing plans retention marketing strategies such as
customer value-building, employee training and growth-related
employee incentives to ensure that marketing investments are
maximized. Additional customers are also gained by cable plant
extensions built to new housing developments once adequate
density is available.
System Enhancements. The Company is committed to maintaining and
enhancing the technical integrity and channel capacity of its
cable systems as demonstrated by the fact that all of the Systems
have capacities of 30 or more channels. Within the next four
years, the Company intends to rebuild nearly all of the Systems
to a bandwidth between 450 MHz and 750 MHz. Additionally, the
Company also is committed to extending its distribution system to
keep pace with the growth in the communities it serves as well as
making continuous investments that improve picture quality and
plant reliability.
The Company is progressively utilizing advances in technology to
upgrade its cable plant. The utilization of fiber optics and
addressable technology (the computerized authorization of
individual converters or receivers to descramble and receive
specifically authorized video, audio or data signals that have
been scrambled for security purposes) in these rebuilds will
improve technical reliability, enhance picture quality and
increase channel capacity to offer new products and services, all
of which will increase customer satisfaction and position the
Company for a competitive future.
Customer Value. The Company uses a high quality, well-trained
staff of customer service representatives and local field
technicians to provide exceptional customer service. To this
end, the Company continues to invest resources in training its
customer service representatives and field technicians. In
addition, the Company regularly evaluates the programming offered
by its systems in order to offer its customers innovative
packages of basic and premium services, including locally
originated programming.
The Cable Television Industry
A cable television system receives television, radio and data
signals at its headend facility that are transmitted by
broadcasting stations, microwave relay systems and communications
satellites. These signals are then electronically processed and
distributed, primarily through coaxial and, in some instances,
fiber optic cable, to customers who pay a fee to receive some or
all of these signals.
Cable television systems generally consist of four principal
operating components. The first component, known as the headend
facility, receives television and radio signals and other
programming and information by means of special antennae,
microwave relays and satellite earth stations. The second
component, the distribution network, which originates at the
headend and extends throughout the system's service area,
typically consists of coaxial or fiber optic cables placed on
utility poles or buried underground, and associated electronic
equipment. The third component of the system is a drop cable,
which extends from the distribution network into each customer's
home and connects the distribution system to the customer's
television set. The fourth component, a converter, is the home
terminal device that converts the services available on the cable
system to channels which can be displayed by the customer's
television set. In addition, this component may serve as a
descrambler to permit reception of limited-distribution services
by authorized viewers.
Cable 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 nonexclusive franchises or similar licenses
granted by local governmental authorities for a specified term of
years.
Cable television systems offer customers various levels or
"tiers" of basic cable services consisting of off-air television
signals of network, independent and educational programming from
local broadcasters, a limited number of television signals from
so-called superstations originating from distant cities, various
satellite delivered, non-broadcast channels (such as Cable-News
Network ("CNN"), the USA Network ("USA"), Entertainment and
Sports Programming Network ("ESPN"), The Discovery Channel and
Turner Network Television ("TNT")), certain programming
originated locally by the cable system such as public,
governmental and educational access programs and informational
displays featuring news, weather, stock market and financial
reports and public service announcements. For an extra monthly
charge, cable systems also typically offer premium television
services to their customers. These services, such as Home Box
Office ("HBO"), Showtime, Cinemax and certain regional sports
networks, are satellite-delivered channels consisting principally
of feature films, live sporting events, concerts and other
special entertainment features, usually presented without
commercial interruption for which a separate per channel or per
event charge may be levied.
Generally, a customer pays an initial installation charge and
fixed monthly fees for basic and premium television services and
for other services, including the rental of converters and remote
control devices. Monthly service fees constitute the primary
source of revenues for cable, television systems. Cable systems
also generate revenues 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 systems also offer to their customers home
shopping services which pay the systems a share of revenues from
sales of products in the systems' service areas.
Programming and Service Offerings
Programming. Rifkin & Associates 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 Systems select basic, tier and premium
programming based on the demographics in the market, national
research on the perceived value of the programming, requests from
customers, the available channel capacity in each system, the
cost of the networks and the availability of local advertising
spots.
Some program suppliers provide volume discount pricing structures
or offer marketing and launch support to the Systems. In
particular, Rifkin & Associates negotiated programming agreements
for the Systems with premium service suppliers that offer cost
incentives under which premium service unit prices decline as
certain premium service growth thresholds are met. The Systems'
successful marketing of multiple premium service packages
emphasizing customer value has enabled the Systems to take
advantage of such cost incentives.
The Systems have 230 retransmission consents with 46 commercial
broadcast stations. None of these consents require direct
payment of fees for carriage; however, in some cases the Systems
have entered into agreements with certain stations to carry
satellite- delivered cable programming which is affiliated with
the network carried by such stations. These agreements have
recently been renewed and don't expire until May 31, 1999 at the
earliest. There can be no assurance that such agreements can or
will be renewed under similar terms after their current term
expiration. See "Legislation and Regulation in the Cable
Television Industry."
Since 1988, Rifkin & Associates has been a member of a
programming consortium consisting of small to mid-size
independent cable television operators serving, in the aggregate,
approximately 4.5 million cable customers. 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
mid-size operators. Currently, approximately 64% of the Systems'
programming contracts are negotiated directly with the networks
by Rifkin & Associates; the remaining 36% are negotiated through
the consortium. The Systems' programming contracts are generally
for a fixed period of time (three to ten years) and are subject
to negotiated renewal. As existing contracts expire, Rifkin &
Associates intends to negotiate the renewals through the
programming consortium.
The Systems' cable programming costs have increased in recent
years and are expected to continue to increase due to carriage of
additional networks, increased costs to produce or purchase cable
programming, system acquisitions, inflationary increases and
other factors. However, the Company is committed to minimizing
these increases. Aside from renewing expired programming
contracts through the programming consortium, in certain target
markets the Company will launch new and more expensive networks
on new product tiers. In these markets, the Company will pay the
programming suppliers for only those customers who are willing to
bear an additional cost for the service rather than paying for
the entire customer base who may or may not find value in the
programming. In addition, the Company plans to replace more
expensive networks with lower priced product of similar content
and quality. Although there can be no assurances, the Company
believes it will continue to have access to cable programming
services at reasonable prices.
Service Offerings. The Systems typically offer a choice of two
tiers of basic cable television programming service: a broadcast
programming tier (consisting generally of broadcast network and
public television programming available "over-the-air" in the
franchise community and "superstation" signals such as WTBS and
WGN) and a satellite programming tier (consisting primarily of
satellite delivered services such as CNN, USA, ESPN, The
Discovery Channel and TNT). Approximately 92% of the customers
in the Systems subscribed to both tiers of service as of December
31, 1996.
The Systems also offer premium programming services (e.g., HBO,
Cinemax, Showtime) on both an a la carte basis and as part of
discounted premium service packages. Premium packages are
designed to generate incremental premium cash flow as well as
enhance the perceived value of the Systems' cable service. The
Systems have successfully promoted innovative premium service
packages. Overall premium service penetration has increased
significantly in the Systems where such packages have been
introduced. Currently, the systems in Georgia, and Fayetteville
and Columbia, Tennessee offer movie and event pay-per-view. The
other Systems offer pay-per-view on an event only basis.
Expanded Service Offerings. New product tiers, which include
programming options that are not available on the basic or
satellite tier, have been implemented and continue to be
developed by the Company. A new product tier will typically
contain four to nine programming services offered on either an a
la carte ($1 to $4 per channel) or a package basis ($5.95
including equipment rental). Signals are secured by addressable
technology. The Columbia, Tennessee system launched a new
product tier in 1996, and a tier is under development for the
Georgia system.
The Georgia system also became a Residential Multi-Tenant
Services (RMTS) provider offering local and long distance phone
services. The system currently serves one apartment complex with
plans to expand to other dwellings within their franchise area.
In addition, the Columbia, Tennessee system offers data transport
services. The system installed a high speed modem-based network
that links local schools, municipal buildings and a hospital.
The high speed modem-based network will allow for internet access
in the future. The system has also installed a full interactive-
distance learning network that allows for teleconferencing
between local schools.
The Company is currently introducing the Sega Channel in systems
where research indicates a strong customer propensity to purchase
this new service. To further enhance revenue, additional
programs and products under development include the launch of new
home shopping services and internet access services.
Systems Operations
The Company acquires, operates and develops cable television
systems based on the principle of increasing operating cash flow
while maintaining a high standard of technical and customer
service.
The Company has a decentralized and locally responsive management
structure which provides significant management experience and
stability to every region. Annual operating budget preparation,
strategic planning and capital expenditure allocation decisions
are made jointly between Rifkin & Associates and the Company's
system managers to ensure that local needs are properly weighted
with maximizing investor returns. Day to day operating decisions
are made by experienced local system managers who are
knowledgeable about local markets and responsive to the specific
needs of the Company's customers. The Company believes that this
management structure enhances the effectiveness of customer
service efforts and assists in the maintenance of good relations
with franchise authorities. Local system managers are rewarded
for attaining operating goals through incentive and bonus plans
based on predefined qualitative and quantitative measures of
system-specific performance.
The Company believes that providing excellent customer and
technical service is essential in an increasingly competitive
environment. To accomplish service-related objectives, the
Company places a special emphasis on exceeding the FCC and
National Cable Television Association ("NCTA") customer service
standards. In addition to adhering to federally-mandated
customer service standards the Company has implemented additional
programs, including an on-time guarantee for installation and
repair appointments, designed to enhance customer satisfaction.
As part of the focus on service-related initiatives, the Company
is committed to fostering the personal and professional growth of
its employees, which includes a strong commitment to and
investment in training. The Company's employees receive training
in customer service, sales and customer retention skills from
outside professionals and qualified management personnel.
Technical employees are encouraged to enroll in courses available
from the National Cable Television Institute and attend regularly
scheduled on-site seminars conducted by equipment manufacturers
to keep pace with the latest technological developments in the
cable television industry. The Company believes that training
programs, coupled with strong growth-oriented bonus and incentive
plans for front line and managerial staff: (i) enhance the
overall level of customer satisfaction; (ii) improve the quality
of workmanship in the field which results in fewer service calls
from customers; (iii) lowers service-related expenses; and (iv)
strengthens the effectiveness of marketing programs.
Marketing
The Company aggressively markets and promotes its cable
television systems with the objective of increasing penetration
and average revenue per customer. The Company actively markets
its basic and premium program packages through innovative
marketing tactics that include direct mail and telemarketing
efforts targeted to specific customer and non-customer
demographic profiles, newspaper and television advertising and
door-to-door sales. Each of the Company's customer service
centers is supported by a Marketing Director who coordinates
marketing and door-to-door campaigns throughout the geographic
region. The Marketing Director also ensures that the Company is
providing high quality sales and service by supervising and
training direct sales representatives and assessing picture and
service quality within the Company's cable systems. In general,
customer service representatives will follow up by telephone
contact with the customer following a new installation, to assess
the quality of the installation and the overall service the
customer is receiving and to assure customer satisfaction.
Customer service representatives are also trained to market
upgrades in service to existing customers and are informed of
current rates, programming packages and promotions.
The Systems utilize a contract third-party service for monthly
customer billing based on modern computer technology and
utilizing software developed specifically for the cable
television industry. Billing statements are printed and mailed
directly to customers, who have approximately 15 days after
receipt of the statement to remit payment to the central payment
processing center. If after 30 days a customer has not made a
payment, the customer is charged a late payment fee. After 35
days, if the customer has not made a payment, a "Past Due
Invoice" is generated. In general, the Systems aggressively
pursue collection of past due amounts by telephoning the customer
at 40 days past due and attempting to collect payments through
field technicians at 45 days past due. If this final attempt to
collect payment fails, the customer is then disconnected. A
final statement is sent within a week after disconnection, and,
approximately 15 days thereafter, the account is referred to a
collection agency. This approach to accounts receivable and
collections has resulted in bad debt expense for the Systems
consistently averaging less than 1% of its revenue.
Technology and Engineering
At December 31, 1996, the Systems maintained over 5,800 miles of
cable distribution plant that passed over 241,300 homes. The
following table sets forth certain information with regard to the
channel capacities of the Systems as of December 31, 1996.
54 or
30 to 53 More
Channels Channels Total
Number of Systems 32 12 44
Percent of Systems 72.7% 27.3% 100.0%
Miles of plant 3,152 2,708 5,860
Customers 89,419 95,769 185,188
The Company continually monitors and evaluates new technological
developments to optimize existing assets and to anticipate the
introduction of new services and program delivery capabilities.
The use of fiber optic cable as a transportation medium is
playing a major role in enhancing channel capacity and improving
the performance and reliability of cable television systems.
Fiber optic cable is capable of carrying hundreds of video, data
and voice channels. The Company has implemented and intends to
continue to use fiber optic technology in conjunction with its
system rebuilds and upgrades. In the future, by interconnecting
headends of adjacent systems with one master facility, the
Company can reduce the number of headends, lower maintenance
costs and add new channels more cost effectively. The Company
generally plans to reduce the number of headends through
consolidation to take advantage of these efficiencies.
The Company intends to explore the use of digital compression
technology to enhance the current channel capacities of its cable
systems. This technology is expected to allow five to ten
channels or more to be carried in the space of one analog
channel. Digital signals not only offer the potential for
allowing cable television systems to carry more programming but
also for improving the quality of the television signals carried.
This technology also allows cable systems to offer additional
products and services, including video game channels like the
Sega Channel. Although the Company believes that the use of
digital technology in the future offers the potential for the
Company to increase channel capacity in a more cost efficient
manner than completely rebuilding systems with higher capacity
distribution plant, digital compression technology is still in
the developmental stage and is not yet widely implemented by
cable system operators. There can be no assurance as to whether
or when such technology can or will be implemented by the Company
and, if it can be implemented, whether such technology will
result in significant cost savings over alternative methods of
expanding channel capacities of the Company's systems.
Customer and Community Relations
In order to succeed in a competitive environment, the Company
recognizes the need to meet and exceed the increasing demands and
expectations of its customers and communities. Through customer
newsletters, surveys and focus groups, the Company is able to
identify and respond to the needs of current and prospective
customers in a system-specific fashion. These means of
communication, as well as cross-channel spots and billing
messages, permit the Company to position itself as a leading
provider of advanced information and entertainment services.
This continuous interaction and two-way communication is critical
to instilling the level of loyalty needed to obtain and retain
customers in today's marketplace.
The Company is dedicated to developing strong community relations
in the locations served by its cable television systems and
believes that good relations with its local franchise authorities
are primarily a result of effective communications by the
Company's local management with local authorities. The Company
also believes that consistent, high quality performance of its
local staff is important to maintain good community relations.
To improve the effectiveness of staff interaction with the
Company's customers, the Company has ongoing training programs
for its field and customer service staff.
The Company also places a high priority on using its facilities
and position in the community to the benefit of the towns and
cities served by its cable television systems. This commitment
is especially apparent in the area of education, as each of the
Systems has initiated a localized version of the Company's
Project TEACH program. Project TEACH assists area schools by
supplementing their classroom curricula with cable-delivered
educational services and related equipment. In addition, the
Systems contribute to the communities they serve through
production and carriage of locally- originated programming,
covering issues and events important to area residents and
otherwise underserved by local media. Ongoing support and
interest in the community is continuously demonstrated through
the involvement of the Systems' personnel in local causes,
including promotions designed to raise money and supplies for
persons in need.
Franchises
Cable television systems are generally constructed and operated
under nonexclusive franchises granted by local governmental
authorities. These franchises typically contain many
requirements, including time limitations on commencement and
completion of construction, conditions of service, system channel
capacity, nature of programming, the provision of free cable
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
Cable Acts. See "Legislation and Regulation in the Cable
Television Industry."
The Systems' franchises provide for the payment of fees to the
issuing authority. Annual franchise fees imposed on the Systems
range up to 5% of gross revenues generated by a system. In
substantially all of the Systems, franchise fees are passed
through to the customers directly as an addition to the rates for
cable television service. The 1984 Cable Act prohibits
franchising authorities from imposing franchise fees in excess of
5% of gross revenues and also permits the cable system operator
to seek renegotiation and modification of franchise requirements
if warranted by changed circumstances.
The table below categorizes the Systems' franchises by date of
expiration and presents the approximate number and percentage of
basic service customers for each category of franchises as of
December 31, 1996.
Year of Percentage
Franchise Number of Percentage of Number of of Total
Expiration Franchises Total Franchises Customers Customers
1997-1999 24 21.2% 36,136 19.5%
2000-2002 26 23.0% 33,006 17.8%
After 2002 63 55.8% 116,046 62.7%
Total 113 100.0% 185,188 100.0%
No single franchise represents more than 11.2% of total customers
of the Systems, and the largest five franchises represent less
than 33.8% of total customers of the Systems.
The 1984 Cable Act provides, among other things, for an orderly
franchise renewal process where franchise renewal will not be
unreasonably withheld or, if renewal is withheld, the franchise
authority must pay the operator the "fair market value" for the
system covered by such franchise but no value will be allocated
to the franchise itself. In addition, the 1984 Cable Act
establishes comprehensive renewal procedures that require that an
incumbent franchisee's renewal application be assessed on its own
merit and not as part of a comparative process with competing
applications.
The Company believes that it generally has good relationships
with its franchising authorities. Neither the Company nor any
other entity controlled by Mr. Rifkin has ever had a franchise
revoked or failed to have a franchise renewed. In addition, all
of the franchises of the Company and such other entities eligible
for renewal have been renewed or extended at or prior to their
stated expirations, and no material franchise community has
refused to consent to a franchise transfer to the Company or any
such predecessor.
Competition
Cable television systems face competition from alternative
methods of receiving and distributing television signals and from
other sources of news, information and entertainment, such as
off-air television broadcast programming, newspapers, movie
theaters, live sporting events, interactive computer programs and
home video products, including videotape cassette
recorders/players. The extent to which cable service is
competitive depends, in part, upon the cable system's ability to
provide a greater variety of programming at a reasonable price to
consumers than is available off-air or through other alternative
delivery sources. See "Legislation and Regulation in the Cable
Television Industry."
The new Telecommunications Act of 1996 (the "1996 Telecom Act")
now allows local telephone companies to provide a wide variety of
video services competitive with services provided by cable
systems and to provide cable services directly to customers. See
"Legislation and Regulation in the Cable Television Industry."
Cable systems could be placed at a competitive disadvantage if
the delivery of video programming services by local telephone
companies becomes widespread because cable systems are required
to obtain local franchises to provide cable service and must
comply with a variety of obligations under such franchises.
Issues of cross- subsidization by local telephone companies pose
strategic disadvantages for cable operators seeking to compete
with local telephone companies providing video services.
Additionally, the 1992 Cable Act ensures that telephone company
providers of video services will have access to acquire all
significant cable programming services. Although the Company
cannot predict the likelihood of success of any video programming
ventures by local telephone companies or the impact on the
Company of such competitive ventures, it is likely such ventures
will result in significant new competition.
A significant competitive impact is expected from medium power
and higher power direct broadcast satellites ("DBS") that use
higher frequencies to transmit signals that can be received by
dish antennas much smaller in size than traditional home
satellite dishes ( "HSDs"). One consortium, comprised of cable
operators and a satellite company, commenced operation in 1990 on
a medium-power DBS satellite system and currently provides
service consisting of approximately 65 channels of programming,
including cable satellite signals and pay-per-view services.
Four other DBS operators, DirectTV, a subsidiary of GM Hughes
Electronics, United States Satellite Broadcasting, a subsidiary
of Hubbard Broadcasting, Inc., EchoStar Communications
Corporation and Alpha Star Communications offer video services
that can be received by HSDs that measure approximately eighteen
inches in diameter. Additionally, such DBS operators have
acquired the right to distribute all of the significant cable
television programming services. American Sky Broadcasting
Corporation ("ASkyB"), a start-up DBS company, has announced
plans to merge with EchoStar Communications and Alpha Star
Communications.
DBS has advantages and disadvantages as an alternative means of
distributing video signals to the home. Among the advantages are
that the capital investment (although initially high) for the
satellite and uplinking segment of a DBS system is fixed and does
not increase with the number of customers receiving satellite
transmissions; that DBS is not currently subject to local
regulation of service and prices or required to pay franchise
fees; and that the capital costs for the ground segment of a DBS
system (the reception equipment) are directly related to and
limited by the number of service customers. DBS's disadvantages
presently include limited ability to tailor the programming
package to the interests of different geographic markets, such as
providing local news, other local origination services and local
broadcast stations; signal reception being subject to line of
sight angles; and intermittent interference from atmospheric
conditions and terrestrially generated radio frequency noise.
Although the effect of competition from these DBS services cannot
be specifically measured or predicted, it is clear there has been
significant growth in DBS customers and the Company assumes that
such DBS competition will be substantial in the future as
developments in technology continue to increase satellite
transmitter power, and decrease the cost and size of equipment
needed to receive these transmissions. Further, the extensive
national advertising of DBS programming packages, including
certain sports packages not available on cable television
systems, will likely continue the rapid growth in DBS customers.
Finally, the recently announced combination of EchoStar
Communications and Rupert Murdoch's ASkyB has stated its
intention to provide for the retransmission of local broadcast
stations to DBS subscribers within the next two years.
Cable systems generally operate pursuant to franchises granted on
a nonexclusive basis. The 1992 Cable Act gives local franchise
authorities control over basic cable service rates, prohibits
franchise authorities from unreasonably denying requests for
additional franchises, and permits franchise authorities to
operate cable systems. See "Legislation and Regulation in the
Cable Television Industry." It is possible that a franchising
authority might grant a second franchise to another cable company
containing terms and conditions more favorable than those
afforded the Systems. Well-financed businesses from outside the
cable industry (such as the public utilities which own the poles
on which cable is attached) may become competitors for franchises
or providers of competing services. The 1996 Telecom Act
eliminates certain federal restrictions on utility holding
companies and thus frees all utility companies to now provide
cable services. See "Legislation and Regulation in the Cable
Television Industry." In general, a cable system's financial
performance will be adversely impacted where a competing cable
service exists (referred to in the cable industry as an
"overbuild"). Although the Systems' franchises are
non-exclusive, and in certain of its service areas there are
multiple franchisees, currently there is only one instance where
a competing franchisee has actually overbuilt the Systems.
In one small section in Gwinnett County, another franchised cable
operator with duplicate cable plant can provide cable service to
approximately 1,000 of the Northeast Gwinnett system's homes
passed.
In October 1996, Bell Intermedia Services, Inc. ("BIMS"), a
subsidiary of Bell South, Inc., was granted a franchise by
Gwinnett County and Roswell, Georgia, to construct and operate a
cable television system. At this time, BIMS has no active
operations in the Company's service areas.
Additionally, in February 1996, Metro Cable, Inc., ("Metro
Cable"), a start up company, was granted by Gwinnett County a
franchise to build and operate a cable television system in
Gwinnett County. The principals of Metro Cable are local to
Gwinnett County and the northeastern Georgia area and have
experience in the construction and operation of cable television
systems. Management believes that Metro Cable does not have any
active business operations at this time and cannot predict the
timing of Metro Cable's starting construction of its cable
system.
The Company is not aware of any company or person that is
actively seeking a cable franchise from local franchise
authorities for areas presently served by the Systems other than
those already granted to BIMS and Metro Cable in Gwinnett County
and Roswell, Georgia.
Cable operators face additional competition from private
satellite master antenna television ("SMATV") systems that serve
condominiums, apartment complexes and other private residential
developments. The operators of these SMATV systems often enter
into exclusive agreements with apartment building owners or
homeowners' associations. Due to the widespread availability of
reasonably priced earth stations, SMATV systems now offer both
improved reception of local television stations and many of the
same satellite-delivered program services offered by franchised
cable systems. Various states have enacted laws to assure
franchised cable systems access to private residential complexes.
These laws have been challenged in the courts with varying
results. Additionally, the 1984 Cable Act gives a franchised
cable operator the right to use existing compatible easements
within its franchise area; however, there have been conflicting
judicial decisions interpreting the scope of this right,
particularly with respect to easements located entirely on
private property. The ability of the Company to compete for
customers in communities served by SMATV operators is uncertain.
The availability of reasonably priced home satellite dish earth
stations ("HSD") may enable individual households to receive many
of the satellite-delivered program services formerly available
only to cable customers. Furthermore, the 1992 Cable Act
contains provisions, which the FCC has implemented with
regulations, to enhance the ability of HSD owners and other cable
competitors to purchase certain satellitedelivered cable
programming at competitive costs. The Company is unable to
estimate accurately the extent to which private HSDs represent
competition in its franchise areas.
Cable television systems also compete with wireless program
distribution services such as multichannel, multipoint
distribution service ("MMDS") which use low-power microwave
frequencies to transmit video programming over-the-air to
customers. The 1992 Cable Act ensures that MMDS operators have
access to acquire all significant cable television programming
services. Although there are MMDS operators who are authorized
to provide or are providing broadcast and satellite programming
to customers in areas served by the Company's cable systems, such
competition is not yet significant. Recent investments in, or
acquisitions of, MMDS companies by local phone companies,
including Bell South acquiring a MMDS operation in the Atlanta,
Georgia market, are likely to substantially increase the
competitive impact of MMDS services in selected markets
throughout the country. Additionally, the FCC has proposed to
allocate frequencies in the 28 GHz band for a new multichannel
wireless video service similar to MMDS. The Company is unable to
predict whether wireless video distribution services, such as DBS
and MMDS, will have a material impact on its future operations.
Finally, an emerging technology, local multipoint distribution
services ("LMDS"), could also pose a significant threat to the
cable television industry, if and when it becomes established.
LMDS, sometimes referred to as cellular television, could have
the capability of delivering more than 100 channels of video
programming to a customer's home. The potential impact, however,
of LMDS is difficult to assess due to the newness of the
technology and the absence of any current, fully-operational LMDS
systems.
In August 1995, Heartland Wireless Communications ("HWC")
launched an MMDS wireless television system in southeast Illinois
near the community of McLeansboro. The signal pattern of the
MMDS operation covers a radius of approximately 35 miles. The
Illinois systems that could be affected by this signal pattern
are McLeansboro, Mt. Vernon, Wayne City, Woodlawn, Grayville and
Sesser/Valier. Collectively, these systems have approximately
10,500 basic customers. Depending on the headend serving a
particular community, these systems offer between 31 and 53 basic
channels for between $26.95 and $28.95 per month. HWC's basic
package currently consists of 26 basic channels, including three
local broadcast channels, 23 cable satellite channels, and HBO
and Cinemax, for $34.95 per month. Three premium channels are
priced at $9.95 each per month, or offered in two channel
discounted packages for $5.00 per channel per month. The Company
believes that HWC has had no material effect on the Illinois
systems.
An MMDS operator filed an application in September 1992 to
provide service in the Bad Axe, Michigan area and has constructed
a 200 foot tower approximately two miles from Bad Axe. The
Company's Bad Axe cable system currently offers 35 channels of
basic programming for $26.25, compared to 25 channels, including
PASS, Disney, Showtime and The Movie Channel for $6.95 each, and
six off-air signals offered for $19.00 by the MMDS operator.
Another MMDS operator has been operational for over three years
near Bridgeport. Currently, this MMDS operator has programmed 26
channels, including PASS, Disney and Showtime for $6.95 each, and
seven off-air channels for $23.85, compared to the Company's
Bridgeport system's 48 basic channels for $28.30. The Company
does not believe that either MMDS operator has had a material
effect on the Michigan Systems.
Wireless One, Inc. operates MMDS wireless television systems in
Manchester, Tennessee near the Company's Tullahoma, McMinnville
and Lawrenceburg systems. Depending on the headend serving each
community, these systems offer between 33 and 36 basic channels
for between $26.80 and $28.50 per month. Wireless One, Inc.
currently offers a basic service package consisting of 19
channels, including four local broadcast channels and fifteen
cable satellite channels, for $19.95 per month and one premium
channel, HBO, at $9.95 per month. Due to the hilly and wooded
topography in the area, the Tullahoma, McMinnville and
Lawrenceburg systems are not currently affected by the signal
pattern of the MMDS operation in Manchester. To date, these MMDS
operations have had no material impact on any of the Company's
Tennessee systems.
Other new technologies may become competitive with non-
entertainment services that cable television systems can offer.
The FCC has authorized television broadcast stations to transmit
textual and graphic information useful both to consumers and to
businesses. The FCC also permits commercial and non-commercial
FM stations to use their subcarrier frequencies to provide non-
broadcast 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. The expansion of fiber optic systems by telephone
companies and other common carriers will provide facilities for
the transmission and distribution of video programming, data and
other non-video services. The FCC has held spectrum auctions for
licenses to provide personal communications services ("PCS").
PCS could enable license holders, including cable operators, to
provide voice and data services.
Advances in communications technology as well as changes in the
marketplace and the regulatory and legislative environment are
constantly occurring. Thus, it is not possible to predict the
effect that ongoing or future developments might have on the
cable industry.
Employees
At December 31, 1996, the Systems had 287 full-time employees and
14 part-time employees, none of whom are subject to a collective
bargaining agreement. The Company considers its relations with
its employees to be good. In addition, Rifkin & Associates,
which is responsible for providing management services to the
Company, employs 53 persons. See Item 13 - "Certain
Relationships and Related Transactions."
Legislation and Regulation in the Cable Television Industry
The operation of cable television systems is extensively
regulated by the FCC, some state governments and most local
governments. The 1996 Telecom Act alters the regulatory
structure governing the nation's telecommunications providers.
It removes barriers to competition in both the cable television
market and the local telephone market. Among other things, it
also reduces the scope of cable rate regulation.
The 1996 Telecom Act requires the FCC to undertake a host of
implementing rulemakings, the final outcome of which cannot yet
be determined. Moreover, Congress and the FCC have frequently
revisited the subject of cable regulation. Future legislative
and regulatory changes could adversely affect the Company's
operations. This section briefly summarizes key laws and
regulations affecting the operation of the Company's cable
systems and does not purport to describe all present, proposed,
or possible laws and regulations affecting the Company.
Cable Rate Regulation. The 1992 Cable Act imposed an extensive
rate regulation regime on the cable television industry. Under
that regime, all cable systems are subject to rate regulation,
unless they face "effective competition" in their local franchise
area. Federal law now defines "effective competition" on a
community-specific basis as requiring either low penetration
(less than 30%) by the incumbent cable operator, appreciable
penetration (more than 15%) by competing multichannel video
providers ("MVPs"), or the presence of a competing MVP affiliated
with a local telephone company.
Although the FCC rules control, local government units (commonly
referred to as local franchising authorities or "LFAs") are
primarily responsible for administering the regulation of the
lowest level of cable -- the basic service tier ("BST"), which
typically contains local broadcast stations and public,
educational, and government ("PEG") access channels. Before an
LFA begins BST rate regulation, it must certify to the FCC that
it will follow applicable federal rules, and many LFAs have
voluntarily declined to exercise this authority. LFAs also have
primary responsibility for regulating cable equipment rates.
Under federal law, charges for various types of cable equipment
must be unbundled from each other and from monthly charges for
programming services. The 1996 Telecom Act allows operators to
aggregate costs for broad categories of equipment across
geographic and functional lines. This change should facilitate
the introduction of new technology.
The FCC itself directly administers rate regulation of any cable
programming service tiers ("CPST"), which typically contain
satellite-delivered programming. Under the 1996 Telecom Act,
the FCC can regulate CPST rates only if an LFA first receives at
least two rate complaints from local customers and then files a
formal complaint with the FCC. When new CPST rate complaints are
filed, the FCC now considers only whether the incremental
increase is justified and will not reduce the previously
established CPST rate.
Under the FCC's rate regulations, most cable systems were
required to reduce their BST and CPST rates in 1993 and 1994, and
have since had their rate increases governed by a complicated
price cap scheme that allows for the recovery of inflation and
certain increased costs, as well as providing some incentive for
expanding channel carriage. The FCC has modified its rate
adjustment regulations to allow for annual rate increases and to
minimize previous problems associated with regulatory lag.
Operators also have the opportunity of bypassing this "benchmark"
regulatory scheme in favor of traditional "cost-of-service"
regulation in cases where the latter methodology appears
favorable. Premium cable services offered on a per- channel or
per-program basis remain unregulated, as do affirmatively
marketed packages consisting entirely of new programming product.
Federal law requires that the BST be offered to all cable
subscribes, but limits the ability of operators to require
purchase of any CPST before purchasing premium services offered
on a per-channel or per-program basis.
In an effort to ease the regulatory burden on small cable
systems, the FCC has created special rate rules applicable for
systems with fewer than 15,000 customers owned by an operator
with fewer than 400,000 customers. The special rate rules allow
for a vastly simplified cost-of-service showing. The 1996
Telecom Act provides additional relief for small cable operators.
For franchising units with less than 50,000 customers and owned
by an operator with less than one percent of the nation's cable
customers (i.e., approximately 600,000 customers), CPST rate
regulation is automatically eliminated. The Company believes
that the majority of its systems qualify for one or both of these
forms of small system rate relief.
The 1996 Telecom Act sunsets FCC regulation of CPST rates for all
systems (regardless of size) on March 31, 1999. It also relaxes
existing uniform rate requirements by specifying that uniform
rate requirements do not apply where the operator faces
"effective competition," and by exempting bulk discounts to
multiple dwelling units, although complaints about predatory
pricing still may be made to the FCC.
Cable Entry Into Telecommunications. The 1996 Telecom Act
provides that no state or local laws or regulations may prohibit
or have the effect of prohibiting any entity from providing any
interstate or intrastate telecommunications service. States are
authorized, however, to impose "competitively neutral"
requirements regarding universal service, public safety and
welfare, service quality, and consumer protection. State and
local governments also retain their authority to manage the
public rights-of-way and may require reasonable, competitively
neutral compensation for management of the public rights-of-way
when cable operators provide telecommunications service. The
favorable pole attachment rates afforded cable operators under
federal law can be gradually increased by utility companies
owning the poles (beginning in 2001) if the operator provides
telecommunications service, as well as cable service, over its
plant.
Cable entry into telecommunications will be affected by the
regulatory landscape now being fashioned by the FCC and state
regulators. One critical component of the 1996 Telecom Act to
facilitate the entry of new telecommunications providers
(including cable operators) is the interconnection obligation
imposed on all telecommunications carriers. Review of the FCC's
initial interconnection order is now pending before the Eighth
Circuit Court of Appeals. The Company has already secured
authorization to provide local exchange service in Maryland and
portions of Virginia and has begun offering some
telecommunications services to customers in both jurisdictions.
Telephone Company Entry Into Cable Television. The 1996 Telecom
Act allows telephone companies to compete directly with cable
operators by repealing the historic telephone company/cable
cross- ownership ban. Local exchange carriers ("LECs"),
including the Bell Operating Companies, can now compete with
cable operators both inside and outside their telephone service
areas. Because of their resources, LECs could be formidable
competitors to traditional cable operators, and certain LECs have
begun offering cable service. See "Competition."
Under the 1996 Telecom Act, a LEC providing video programming to
customers will be regulated as a traditional cable operator
(subject to local franchising and federal regulatory
requirements), unless the LEC elects to provide its programming
via an "open video system" ("OVS"). To qualify for OVS status,
the LEC must reserve two-thirds of the system's activated
channels for unaffiliated entities.
Although LECs and cable operators can now expand their offerings
across traditional service boundaries, the general prohibition
remains on LEC buyouts (i.e., any ownership interest exceeding
10%) of co-located cable systems, cable operator buyouts of
co-located LEC systems, and joint ventures between cable
operators and LECs in the same market. The 1996 Telecom Act
provides a few limited exceptions to this buyout prohibition,
including a carefully circumscribed "rural exemption." The 1996
Telecom Act also provides the FCC with the limited authority to
grant waivers of the buyout prohibition (subject to LFA
approval).
Electric Utility Entry Into Telecommunications/Cable Television.
The 1996 Telecom Act provides that registered utility holding
companies and subsidiaries may provide telecommunications
services (including cable television) notwithstanding the Public
Utilities Holding Company Act. Electric utilities must establish
separate subsidiaries, known as "exempt telecommunications
companies" and must apply to the FCC for operating authority.
Again, because of their resources, electric utilities could be
formidable competitors to traditional cable systems.
Additional Ownership Restrictions. The 1996 Telecom Act
eliminates statutory restrictions on broadcast/cable
cross-ownership (including broadcast network/cable restrictions),
but leaves in place existing FCC regulations prohibiting local
cross-ownership between co-located television stations and cable
systems. The 1996 Telecom Act also eliminates the three year
holding period required under the 1992 Cable Act's
"anti-trafficking" provision. The 1996 Telecom Act leaves in
place existing restrictions on cable cross- ownership with SMATV
and MMDS facilities, but lifts those restrictions where the cable
operator is subject to effective competition. In January 1995,
however, the FCC adopted regulations which permit cable operators
to own and operate SMATV systems within their franchise area,
provided that such operation is consistent with local cable
franchise requirements.
Pursuant to the 1992 Cable Act, the FCC adopted rules precluding
a cable system from devoting more than 40% of its activated
channel capacity to the carriage of affiliated national program
services. A companion rule establishing a nationwide ownership
cap on any cable operator equal to 30% of all domestic cable
customers has been stayed pending further judicial review.
Must Carry/Retransmission Consent. The 1992 Cable Act contains
broadcast signal carriage requirements that allow local
commercial television broadcast stations to elect once every
three years between requiring a cable system to carry the station
("must carry") or negotiating for payments for granting
permission to the cable operator to carry the station
("retransmission consent"). Less popular stations typically
elect "must carry" and more popular stations typically elect
"retransmission consent." Must carry requests can dilute the
appeal of a cable system's programming offerings, and
retransmission consent demands may require substantial payments
or other concessions. Either option has a potentially adverse
affect on the Company's business. Additionally, cable systems
are required to obtain retransmission consent for all "distant"
commercial television stations (except for satellite-delivered
independent "superstations" such as WTBS). The constitutionality
of the must carry requirements has been challenged and is
awaiting a decision from the U.S. Supreme Court.
Access Channels. LFAs can include franchise provisions requiring
cable operators to set aside certain channels for public,
educational and governmental access programming. Federal law
also requires cable systems to designate a portion of their
channel capacity (up to 15% in some cases) for commercial leased
access by unaffiliated third parties. The FCC has adopted rules
regulating the terms, conditions and maximum rates a cable
operator may charge for use of these designated channel capacity,
but use of commercial leased access channels has been relatively
limited. The FCC recently revised its rules, including a modest
reduction in the leased access rates. These recent rule changes
could make commercial leased access a more attractive option for
third party programmers.
Access to Programming. To spur the development of independent
cable programmers and competition to incumbent cable operators,
the 1992 Cable Act imposed restrictions on the dealings between
cable operators and cable programmers. Of special significance
from a competitive business posture, the Act precludes video
programmers affiliated with cable companies from favoring cable
operators over competitors and requires such programmers to sell
their programming to other multichannel video distributors. This
provision limits the ability of vertically integrated cable
programmers to offer exclusive programming arrangements to cable
companies.
Other FCC Regulations. In addition to the FCC regulations noted
above, there are other FCC regulations covering such areas as
equal employment opportunity, customer privacy, programming
practices (including, among other things, syndicated program
exclusivity, network program nonduplication, local sports
blackouts, indecent programming, lottery programming, political
programming, sponsorship identification, and children's
programming advertisements), registration of cable systems and
facilities licensing, maintenance of various records and public
inspection files, frequency usage, lockbox availability, antenna
structure notification, tower marking and lighting, consumer
protection and customer service standards, technical standards,
and consumer electronics equipment compatibility. The FCC is
expected to impose new Emergency Alert System requirements on
cable operators this year. The FCC has the authority to enforce
its regulations through the imposition of substantial fines, the
issuance of cease and desist orders and/or the imposition of
other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities used
in connection with cable operations.
Two pending FCC proceedings of particular competitive concern
involve inside wiring and navigational devices. The former
rulemaking is considering ownership of cable wiring located
inside multiple dwelling unit complexes. If the FCC concludes
that such wiring belongs to, or can be unilaterally acquired by
the complex owner, it will become easier for complex owners to
terminate service from the incumbent cable operator in favor of a
new entrant. The latter rulemaking is considering whether cable
customers must be allowed to purchase cable converters from third
party vendors. If the FCC concludes that such distribution is
required, and does not make appropriate allowances for signal
piracy concerns, it may become more difficult for cable operators
to combat theft of service.
Copyright. Cable television systems are subject to federal
copyright licensing covering carriage of television and radio
broadcast signals. In exchange for filing certain reports and
contributing a percentage of their revenues to a federal
copyright royalty pool (that varies depending on the size of the
system and the number of distant broadcast television signals
carried), cable operators can obtain blanket permission to
retransmit copyrighted material on broadcast signals. The
possible modification or elimination of this compulsory copyright
license is the subject of continuing legislative review and could
adversely affect the Company's ability to obtain desired
broadcast programming. In addition, the cable industry pays
music licensing fees to BMI and is negotiating a similar
arrangement with ASCAP. Copyright clearances for nonbroadcast
programming services are arranged through private negotiations.
State and Local Regulation. Cable television systems generally
are operated pursuant to nonexclusive franchises granted by a
municipality or other state or local government entity in order
to cross public rights-of-way. Federal law now prohibits
franchise authorities from granting exclusive franchises or from
unreasonably refusing to award additional franchises. Cable
franchises generally are granted for fixed terms and in many
cases include monetary penalties for non-compliance and may be
terminable if the franchisee fails to comply with material
provisions.
The terms and conditions of franchises vary materially from
jurisdiction to jurisdiction. Each franchise generally contains
provisions governing cable operations, service rates, franchise
fees, system construction and maintenance obligations, system
channel capacity, design and technical performance, customer
service standards, and indemnification protections. A number of
states subject 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.
Although LFAs have considerable discretion in establishing
franchise terms, there are certain federal limitations. For
example, LFAs cannot insist on franchise fees exceeding 5% of the
system's gross revenues, cannot dictate the particular technology
used by the system, and cannot specify video programming other
than identifying broad categories of programming.
Federal law contains renewal procedures designed to protect
incumbent franchisees against arbitrary denials of renewal. Even
if a franchise is renewed, the franchise authority may seek to
impose new and more onerous requirements such as significant
upgrades in facilities and services or increased franchise fees
as a condition of renewal. Similarly, if a franchise authority's
consent is required for the purchase or sale of a cable system or
franchise, such authority may attempt to impose more burdensome
or onerous franchise requirements in connection with a request
for consent. Historically, franchises have been renewed for
cable operators that have provided satisfactory services and have
complied with the terms of their franchises.
ITEM 2 - PROPERTIES
In connection with its operation of cable television systems, the
Company owns or leases real property for signal reception sites
(antenna towers and headends), microwave facilities and business
offices. The Company believes that its properties, both owned
and leased, are in good condition and are suitable and adequate
for the Company's business operations.
The Systems' distribution plant generally is attached to utility
poles under pole rental agreements with local public utilities,
although in some areas the plant is buried in underground ducts
or trenches. The physical components of the Systems require
maintenance and periodic upgrading to keep pace with
technological advances.
The Systems consist of four geographic clusters: Georgia,
Tennessee, Illinois and Michigan.
Georgia Systems. The table below sets forth certain information
with respect to the Georgia Systems.
Year Ended December 31,
1996 1995 1994 1993 1992
Homes Passed 71,152 66,307 60,898 55,489 53,781
Basic Customers 53,386 48,925 44,290 39,451 35,935
Basic Penetration 75.0% 73.8% 72.7% 71.1% 66.8%
Average Monthly Revenue
per Customer $37.35 $35.44 $33.61 $33.01 $31.79
The Georgia Systems have been managed by Rifkin & Associates
since 1985. On a combined basis, these systems consisted of
approximately 1,500 miles of distribution plant.
The Georgia Systems serve unincorporated areas in northeast
Gwinnett County and certain incorporated communities therein,
including the cities of Lawrenceville, Duluth, Suwanee, Buford,
Sugar Hill, Dacula and Resthaven. In addition, the Georgia
Systems serve the City of Roswell and Mountain Park in Fulton
County. All of the communities served by the Georgia Systems are
suburbs of Atlanta.
Tennessee Systems. The table below sets forth certain
information with respect to the Tennessee Systems.
Year Ended December 31,
1996 1995 1994 1993 1992
Homes Passed 120,285 115,057 110,441 108,217 103,677
Basic Customers 96,768 93,765 89,205 85,586 82,206
Basic Penetration 80.4% 81.5% 80.8% 79.1% 79.3%
Average Monthly Revenue
per Customer (1)$32.38 $30.05 $28.73 $28.45 $27.08
(1) Refer to Footnote (d) on Page 20.
Part of the Tennessee Systems have been managed by Rifkin &
Associates since 1984 and part since 1986. On a combined basis,
these systems consisted of approximately 3,400 miles of
distribution plant.
The Tennessee Systems serve the communities of Columbia,
Cookeville, Paris, Tullahoma, Piney Flats, Lebanon, McMinnville,
Pulaski, Lawrenceburg, and Fayetteville. The communities served
are primarily in central and south central Tennessee.
The Illinois Systems. The table below sets forth certain
information with respect to the Illinois Systems.
Year Ended December 31,
1996 1995 1994 1993 1992
Homes Passed 35,739 35,469 35,320 35,209 35,209
Basic Customers 23,887 24,269 23,987 23,091 22,109
Basic Penetration 66.8% 68.4% 67.9% 65.6% 62.8%
Average Monthly Revenue
per Customer $32.70 $30.63 $29.57 $29.62 $27.82
The Illinois Systems have been managed by Rifkin & Associates
since December 1985. On a combined basis, these systems
consisted of approximately 590 miles of distribution plant.
The Illinois Systems serve the communities of Mt. Vernon,
Centralia, Sparta, Sesser, Steelville, Cairo and Nashville all
located in southern Illinois. These communities generally
receive poor off-air reception from St. Louis and require cable
service to receive high quality broadcast signals. Nearly 60% of
the customers are in the Mt. Vernon and Centralia systems.
Michigan Systems. The table below sets forth certain information
with respect to the Michigan Systems.
Year Ended December 31,
1996 1995 1994 1993 1992
Homes Passed 14,141 13,989 13,805 13,562 13,533
Basic Customers 11,147 10,949 10,469 9,955 9,423
Basic Penetration 78.8% 78.3% 75.8% 73.4% 69.6%
Average Monthly Revenue
per Customer $31.86 30.18 $28.87 $28.46 $27.43
The Michigan Systems have been managed by Rifkin & Associates
since December 1985. On a combined basis, these systems
consisted of approximately 370 miles of distribution plant.
The Michigan Systems serve the cities of Bad Axe,
Bridgeport/Frankenmuth, Gagetown, Harbor Beach and Reese. The
Bridgeport/Frankenmuth system, which is located between the
industrial cities of Flint and Saginaw, represents approximately
two-thirds of the customers served by the Michigan Systems.
ITEM 3 - LEGAL PROCEEDINGS
Other than customary administrative proceedings incidental to the
conduct of its business, the Company is not involved in any other
pending legal proceedings. The Company does not believe that any
of these administrative proceedings will have a material adverse
effect on its financial condition or results of operations or
cash flows.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the the fiscal year covered by
this report to a vote of security holders.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
There is no established public trading market for any of the
registrants' equity securities.
Within the past three years, the Registrants have issued
securities without registration under the Securities Act as
follows:
On January 24, 1996, RACC issued 1,000 shares of its Common
Stock, par value $1.00 per share to the Partnership for $1,000.
The foregoing securities were issued pursuant to the exemption
from registration under Section 4(2) of the Securities Act since
no public offering was involved and the securities had been taken
for investment and not with a view to distribution.
On January 26, 1996, the Partnership and RACC sold $125,000,000
principal amount of 11 1/8% Senior Subordinated Notes due 2004
(the "Old Notes") to BT Securities Corporation, Smith Barney
Inc., First Union Capital Markets Corp. and PaineWebber
Incorporated (the "Initial Purchasers"). Such transaction was
exempt from the registration requirements of the Securities Act
in reliance on Section 4(2) of the Securities Act on the basis
that such transaction did not involve a public offering. In
accordance with the agreement pursuant to which the Initial
Purchasers purchased the Old Notes, the Initial Purchaser agreed
to offer and sell the Old Notes only to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) or a
limited number of institutional "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under
the Securities Act).
ITEM 6 - SELECTED FINANCIAL DATA
The selected consolidated financial data set forth on the
following page for the year ended December 31, 1996, for the four
months ended December 31, 1995 and the eight months ended August
31, 1995 and for the year ended December 31, 1994 have been
derived from, and are qualified by reference to, the audited
financial statements of the Company included herein. The
selected consolidated financial data set forth below for the
years ended December 31, 1993 and 1992 have been derived from the
Company's audited financial statements not included herein.
Because of the Recapitalization, the Company's results of
operations for the four month period from September 1, 1995 to
December 31, 1995 and for the year ended December 31, 1996 are
not comparable to results for prior periods. The company's
acquisitions of cable television systems during the year ended
December 31, 1996 included in the selected consolidated financial
data presented below, materially affect the comparability with
data from previous periods. Recent federal legislation and
related existing and pending FCC regulation applicable to cable
television companies could have a material adverse impact on the
Company's business in the future. The selected consolidated
financial data set forth below should be read in conjunction
with, and is qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations"
and the consolidated financial statements of the Company
(including accompanying notes) included thereto (amounts in
thousands except Operating Data).
<PAGE>
<TABLE>
The Company
RAP L.P.
Combined
<CAPTION>
Year Year Four Eight
Ended Ended Months Months Year Ended December 31,
1996 1995(a) 12/31/95 8/31/95 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue $71,285 $50,208 $17,301 $32,907 $ 44,889 $41,470 $36,935
Costs and Expenses:
Operating expense 10,363 7,311 2,634 4,677 7,146 6,154 5,770
Programming expense 14,729 10,163 3,496 6,667 8,530 7,563 6,500
Selling, general and
administrative expense 10,733 7,054 2,486 4,568 6,090 5,665 4,908
Depreciation and
amortization 35,298 15,825 8,200 7,625 13,154 13,795 14,313
Management fees 2,475 2,251 606 1,645 2,244 2,073 1,846
Costs associated with
transfer of net assets - 441 - 441 - - -
Loss on disposal of assets 1,357 506 275 231 128 760 1,298
Total costs and expenses 74,955 43,551 17,697 25,854 37,292 36,010 34,635
Operating income (loss) (3,670) 6,657 (396) 7,053 7,597 5,460 2,300
Interest expense 21,607 18,871 4,252 14,619 18,008 18,283 19,222
Loss before income taxes,
extraordinary item and
cumulative effect of
accounting change (25,277) (12,214) (4,648) (7,566) (10,411) (12,823) (16,922)
Income tax expense
(benefit) (3,646) (3,232) (1,674) (1,558) 1,558 - -
Loss before extraordinary
item and cumulative effect of
accounting change (21,631) (8,982) (2,974) (6,008) (11,969) (12,823) (16,922)
Extraordinary item- Loss on
early retirement of debt - 1,699 - 1,699 - - -
Cumulative effect of accounting change for
income taxes - - - - - 3,500 -
Net loss $(21,631) $(10,681) $(2,974) $(7,707) $(11,969) $(16,323) $(16,922)
Other Financial Data:
Capital expenditures
(excluding acquisitions) $16,897 $ 7,479 $ 3,360 $ 4,119 $ 6,280 $ 6,278 $ 7,917
Adjusted EBITDA(b) 33,085 23,429 8,079 15,350 20,879 20,015 17,911
Financial Ratios:
Ratio of earnings to
fixed charges (c) - - - - - - -
Operating Data:
Homes passed 241,317 174,054 - - 165,740 158,723 155,013
Basic customers 185,188 132,271 - - 124,059 115,793 108,991
Basic penetration 76.7% 76.0% - - 74.9% 73.0% 70.3%
Premium service units 108,118 80,385 - - 74,913 67,192 56,437
Premium penetration 58.4% 60.8% - - 60.4% 58.0% 51.8%
Average monthly revenue
per basic customer(d) $ 34.13 $ 32.65 - - $ 31.19 $ 30.75 $ 29.10
Balance Sheet Data (at end of period):
Total assets $299,833 - $ 238,045 - $95,210 $101,724 $114,074
Total debt 198,500 - 137,500 - 166,833 163,766 160,449
Redeemable partners'
interests and detachable
warrants 4,862 - 3,600 - 2,739 2,739 2,739
Total partners'
capital (deficit) 61,005 - 68,898 - (85,057) (73,087) (56,764)
<FN>
(a) Reflects the historical financial data of the Company for the eight months ended August 31, 1995
and the four months ended December 31, 1995, combined for convenience purposes. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and consolidated financial
statements of the Company.
(b) Adjusted EBITDA represents income (loss) before interest expense, income taxes, depreciation
and amortization, costs associated with the transfer of net assets, loss on disposal of assets, incentive
plan expense, escrow income, extraordinary item and cumulative effect of accounting changes. Industry
analysts generally consider Adjusted EBITDA to be an appropriate measure of the performance of multi-channel
television operations. Adjusted EBITDA is not presented in accordance with generally accepted accounting
principles and should not be considered an alternative to, or more meaningful than, operating income or
operating cash flow as an indication of the Company's operating performance.
(c) Earnings were inadequate to cover fixed charges by $25.9 million, $12.6 million, $10.8 million,
$13.2 million and $17.8 million for the respective years ended December 31, 1996, 1995, 1994, 1993, 1992,
and $4.8 million and $7.8 million, respectively, for the four months ended December 31, 1995 and the eight
months ended August 31, 1995. In calculating the ratio of earnings to fixed charges, earnings consist of
net loss before income taxes, extraordinary item, cumulative effect of accounting change and interest expense.
Fixed charges consist of interest expense and the portion of rental expense which, in Management's opinion,
is representative of the interest factor.
(d) The average monthly revenue per basic customer for the year ended December 31, 1996 has been calculated
on a pro forma basis, as if the acquisitions of the Mid-Tennessee systems and RCT systems had occurred on December
31, 1995.
</TABLE>
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10-K, including the sections
entitled "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). The
words "believes," "expects," "intends," "strategy," "considers"
or "anticipates" and similar expressions identify forward-looking
statements. The Company does not undertake to update, revise or
correct any of the forward-looking information. Such forward-
looking statements involve known and unknown risks,
uncertainties, and other factors which may cause the actual
results, performance, or achievements of the Company to be
materially different from any future results, performance, or
achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following:
general economic and business conditions; competition in the
cable television industry; substantial leverage and risk of
inability to service or repurchase the Company's and RACC's debt;
restrictions imposed by the terms of indebtedness; the Company's
acquisition strategy; the need for significant capital
expenditures; potential termination of franchises; the non-
exclusivity of franchises; government regulation in the cable
television industry; dependence on key personnel; dependence upon
distributions from the Partnership's subsidiaries; potential
conflicts of interest arising out of the relationship between the
Company, RACC, and affiliates and other factors.
Where any such forward-looking statement includes a statement of
the assumptions or bases underlying such forward-looking
statement, the Company cautions that, while it believes such
assumptions or bases to be reasonable and makes them in good
faith, assumed facts or bases almost always vary from actual
results, and the differences between assumed facts or bases and
actual results can be material, depending upon the circumstances.
Where, in any forward-looking statement, the Company, or its
management, expresses an expectation or belief as to the future
results, such expectation or belief is expressed in good faith
and believed to have a reasonable basis, but there can be no
assurance that the statement of expectation or belief will result
or be achieved or accomplished.
Results of Operations
In August 1995, the Partnership effected a recapitalization in
which a group led by VS&A Communications Partners II, L.P. and
further comprised of Greenwich Street (RAP) Partners I, L.P., IEP
Holdings I LLC and Paine Webber Capital, Inc. acquired the
interests of certain limited partners in Rifkin Acquisition
Partners, L.P. (the "Predecessor"). Concurrently, all of the
Predecessor's debt was repaid and the Company entered into a new
credit agreement (the "Credit Agreement") with a syndicate of
banks. In addition, in January 1996, the Company completed the
issuance of $125 million of 11 1/8% Senior Subordinated Notes due
2006 (the "Notes"), which were subsequently publicly registered,
and amended its Credit Agreement to provide ongoing borrowing
availability, including availability to finance acquisitions.
The recapitalization was accounted for using the purchase method
of accounting, resulting in the restatement of the Company's
assets and liabilities to fair market value as of September 1,
1995. On a pro forma basis, in order to account for the
recapitalization as if it had occurred on December 31, 1994,
depreciation and amortization, management fee and interest
expense would have been $24.5 million, $1.8 million and $12.2
million, respectively.
1996 compared to 1995
Revenue increased 42%, or $21.1 million, to $71.3 million for the
year ended December 31, 1996 from $50.2 million for the year
ended December 31, 1995. This increase resulted from the
following: (a) approximately $5.8 million from growth in basic
customers and increases in basic and tier rates, (b)
approximately $10.8 million in total revenue as a result of the
March 1, 1996 acquisition of cable systems serving Hickory Hill,
Lebanon and McMinnville, Tennessee (the "Mid-Tennessee
Acquisition"), and (c) approximately $3.2 million in total
revenue as a result of the April 1, 1996 acquisition of cable
systems serving Fayetteville, Lawrenceburg and Pulaski, Tennessee
(the "RCT Acquisition"). Basic customers increased 40% to
approximately 185,200 at December 31, 1996 from approximately
132,300 at December 31, 1995. This increase was attributable to
the approximate 33,500 customers acquired in the Mid-Tennessee
Acquisition, the approximate 12,200 customers acquired in the RCT
Acquisition, as well as continued growth in Georgia (4,500 or
91.1%) and Tennessee (3,000 or 3.2%) systems. Average monthly
revenue per customer increased 4.5% from $32.65 for the year
ended December 31, 1995 to $34.13 for 1996. Premium service
units increased 34.5% to approximately 108,100 as of December 31,
1996, from approximately 80,400 as of December 31, 1995, largely
as a result of the Mid-Tennessee Acquisition (20,900) and the RCT
Acquisition (6,900). The Company's premium penetration decreased
to 58.4% from 60.8% between 1996 and 1995 due mainly to decreased
premium penetrations in Tennessee as a result of moving the
Disney Channel from premium to tier in certain systems.
Operating expense, which includes costs related to technical
personnel, franchise fees and repairs and maintenance, increased
41.8%, or approximately $3.1 million to approximately $10.4
million for the year ended December 31, 1996 from approximately
$7.3 million in 1995, and decreased as a percentage of revenue to
14.5% from 14.6%. Approximately $1.6 million and $500,000 of the
increase relates to the operating expense of the acquired systems
in the Mid-Tennessee Acquisition and RCT Acquisition,
respectively. Approximately $400,000 of the increase relates to
higher salaries and benefits as a result of added technical
personnel and annual wage increases and approximately $200,000 of
the increase relates to higher franchise fees as a result of
increased revenue.
Programming expense, which includes costs related to basic, tier
and premium services, increased 44.9%, or approximately $4.6
million, to approximately $14.7 million for the year ended
December 31, 1996 from approximately $10.2 million for the year
ended December 31, 1995, and increased as a percentage of revenue
to 20.7% from 20.2%. Approximately $2.2 million and $800,000 of
the increase relates to the programming expenses of the acquired
systems in the Mid-Tennessee Acquisition and RCT Acquisition,
respectively. The remainder of the increase is due to program
vendor rate increases and the addition of programming in certain
systems.
Selling, general and administrative expense, which includes
expenses related to on-site office and customer-service
personnel, customer billing and postage and marketing, increased
52.2%, or approximately $3.7 million to approximately $10.7
million for the year ended December 31, 1996 from $7.1 million
for the same period in 1995. As a percentage of revenue,
selling, general and administrative expense increased to 15.1%
for the year ended December 31, 1996 from 14.1% in 1995.
Approximately $700,000 of the increase resulted from the
provision for the management incentive plan which became
effective January 1, 1996, approximately $400,000 of the increase
resulted from increases in personnel and related benefits costs,
approximately $200,000 of the increase resulted from higher
customer billing costs, while approximately $1.7 million and
$600,000 related to the selling, general and administrative
expense of the acquired systems in the Mid-Tennessee Acquisition
and RCT Acquisition, respectively.
Depreciation and amortization expense of approximately $35.3
million for the year ended December 31, 1996 increased
approximately $19.5 million from the year ended December 31, 1995
due partially to the recapitalization discussed above.
Depreciation and amortization expense increased approximately
$10.8 million from pro forma depreciation and amortization
expense in 1995. The increases in depreciation resulted
primarily from increases of approximately $7.5 million in 1995
and approximately $16.9 million in 1996 in property, plant and
equipment. The increases in amortization expense resulted
primarily from the amortization of franchise cost related to the
Mid-Tennessee Acquisition and RCT Acquisition, respectively. As
a percentage of revenue, depreciation and amortization expenses
increased to 50.0% in 1996 from 48.8% in 1995.
Management fees, equal to 3.5% of gross revenue, of approximately
$2.5 million in 1996 increased approximately $200,000 from the
year ended December 31, 1995. Management fees for the year ended
December 31, 1996 increased approximately $700,000 from pro forma
1995 management fees of approximately $1.8 million due to the
increase in the Company's revenue as a result of rate increases
and increased customers as well as the Mid-Tennessee Acquisition
and RCT Acquisition.
The loss on disposal of assets, primarily the write-off of
replaced house drops and rebuilt trunk and distribution
equipment, increased to approximately $1.4 million in 1996 from
approximately $500,000 in 1995.
Interest expense during 1996 increased approximately $2.7 million
from the year ended December 31, 1995. However, interest expense
for the year ended December 31, 1996 increased by approximately
$9.4 million or 76.6% over pro forma interest for the same period
in 1995 and increased as a percentage of revenue from 24.4% to
30.3%. Interest expense was based on an average debt balance of
$202.9 million with an average interest rate of 10.6% and an
average debt balance of $137.9 million with an average interest
rate of 8.9% for 1996 and 1995, respectively. This increase was
primarily a result of the issuance of the Notes on January 26,
1996 with proceeds being held in escrow until March 1, 1996,
pending the completion of the Mid-Tennessee Acquisition. The
release of the Note proceeds from escrow resulted in the
reduction in outstandings under the Credit Agreement of
approximately $66.0 million.
The Partnership is a "pass-through" entity for income tax
purposes. All income or loss flows through to the partners of
the Partnership in accordance with the Partnership Agreement. An
income tax benefit of approximately $3.7 million was recorded in
1996 compared to an income tax benefit of approximately $3.2
million from the year ended December 31, 1995. However, the
income tax benefit for 1995 on a pro forma basis is approximately
$1.7 million and relates to deferred income taxes recorded as a
result of the non-cash tax liability of the Company's corporate
subsidiaries in conjunction with the application of Financial
Accounting Standard No. 109 (FAS 109), "Accounting for Income
Taxes."
As a result of the factors discussed above, net loss increased
85.7%, or approximately $11 million in 1996 compared with 1995
and approximately $10 million compared with pro forma 1995.
Adjusted EBITDA, defined as income (loss) before interest
expense, income taxes, depreciation and amortization, loss on
disposal of assets, non-recurring interest income (related to the
escrowed Notes proceeds) and the non-cash provision for the
management incentive plan, increased 41.4%, or approximately
$9.7million to $33.1 million in 1996 from $23.4 million for 1995.
The 1996 results increased 38.3%, or approximately $9.2 million
from a $23.9 million pro forma 1995 amount. As a percent of
revenue, Adjusted EBITDA decreased to 46.4% in 1996 from 46.7%
for 1995. When compared to pro forma 1995, Adjusted EBITDA as a
percent of revenues decreased to 46.4% in 1996 from 47.6% in 1995
as the Company's expense growth exceeded its revenue growth.
Industry analysts generally consider Adjusted EBITDA to be an
appropriate measure of the performance of multi-channel
television operations. Adjusted EBITDA is not presented in
accordance with generally accepted accounting principles and
should not be considered an alternative to, or more meaningful
than, operating income or operating cash flow as an indication of
the Company's operating performance.
Pro Forma 1995 Compared to 1994
For financial statement purposes, the Recapitalization was
accounted for using the purchase method of accounting.
Accordingly, the Recapitalization resulted in the restatement of
the Company's assets and liabilities to fair market value as of
September 1, 1995 to the extent of the new ownership interests
acquired by the Investor Group. In the discussion of operations
which follows, the Company's results of operations for 1995 are
reflected on a pro forma basis to account for the
Recapitalization as if it had occurred on December 31, 1994.
Because of the Recapitalization, pro forma results of operations
for 1995 are not comparable to results for prior periods
principally in the following areas: (i) depreciation and
amortization expense in the post-Recapitalization financial
statements reflect the restatement of assets described above,
(ii) interest expense in the post- Recapitalization financial
statements reflects the new debt structure of the Company and
(iii) results of operations for the period following the
Recapitalization reflect a reduction in management fees charged
by Rifkin & Associates.
Revenue increased 11.8%, or approximately $5.3 million, to $50.2
million for the year ended December 31, 1995 from $44.9 million
for year ended December 31, 1994. This increase resulted
primarily from growth in basic customers, increases in basic and
tier rates and higher sales of premium service units.
Approximately $3.9 million of the increase relates to basic, tier
and equipment revenue, and approximately $1.4 million relates to
premium and miscellaneous revenue. The number of basic customers
in the Systems increased 6.6% to approximately 132,300 at
December 31, 1995 from approximately 124,100 at December 31,
1994. This growth occurred primarily in the Georgia and
Tennessee systems, which added 4,600 (an increase of 10.5%) and
2,800 (an increase of 6.2%) customers, respectively, reflecting
the favorable demographic trends in certain communities covered
by such systems. Average monthly revenue per customer increased
4.7% from $31.19 for the year ended December 31, 1994 to $32.65
for 1995. Premium service units increased 7.3% to 80,400 as of
December 31, 1995, from 74,900 as of December 31, 1994, due in
large part to the Company's promotion of discounted premium
service packages designed to enhance customer value and enable
the Company to take advantage of programming cost incentives
based on premium service unit growth. The Company's premium
penetration increased to 60.8% from 60.4% between 1994 and 1995.
Operating expense, which includes costs related to technical
personnel, franchise fees and repairs and maintenance, increased
2.3%, or approximately $200,000, to $7.3 million for the year
ended December 31, 1995 from $7.1 million in 1994, but decreased
as a percentage of revenue to 14.6% from 15.9%.
Programming expense, which includes costs related to basic tier
and premium services, increased 19.1%, or approximately $1.7
million, to $10.2 million for the year ended December 31, 1995
from $8.5 million in 1994, and increased as a percentage of
revenue to 20.2% from 19.0% due to the impact of rate increases
effected in early 1995. This increase was due to higher
programming costs resulting from rate increases by certain
programming vendors and growth in customers. The increase also
reflects the termination of certain programming cost incentives
that generally were in effect through the fourth quarter of 1994.
Selling, general and administrative expense, which includes
expenses related to on-site office and customer service
personnel, customer billing and postage and marketing, increased
15.8%, or approximately $1 million, to $7.1 million for the year
ended December 31, 1995 from $6.1 million in 1994. As a
percentage of revenue, selling, general and administrative
expense increased to 14.1% for the year ended December 31, 1995
from 13.6% for the year ended in 1994. Approximately $500,000 of
the increase resulted from the hiring and training of additional
on-site office personnel to promote the ongoing compliance with
recently enacted cable regulations which established customer
service standards and due to customer growth.
Depreciation and amortization expense of $24.5 million in pro
forma 1995 increased approximately $11.4 million from
depreciation expense of $13.2 million in 1994. The increase in
depreciation resulted primarily from increases of $6.3 million in
1994 and $7.5 million in 1995 in property, plant, and equipment,
as well as purchase accounting adjustments to the carrying value
of certain fixed assets related to the Recapitalization. The
increase in amortization expense resulted primarily from the full
amortization of certain intangible assets as of December 31,
1994, more than offset by purchase accounting adjustments to the
carrying value of certain intangible assets related to the
Recapitalization. As a percentage of revenue, depreciation and
amortization expense increased to 48.8% in 1995 from 29.3% in
1994.
Management fees decreased to $1.8 million in pro forma 1995 from
$2.2 million in 1994, as the increase in the Company's revenue
between 1994 and 1995 was more than offset by the pro forma
reduction in such fees from 5.0% to 3.5% of revenue effective
December 31, 1994.
The loss on disposal of assets, primarily the write-off of
replaced house drops and rebuilt trunk and distribution
equipment, increased to approximately $500,000 in 1995 from
approximately $100,000 in 1994.
Interest expense during pro forma 1995 decreased by approximately
$5.8 million or 32.1% over 1994 and decreased as a percentage of
revenue from 40.1% to 24.4%. Interest expense from debt was based
on an average debt balance of $138 million with an average
interest rate of 8.9% and an average debt balance of $165.3
million with an average interest rate of 10.6% for 1995 and 1994,
respectively. This decrease was primarily a result of the
effects of the pro forma treatment of the Recapitalization.
The Partnership is a "pass-through" entity for income tax
purposes. All income or loss flows through to the partners of
the Partnership in accordance with the Partnership Agreement.
Income tax expense of approximately $1.6 million and an income
tax benefit of approximately $1.7 million recorded in 1994 and
pro forma 1995, respectively, relate to deferred income taxes
recorded as a result of the non-cash tax liability of the
Company's corporate subsidiaries in conjunction with the
application of Financial Accounting Standard No. 109 (FAS 109),
"Accounting for Income Taxes." See Note 3 to the Company's
Consolidated Financial Statements.
As a result of the factors discussed above, net loss decreased
2.7%, or approximately $300,000, in pro forma 1995 compared with
1994.
Adjusted EBITDA increased 14.6%, or approximately $3.0 million,
to $23.9 million in pro forma 1995 from $20.9 million in 1994.
As a percentage of revenue, Adjusted EBITDA increased to 47.6% in
1995 from 46.5% in 1994 as the impact of the Company's revenue
growth was largely offset by the increase in selling, general and
administrative expense as a percentage of revenue.
Liquidity and Capital Resources
The Company has relied upon cash generated by operations,
borrowing and equity contributions to fund capital expenditures
and acquisitions, service its indebtedness and finance its
working capital needs. During the comparable years ended
December 31, 1996 and 1995, net cash provided by operations
(including changes in working capital) of the Company was
approximately $20.8 and $14.8 million, respectively.
From December 31, 1995 to December 31, 1996, the Company's
available cash increased from approximately $300,000 to
approximately $1.4 million. For the same comparable period,
accounts payable and accrued liabilities increased by
approximately $4.1 million to approximately $9.9 million, due
primarily to the liabilities and accruals related to the systems
acquired in the Mid-Tennessee and RCT Acquisitions. Interest
payable increased from approximately $100,000 to approximately
$6.8 million for the same comparable period due primarily to the
increased debt level as well as the effect of the timing of
payments. Also, for the same comparable period, deferred taxes
payable decreased approximately $3.7 million to approximately
$17.5 million as a result of differences in book and tax
depreciation and amortization lives and methods. Notes payable
increased by $61 million from December 31, 1995 to December 31,
1996 due to the January 26, 1996 issuance of the Notes offset by
the paydown of the revolver portion of the Credit Agreement.
In order to improve liquidity and increase financial flexibility,
the Company completed its recapitalization in August 1995. In
connection with the recapitalization, the Company obtained $41.6
million in new equity, made initial borrowings of $138 million
under the Credit Facility and assumed $3 million of subordinated
debt. The proceeds of such debt and equity financings were used
to refinance or repay all of the Company's indebtedness and
provide ongoing liquidity for the Company.
In January 1996, the Partnership and RACC issued and sold the Old
Notes in order to fund certain acquisitions of cable systems and
the repayment of borrowings under a Credit Agreement. Such sales
were not registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act and Rule
144A promulgated under the Securities Act. In connection with
the sale of the Old Notes, the Partnership and RACC agreed to
file with the Commission a registration statement relating to an
exchange offer pursuant to which the Issuers would exchange the
New Notes for the Old Notes tendered at the option of the
holders. In June 1996, the Partnership and RACC exchanged the
New Notes for the Old Notes. The Notes are the joint and several
general unsecured obligations of the Partnership and RACC and are
fully and unconditionally guaranteed on a Senior Subordinated
basis by the Subsidiary Guarantors.
Additionally, in conjunction with the Mid-Tennessee and RCT
Acquisitions and the issuance of the Notes, the partners of the
Company contributed an additional $15 million of equity.
The Company has increased its total consolidated debt to $198.5
million as of December 31, 1996 from $137.5 million at December
31, 1995. The Company has unused commitments under the Amended
and Restated Credit Agreement of $74.5 million, $11 million of
which is available for general corporate purposes. Access to the
remaining $63.5 million of availability under the Credit
Agreement for general corporate purposes or Permitted
Acquisitions (as defined in the Amended and Restated Credit
Agreement) is subject to the Company's compliance with all
covenants in such facility and the Company's Total Funded Debt
Ratio (defined as the ratio of funded indebtedness of the Company
to annualized Adjusted EBITDA based on the most recent quarter)
being below 6.25x. As of December 31, 1996, the Company's Total
Funded Debt Ratio was 5.77x. Interest payments on the Notes and
interest and principal payments under the Amended and Restated
Credit Agreement represent significant liquidity requirements for
the Company. The Amended and Restated Credit Agreement provides
for two term loan facilities in a total amount of $65 million.
Term Loan A in the amount of $25 million, matures on March 31,
2003 and begins amortizing on March 31, 2000. Term Loan B in the
amount of $40 million, matures March 31, 2004 and begins
amortizing March 31, 2002. The Amended and Restated Credit
Agreement also provides for an $80 million reducing revolving
facility with a final maturity date of March 31, 2003. The
revolving facility will be subject to permanent annual commitment
reductions commencing in 1997. Borrowings under the Amended and
Restated Credit Agreement will bear interest at floating rates
and will require interest payments on various dates depending
upon the interest rate options selected by the Company.
In addition to its debt service obligations, the Company will
require liquidity for capital expenditures and working capital
needs. The cable television business requires substantial
capital for construction, expansion and maintenance of plant and
the Company has committed substantial capital resources to (i)
expand its cable systems; (ii) conduct routine replacement of
cable television plant; and (iii) increase the channel capacity
of certain systems.
The Company expects that cash flow from operating activities and
available borrowings will be sufficient to meet its debt service
obligations, anticipated capital expenditure requirements and
working capital needs for the next twelve months, as well as
through the maturity date of the Notes.
The Amended and Restated Credit Agreement and the Indenture
restrict, among other things, the Company's and the Subsidiary
Guarantors' ability to incur additional indebtedness, incur
liens, pay distributions or make certain other restricted
payments, consummate certain asset sales, enter into certain
transactions with affiliates, 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.
The Amended and Restated Credit Agreement also requires the
Company to maintain specified financial ratios and satisfy
certain financial condition tests. The obligations under the
Amended and Restated Credit Agreement are secured by (i) a pledge
of all of the equity interest of the Company's subsidiaries and
(ii) subject to certain exceptions, a perfected first priority
security interest in all tangible and intangible assets.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Rifkin Acquisition Partners, L.L.L.P.
Rifkin Acquisition Partners, L.P.
Reports of Independent Accountants. . . . . . . . . F-1
Consolidated Balance Sheet . . . . . . . . . . . . . F-3
Consolidated Statement of Operations . . . . . . . . F-4
Consolidated Statement of Cash Flows . . . . . . . . F-5
Consolidated Statement of Partners' Capital (Deficit) F-6
Notes to Consolidated Financial Statements . . . . . F-7
Rifkin Acquisition Capital Corp.
Report of Independent Accountants. . . . . . . . . . F-18
Balance Sheet. . . . . . . . . . . . . . . . . . . . F-19
Notes to Balance Sheet . . . . . . . . . . . . . . . F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Rifkin Acquisition Partners, L.L.L.P.
In our opinion, the accompanying consolidated balance sheet and
the related consolidated statements of operations, of partners'
capital(deficit) and of cash flows present fairly, in all
material respects, the financial position of Rifkin Acquisition
Partners, L.L.L.P. and its subsidiaries (the "Company") at
December 31, 1996 and 1995, and the results of their operations
and their cash flows for the year ended December 31, 1996 and the
four months ended December 31, 1995 in conformity with generally
accepted accounting principles. These financial statements are
the responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
As explained in Note 1 to the financial statements, effective
September 1, 1995, Rifkin Acquisition Partners, L.P. and its
subsidiaries (the "Partnership") transferred substantially all of
its net assets to the Company. The Company has recorded the
assets and liabilities transferred at their estimated fair values
at September 1, 1995. Accordingly, the consolidated financial
statements of the Company are not comparable to those of the
Partnership.
Price Waterhouse LLP
Denver, Colorado
February 28, 1997
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Rifkin Acquisition Partners, L.P.
In our opinion, the accompanying consolidated statements of
operations, of partners' capital (deficit) and of cash flows
present fairly, in all material respects, the results of
operations and cash flows of Rifkin Acquisition Partners, L.P.
and its subsidiaries ("RAP L.P.") for the eight months ended
August 31, 1995 and the year ended December 31, 1994 in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of RAP L.P.'s
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
As explained in Note 1 to the financial statements, effective
September 1, 1995, RAP L.P. transferred substantially all of its
net assets to Rifkin Acquisition Partners, L.L.L.P. and its
subsidiaries (the "Company"). The Company has recorded the
assets and liabilities transferred at estimated fair values at
September 1, 1995. Accordingly, the consolidated financial
statements of the Company are not comparable to those of RAP L.P.
Price Waterhouse LLP
Denver, Colorado
December 20, 1995
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED BALANCE SHEET
<CAPTION>
ASSETS 12/31/96 12/31/95
----------- -----------
<S> <C> <C>
Cash and cash equivalents $1,387,232 $ 318,020
Subscriber accounts receivable,
net of allowance for doubtful
accounts of $381,197 in 1996
and $292,626 in 1995 1,184,074 884,908
Other receivables 2,622,375 1,542,667
Prepaid expenses and other 1,776,272 924,229
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related equipment 110,600,391 73,994,528
Land, buildings, vehicles and furniture
and fixtures 5,726,169 3,159,116
------------- -------------
116,326,560 77,153,644
Less accumulated depreciation (14,264,937) (2,741,453)
Net property, plant and equipment 102,061,623 74,412,191
Franchise costs and other intangible assets,
net ofaccumulated amortization of
$28,849,916 in 1996 and $5,128,754 in 1995 190,801,885 159,963,395
------------- -------------
Total assets $ 299,833,461 $ 238,045,410
============= =============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable and accrued liabilities $ 9,937,238 $ 5,867,584
Subscriber deposits and prepayments 1,272,279 961,528
Interest payable 6,784,261 91,273
Deferred taxes payable 17,473,000 21,127,000
Notes payable 198,500,000 137,500,000
--------------- -------------
Total liabilities 233,966,778 165,547,385
Commitments (Note 7)
Redeemable partners' interests 4,861,840 3,600,000
Partners' capital (deficit):
General partner (1,309,354) (1,085,311)
Limited partners 61,881,692 69,421,043
Preferred equity interest 432,505 562,293
------------- -------------
Total partners' capital (deficit) 61,004,843 68,898,025
------------- -------------
Total liabilities and partners'
capital (deficit) $ 299,833,461 $ 238,045,410
============= =============
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
RIFKIN ACQUISITION PARTNERS, L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
Company RAP L.P.
Year Ended 4 Months Ended 8 Months Ended Year Ended
12/31/96 12/31/95 8/31/95 12/31/94
<S> <C> <C> <C> <C>
Revenue:
Service $ 66,433,321 $16,316,638 $30,954,441 $ 42,423,453
Installation and other 4,852,124 983,924 1,952,807 2,465,573
Total revenue 71,285,445 17,300,562 32,907,248 44,889,026
Costs and Expenses:
Operating expense 10,362,671 2,633,625 4,676,542 7,146,220
Programming expense 14,728,925 3,496,262 6,667,194 8,529,692
Selling, general and
administrative expense 10,733,472 2,486,389 4,568,081 6,090,102
Depreciation and
amortization 35,297,703 8,199,945 7,624,784 13,154,400
Management fees 2,475,381 605,503 1,645,191 2,244,121
Costs associated with
the transfer of
net assets - - 441,216 -
Loss on disposal
of assets 1,357,180 275,311 231,051 128,228
Total costs and expense 74,955,332 17,697,035 25,854,059 37,292,763
Operating income (loss) (3,669,887) (396,473) 7,053,189 7,596,263
Interest expense 21,607,174 4,251,616 14,618,957 18,007,725
Loss before income
taxes and
extraordinary item (25,277,061) (4,648,089) (7,565,768) (10,411,462)
Income tax expense
(benefit) (3,645,719) (1,674,000) (1,558,000) 1,558,000
Loss before
extraordinary item (21,631,342) (2,974,089) (6,007,768) (11,969,462)
Extraordinary item
- - Loss on early
retirement of debt - - 1,699,322 -
Net loss $(21,631,342) $(2,974,089) $(7,707,090) $(11,969,462)
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
RIFKIN ACQUISITION PARTNERS, L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Company RAP L.P.
Year Ended 4 Mos Ended 8 Mos Ended Year Ended
12/31/96 12/31/95 8/31/95 12/31/94
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(21,631,342) $ (2,974,089) $ (7,707,090) $(11,969,462)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 35,297,703 8,199,945 7,624,784 13,154,400
Amortization of deferred
loan costs 970,753 111,037 312,243 468,365
Amortization of original debt discount
and accretion of interest - - 1,105,269 317,161
Loss on disposal of fixed assets 1,357,180 275,311 231,051 128,228
Deferred taxes provision (benefit) (3,654,000) (1,674,000) (1,558,000) 1,558,000
(Increase) decrease in subscriber
accounts receivables (117,278) (133,267) 149,258 (133,187)
Increase in other receivables (994,681) (152,759) (30,206) (28,754)
(Increase) decrease in prepaid
expenses and other (494,252) 213,483 (69,650) (348,849)
Increase in accounts payable and
accrued liabilities 3,245,736 1,164,367 469,787 469,151
Increase (decrease) in subscriber
deposits and prepayment 164,824 (242,011) 170,457 (63,061)
Increase in interest payable 6,692,988 91,273 9,239,139 424,300
Net cash provided by operating
activities 20,837,631 4,879,290 9,937,042 3,976,292
Cash flows from investing activities:
Initial cash acquisition cost,
net (Note 1) - (173,447,115) - -
Acquisition of
Mid-Tennessee systems, net (61,942,179) - - -
Acquisition of RCT systems, net (9,854,859) - - -
Additions to property, plant and
equipment (16,896,582) (3,360,037) (4,119,335) (6,279,791)
Additions to cable television
franchises, netof retirements
and changes in other intangible
assets (1,182,311) (326,335) 29,087 (102,556)
Net proceeds from the sale of assets 197,523 19,777 32,521 80,750
Management fee escrow (1,000,000) - -
Net cash used in investing
activities (89,678,408) (178,113,710) (4,057,727) (6,301,597)
Cash flows from financing activities:
Proceeds from isssuance of senior
subordinated notes 125,000,000 - - -
Proceeds from debt 18,000,000 138,500,000 4,000,000 13,000,000
Deferred loan costs (6,090,011) (3,147,989) - -
Payments of debt (82,000,000) (4,000,000) (6,250,000) (10,250,000)
Partners' capital contributions 15,000,000 42,200,429 - -
Net cash provided by (used in)
financing activities 69,909,989 173,552,440 (2,250,000) 2,750,000
Net increase in cash 1,069,212 318,020 3,629,315 424,695
Cash and cash equivalents
at beginning of period 318,020 - 1,196,651 771,956
Cash and cash equivalents
at end of period $ 1,387,232 $ 318,020 $4,825,966 $ 1,196,651
Supplemental Cash Flow Information:
Interest paid $13,866,995 $ 4,024,306 $5,624,247 $16,744,898
</TABLE>
<PAGE>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
RIFKIN ACQUISITION PARTNERS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
<CAPTION>
Preferred General Limited
RAP L.P. Equity Interest Partner Partners Total
<S> <C> <C> <C> <C>
Partners' deficit at December 31, 1993 $ - $ (434,525)$(72,652,709)$(73,087,234)
Net loss - (119,695) (11,849,767) (11,969,462)
Partners' deficit at December 31, 1994 - (554,220) (84,502,476) (85,056,696)
Net loss - (77,071) (7,630,019) (7,707,090)
Partners' deficit at August 31, 1995 $ - $ (631,291)$(92,132,495)$(92,763,786)
COMPANY
Partners' capital contributions $ 583,112 $ - 81,017,838 81,600,950
Partners' carryover interest (Note 1) - (605,570) (5,523,266) (6,128,836)
Accretion of redeemable partners' interest - (450,000) (3,150,000) (3,600,000)
Net loss (20,819) (29,741) (2,923,529) (2,974,089)
Partners' capital (deficit)
at December 31, 1995 562,293 (1,085,311) 69,421,043 68,898,025
Partners' capital contributions - 150,000 14,850,000 15,000,000
Accretion of redeemable partners' interest - (157,730) (1,104,110) (1,261,840)
Net loss (129,788) (216,313) (21,285,241) (21,631,342)
Partners' capital (deficit)
at December 31, 1996 $ 432,505 $(1,309,354)$ 61,881,692 $ 61,004,843
<FN>
The Partners' capital accounts for financial reporting purposes vary from the
tax capital accounts.
</TABLE>
<PAGE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
RIFKIN ACQUISITION PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General Information and Transfer of Net Assets
General Information
Rifkin Acquisition Partners, L.P. ("RAP L.P.") was formed on
December 16, 1988, pursuant to the laws of the State of Colorado,
for the purpose of acquiring and operating cable television (CATV)
systems. On September 1, 1995, RAP L.P. registered as a limited
liability limited partnership, Rifkin Acquisition Partners,
L.L.L.P. (the "Partnership") pursuant to the laws of the State of
Colorado. Rifkin Acquisition Management, L.P., an affiliate of
Rifkin & Associates, Inc. (Note 6), was the general partner of RAP
L.P. and is the general partner of the Partnership ("General
Partner"). The Partnership and its subsidiaries are hereinafter
referred to on a consolidated basis as the "Company."
The Partnership operates under a limited liability limited
partnership agreement (the "Partnership Agreement") which
establishes contribution requirements, enumerates the rights and
responsibilities of the partners and advisory committee, provides
for allocations of income, losses and distributions, and defines
certain items relating thereto.
The Partnership Agreement provides that net income or loss, certain
defined capital events, and cash distributions, all as defined in
the Partnership Agreement, are generally allocated 99% to the
limited partners and 1% to the general partner.
Transfer of Net Assets
On September 1, 1995, unrelated third party investors purchased for
approximately $39 million the interest of certain limited partners
in RAP L.P. and contributed approximately $42 million in direct
equity for an approximate 89% limited partner interest resulting in
a total basis therein of $81 million. In addition, existing RAP
L.P. limited and general interests were carried over and $600,000
contributed for 10% and 1%, respectively (the "Carryover
iterests"). The Carryover Interests had negative basis of
approximately $6.1 million. Also, $138 million of debt was
borrowed.
Further, on September 1, 1995, RAP L.P. was renamed Rifkin
Acquisition Partners, L.L.L.P. and a new basis of accounting was
established. The proceeds of the new debt and equity were used to
retire existing debt and pay interest and penalties of
approximately $176 million, and to pay agency, bank, and legal fees
of approximately $5 million. The Company has recorded the assets
and liabilities transferred at their estimated fair values at
September 1, 1995 adjusted for the Carryover Interests.
Accordingly, the consolidated financial statements of the Company
are not comparable to those of RAP L.P., which are based upon its
historical costs. The transaction to record the funds received due
to the recapitalization and the payoff of debt of RAP L.P. took
place on September 1, 1995 and is not reflected in the Consolidated
Statement of Cash Flows for the eight months ended August 31, 1995.
This was the only RAP L.P. transaction which took place subsequent
to August 31, 1995 prior to its termination. The results of the
completed transaction are as follows (dollars in thousands):
Proceeds from the Company due to the capitalization..............$175,800
Payment of long-term debt at time of recapitalization......(162,700)
Payment of interest payable and accrued liabilities.........(13,100)
--------
Net result of the transaction..............................$ -
========
Cash interest paid.........................................$ 11,400
========
The acquisition was recorded using the purchase method of accounting as
follows
(dollars in thousands):
Cash paid to RAP L.P.......................................$175,797
Acquisition costs (legal and advisory fees)................ 2,476
Cash acquired ............................................. (4,826)
--------
Cash acquisition cost...................................... 173,447
Adjusted for: Working capital deficit assumed............. 3,627
Non-cash transactions---
Interests of RAP L.P. purchased directly by investors.. 39,401
Conveyance of debt..................................... 3,000
Reduction due to accounting for Carryover Interests.... (6,129)
--------
Total acquisition cost.....................................$213,346
Allocation: ========
Property, plant and equipment.............................. $74,095
Franchise cost and other intangible assets................. 139,251
--------
$213,346
========
1. General Information and Transfer of Net Assets--(continued)
The allocation of the total acquisition cost to property, plant and
equipment and franchise cost and other intangible assets was
calculated based on values established by independent appraisal
reduced for the adjustment arising from the effect of the Carryover
Interests.
The following table presents unaudited pro forma operating results
as if the transfers of assets and step up in bases had occurred on
the first day of the period presented:
Years Ended
12/31/95 12/31/94
(Dollars in Thousands)
Total Revenue $ 50,208 $44,889
Net Loss $ (11,649) $(15,268)
The pro forma results are based upon certain assumptions and
estimates which the Company believes are reasonable. The pro forma
results do not purport to be indicative of results that actually
would have been obtained had the transfer occurred on January 1,
1995, nor are they intended to be a projection of future results.
2. Acquisition of Cable Properties
On March 1, 1996, the Company acquired certain cable operating
assets ("Mid-Tennessee Systems") from Mid-Tennessee CATV, L.P., and
on April 1, 1996 acquired the cable operating assets ("RCT
Systems") from Rifkin Cablevision of Tennessee, Ltd. Both Mid-
Tennessee CATV, L.P. and Rifkin Cablevision of Tennessee, Ltd. are
affiliates of the General Partner. The acquisition costs were
funded by $15 million of additional partner contributions and the
remainder from a portion of the proceeds received from the issuance
of $125 million of 11 1/8% Senior Subordinated Notes due 2006 (see
Note 5).
The acquisitions were recorded using the purchase method of
accounting. The results of operations of the Mid-Tennessee Systems
have been included in the consolidated financial statements since
March 1, 1996, and the results of the RCT Systems have been
included in the consolidated financial statements since April 1,
1996. The purchase price of each was allocated based on estimated
fair values from an independent appraisal to property, plant and
equipment and franchise cost as follows (dollars in thousands):
Mid-Tennessee RCT
Systems Systems
Cash paid, net of acquired cash $61,755 $ 9,827
Acquisition costs (appraisal, transfer
fees, and direct costs) 187 28
Total acquisition cost $61,942 $ 9,855
======= ========
Allocation:
Current assets $ 467 $ 157
Current liabilities (435) (534)
Property, plant and equipment 18,046 5,987
Franchise cost and other intangible assets 43,864 4,245
Total cost allocated $61,942 $ 9,855
The following unaudited pro forma information presents a summary of
consolidated results of operations for the Company as if the
Mid-Tennessee Systems and the RCT Systems acquisitions had occurred
at the beginning of 1995, with pro forma adjustments to show the
effect on depreciation and amortization for the acquired
assets, management fees on additional revenues and interest expense
on additional debt (dollars in thousands):
2. Acquisition of Cable Properties (continued)
Years Ended
December 31,
1996 1995
Total revenues $74,346 $65,567
Net loss (22,558) (22,357)
The pro forma financial information is not necessarily
indicative of the operating results that would have occurred had
the Mid-Tennessee Systems and the RCT Systems actually been
acquired on January 1, 1995.
On November 29, 1996, the Company entered into a definitive
agreement to purchase certain assets comprising two cable systems
serving the Tennessee communities of Shelbyville and Manchester
(the "Manchester Systems"). The purchase price is $19,750,000
subject to certain post-closing adjustments.
3. Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of
the following entities:
Rifkin Acquisition Partners, L.L.L.P. - Cable Equities,
Incorporated (CEI)
Cable Equities of Colorado - FNI Management Corp.(FNI)
Management Corp. (CEM) - Rifkin/Tennessee, Ltd.
(RTL)
Cable Equities of Colorado, Ltd. (CEC) - Rifkin Acquisition
Capital Corp. (RACC)
All significant intercompany accounts and transactions have
been eliminated.
Revenue and Programming
Subscriber fees are recorded as revenue in the period the
service isprovided. The cost to acquire the rights to the
programming generally is recorded when the product is initially
available to be viewed by the subscriber.
Advertising and Promotion Expenses
Advertising and promotion expenses are charged to income during
the year in which they are incurred.
Property, Plant and Equipment
Additions to property, plant and equipment are recorded at
cost, which in the case of assets constructed, includes amounts for
material, labor, overhead and interest, if applicable.
Depreciation expense is calculated using the straight-line
method over the estimated useful lives of the assets as follows:
Buildings 27 - 30 years
Cable television transmission and
distribution systems and related equipment 3 - 15 years
Vehicles and furniture and fixtures 3 - 5 years
Expenditures for maintenance and repairs are expensed as
incurred.
3. Summary of Significant Accounting Policies--(continued)
Franchise Costs
Franchise costs are amortized using the straight-line method over
the remaining lives of the franchises as of the date they were
acquired, ranging from one to twenty years. The carrying value of
franchise costs is assessed for recoverability by management based
on an analysis of undiscounted future expected cash flows from the
underlying operations of the Company. Management believes that
there has been no impairment thereof as of December 31, 1996.
Other Intangible Assets
Certain loan costs have been deferred and are amortized to
interest expense over the remaining term of the related debt. The
net amounts remaining at December 31, 1996 and 1995 were $8,156,210
and $3,036,952, respectively.
Cash and Cash Equivalents
All highly liquid debt instruments purchased with an original
maturity of three months or less are considered to be cash
equivalents.
Redeemable Partners' Interests
The Partnership Agreement provides that if a certain partner dies
or becomes disabled, that partner (or his personal representative)
shall have the option, exercisable by notice given to the partners
at any time within 270 days after his death or disability (except
that if that partner dies or becomes disabled prior to August 31,
2000, the option may not be exercised until August 31, 2000 and
then by notice by that partner or his personal representative given
to the partners within 270 days after August 31, 2000) to sell, and
require the General Partner and certain trusts controlled by that
partner to sell, and the Partnership to purchase, up to 50% of the
partnership interests owned by any of such partners and certain
current andformer members of management of Rifkin & Associates,
Inc. that requests to sell its interest, for a purchase price equal
to the fair market value of those interests determined by appraisal
in accordance with the Partnership Agreement. Accordingly, the
current fair value of such partnership interests have been
reclassified outside of partners' capital.
Use of Estimates
The preparation of the 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.
Reclassification of Financial Statement Presentation
Certain reclassifications have been made to the previous years'
financial statements to conform with the 1996 financial statement
presentation.
4. Income Taxes
Although neither the Partnership nor RAP L.P., are taxable
entities, three corporations (the "subsidiaries") are included in
the consolidated financial statements. The subsidiaries are
required to pay taxes on their taxable income, if any.
4. Income Taxes (continued)
The following represents a reconciliation of pre-tax losses as
reported in accordance with generally acepted accounting principles
and the losses attributable to the partners and included in their
individual income tax returns:
<TABLE>
<CAPTION>
Company RAP L.P.
----------------------- ------------------------
Year 4 Months 8 Months Year
Ended Ended Ended Ended
12/31/96 12/31/95 8/31/95 12/31/94
<S> <C> <C> <C> <C>
Pre-tax loss as reported $(25,277,061) $(4,648,089) $(7,565,768) $(10,411,462)
(Increase)decrease due to:
Separately taxed book
results of corporate
subsidiaries 9,716,000 3,163,000 2,915,600 2,944,600
Effect of different
depreciation and
amortization methods
for tax and book
purposes (3,833,000) 5,249,000 (75,400) (1,625,000)
Other (22,539) 86,489 (161,332) 348,962
Tax income (loss)
attributed to the
partners $(19,416,600) $ 3,850,400 $(4,886,900) $(8,742,900)
</TABLE>
The Company accounts for income taxes under the liability
method. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax
bases of assets and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the differences are
expected to reverse.
As a result of the transfer of net assets on September 1, 1995
(Note 1), the book value of the net assets was increased to reflect
their fair market value at that date. In connection with this
revaluation, a deferred income tax liability in the amount of
$22,801,000 was established to provide for future taxes payable on
the revised valuation of the net assets. A deferred tax benefit of
$3,654,000 and $1,674,000 was recognized for the year ended
December 31, 1996 and the four months ended December 31, 1995,
respectively, reducing the liability to $17,473,000.
Deferred tax assets (liabilities) were comprised of the following
at December 31, 1996 and 1995:
Company
12/31/96 12/31/95
Deferred tax assets resulting
from loss carryforwards $ 8,264,000 $ 6,812,000
Deferred tax liabilities resulting
from depreciation and amortization (25,737,000) (27,939,000)
Net deferred tax liability $(17,473,000) $(21,127,000)
As of December 31, 1996 and 1995, the subsidiaries have net
operating loss carryforwards ("NOLs") for income tax purposes of
$21,815,000 and $18,099,000, respectively, substantially all of
which are limited. The NOLs will expire at various times between
the years 2000 and 2011. As a result, the Company had no current
tax for 1995 and a current expense of $8,281 for 1996.<PAGE>
4. Income Taxes--(continued)
Under the Internal Revenue Code of 1986, as amended (the Code),
the subsidiaries generally would be entitled to reduce their future
federal income tax liabilities by carrying the unused NOLs forward
for a period of 15 years to offset their future income taxes. The
subsidiaries ability to utilize any NOLs in future years may be
restricted, however, in the event the subsidiaries undergo an
ownership change as defined in Section 382 of the Code. In the
event of an ownership change, the amount of NOLs attributable to
the period prior to the ownership change that may be used to offset
taxable income in any year thereafter generally may not exceed the
fair market value of the subsidiary immediately before the
ownership change (subject to certain adjustments) multiplied by the
applicable long-term, tax exempt rate announced by the Internal
Revenue Service for the date of the ownership change. Two of the
subsidiaries underwent an ownership change on September 1, 1995
pursuant to Section 382 of the Code. As such, the NOLs of the
subsidiary are subject to limitation from that date forward. It is
the opinion of management that the NOLs will be released from this
limitation prior to their expiration dates and, as such, have not
been limited in its calculation of deferred taxes.
The provision for income tax expense (benefit) differs from the
amount which would be computed by applying the statutory federal
income tax rate of 35% to pre-tax income before extraordinary loss
as a result of the following:
Company RAP L.P.
Year ended 4 Months ended 8 Months ended Year Ended
12/31/96 12/31/95 8/31/95 12/31/94
Tax (benefit) computed
at statutory rate $(8,846,971) $(1,626,831) $(2,648,019) $(3,644,012)
Increase (reduction) due to:
Tax benefit for non-corporate
loss 5,446,721 519,781 1,627,602 2,613,396
Increase/(decrease) in
valuation allowance due
to NOL carryforwards - (493,000) 1,712,000
Permanent differences between
financial statement income and
taxable income 48,270 - 80,300 853,234
State income tax,
net of federal benefit (252,590) (120,850) (196,710) (270,698)
Other (41,149) (446,100) 71,827 294,080
Income Tax Expense (Benefit)$(3,645,719) $(1,674,000) $(1,558,000) $1,558,000
5. Notes Payable
Debt consisted of the following:
December 31, December 31,
1996 1995
Senior Subordinated Notes $ 125,000,000 $ -
Reducing Revolving Loan 5,500,000 94,500,000
Term Loan - 40,000,000
Tranche A Term Loan 25,000,000 -
Tranche B Term Loan 40,000,000 -
Senior Subordinated Debt 3,000,000 3,000,000
$ 198,500,000 $ 137,500,000
5. Notes Payable (continued)
The Notes and loans are secured by substantially all of the
assets of the Company.
Concurrent with the transfer of net assets described in Note 1,
on September 1, 1995, the Company obtained a term loan and reducing
revolving loan with a financial institution. The term loan was for
$40,000,000 and required varying annual payments. The reducing
revolving loan provided for borrowing up to $105,000,000 at the
discretion of the Company with annual decreases. At December 31,
1995, the term loan bore an interest rate of 9.75% and the weighted
average effective interest rate on the reducing revolving loan was
8.4%.
On January 26, 1996, the Company and its wholly-owned
subsidiary, RACC (the "Issuers"), co-issued $125,000,000 of 11 1/8%
Senior Subordinated Notes (the "Notes") to institutional investors.
These notes were subsequently exchanged on June 18, 1996 for
publicly registered notes with identical terms. Interest on the
Notes is payable semi-annually on January 15 and July 15 of each
year. The Notes, which mature on January 15, 2006, can be redeemed
in whole or in part, at the Issuers' option, at any time on or
after January 15, 2001, at redeemable prices contained in the Notes
plus accrued interest. In addition, at any time on or prior to
January 15, 1999, the Issuers, at their option, may redeem up to
25% of the principle amount of the Notes issued to institutional
investors of not less than $25,000,000. At December 31, 1996, all
of the Notes were outstanding (see Note 11).
On March 1, 1996, the credit agreement covering the term loan
and reducing revolving loan was amended. Under the new agreement,
$25,000,000 of the outstanding reducing revolving loan was
converted to the Tranche A term loan which requires quarterly
payments of $1,875,000 plus interest commencing on March 31, 2000.
Any unpaid balance is due March 31, 2003.
The interest rate on the Tranche A term loan is either the
bank's prime rate plus .25% to 1.75% or LIBOR plus 1.5% to 2.75%.
The specific rate is dependent upon the senior funded debt ratio
which is recalculated quarterly. The weighted average effective
interest rate at December 31, 1996 was 8.09%.
The balance of the reducing revolving loan was amended to be a
reducing revolving loan providing for borrowing up to $20,000,000
at the Company's discretion, subject to certain restrictions, and
an additional $60,000,000 available to finance acquisitions subject
to certain restrictions. At December 31, 1996, $5,500,000 had been
drawn against the $20,000,000 commitment. The amount available for
borrowing will decrease annually during its term with changes over
the five years following December 31, 1996 as follows: 1997 and
1998 - $1,875,000 reduction per quarter, and 1999 through 2001 -
$3,625,000 per quarter. Any unpaid balance is due on March 31,
2003. The revolving loan bears an interest rate of either the
bank's prime rate plus .25% to 1.75% or LIBOR plus 1.5% to 2.75%.
The specific rate is dependent upon the senior funded debt ratio
which is recalculated quarterly. The weighted average effective
interest rate at December 31, 1996 was 8.03%. The reducing
revolving loan includes a commitment fee of 1/2% per annum on the
unborrowed balance.
The existing $40,000,000 term loan was converted to the
$40,000,000 Tranche B term loan, which requires principal payments
of $2,000,000 on March 31, 2002, $18,000,000 on March 31, 2003, and
$20,000,000 on March 31, 2004. The Tranche B term loan bears an
interest rate of 9.75% and is payable quarterly.
Certain mandatory prepayments may also be required, commencing
in fiscal 1997, on the reducing revolving loan, the Tranche A term
loan and the Tranche B term loan, based on the Company's cash flow
calculations, proceeds from the sale of a cable system or equity
contributions. Optional prepayments are allowed, subject to certain
restrictions. The related loan agreement contains covenants
limiting additional indebtedness, dispositions of assets,
investments in securities, distribution to partners, management
fees and capital expenditures. In addition, the Company must
maintain certain financial levels and ratios. At December
31, 1996, the Company was in compliance with these covenants.
The Company also has $3,000,000 of senior subordinated debt
payable to a Rifkin Partner which was originally conveyed from RAP
L.P. (the "Old Rifkin Note") concurrent with the September 1, 1995
asset transfer described in Note 1. On January 26, 1996, in
connection with the issuance of the Notes, the Company amended and
restated the Old Rifkin Note and issued a new senior subordinated
debt note (the "New Rifkin Note"). The New Rifkin Note has a
scheduled maturity, interest rate and interest payment schedule
identical to that of the Notes.
Based on the outstanding debt as of December 31, 1996, the
minimum aggregate maturities for the five years following 1996 are
none in 1997, 1998, and 1999, and $7,500,000 in 2000 and 2001.
6. Related Party Transactions
RAP L.P. was operated under a management agreement (the "old
agreement") with Rifkin & Associates, Inc. (Rifkin). The
management agreement which ended August 31, 1995, provided that
Rifkin act as manager of RAP L.P.'s CATV systems, and be entitled
to annual compensation of 5.0% of the revenues of RAP L.P. A new
management agreement effective September 1, 1995, provides that
Rifkin act as manager of the Company's CATV systems, and be
entitled to an annual compensation of 3.5% of its revenue.
Expenses incurred pursuant to the management agreement with Rifkin
are disclosed on the Consolidated Statement of Operations.
Accrued management fees at December 31, 1996 and 1995 include
deferred management fees of $161,093 and $402,732, respectively,
which are being paid out over twenty-four months through September
30, 1997.
The Company paid approximately $2,200,000 in 1995 to certain
limited partners or affiliates thereof for assistance in connection
with the transfer of net assets described in Note 1.
The Company paid approximately $550,000 to a law firm in
connection with the public offering in 1996. A partner of this law
firm is a relative of one of the Company's partners.
7. Commitments and Rental Expense
The Company leases and RAP L.P. leased certain real and
personal property under noncancelable operating leases expiring
through the year 2037. Future minimum lease payments under such
noncancelable leases as of December 31, 1996 are: $343,231 in 1997;
$296,223 in 1998; $266,696 in 1999; $217,361 in 2000; $194,981 in
2001; and $587,793 thereafter, totaling $1,906,285.
Total rental expense and the amount included therein which
pertains to cancelable pole rental agreements were as follows for
the periods indicated:
Total Cancelable
Rental Pole Rental
Period Expense Expense
Company
Year Ended December 31, 1996 $1,294,084 $874,778
Four Months Ended December 31, 1995 $ 261,491 $149,847
RAP L.P.
Eight Months Ended August 31, 1995 $ 527,802 $292,293
Year Ended December 31, 1994 $ 797,799 $422,886
8. Compensation Plans and Retirement Plans
Equity Incentive Plan
In 1996 the Company implemented an Equity Incentive Plan (the
"Plan") in which certain Rifkin & Associates' executive officers
and key employees,and certain key employees of the Company are
eligible to participate. Plan participants in the aggregate, have
the right to receive (i) cash payments of up to 2.0% of the
aggregate value of all partnership interests of the Company (the
"Maximum Incentive Percentage"), based upon the achievement
of certain annual Operating Cash Flow (as defined in the Plan)
targets for the Company for each of the calendar years 1996 through
2000, and (ii) an additional cash payment equal to up to 0.5% of
the aggregate value of all partnership interests of the Company
(the "Additional Incentive Percentage"), based upon the achievement
of certain cumulative Operating Cash Flow targets for the Company
for the five-year period ended December 31, 2000. Subject to the
achievement of such annual targets and the satisfaction of certain
other criteria based on the Company's operating performance, up to
20% of the Maximum Incentive Percentage will vest in each such
year; provided, that in certain events vesting may accelerate.
Payments under the Plan are subject to certain restrictive
covenants contained in the Notes.
No amounts are payable under the Plan except upon (i) the sale
of substantially all of the assets or partnership interests of the
Company or (ii) termination of a Plan participant's employment with
Rifkin & Associates or the Company, as applicable, due to (a) the
decision of the Advisory Committee to terminate such participant's
employment due to disability, (b) the retirement of such
participant with the Advisory Committee's approval or (c) the death
of such Participant. The value of amounts payable pursuant to
clause (i) above will be based upon the aggregate net proceeds
received by the holders of all of the partnership interests in the
Company, as determined by the Advisory Committee, and the amounts
payable pursuant to clause (ii) above will be based upon the
Enterprise Value determined at the time of such payment. For
purposes of the Plan, Enterprise Value generally is defined as
Operating Cash Flow for the immediately preceding calendar year
times a specified multiple and adjusted based on the Company's
working capital.
The amount expensed for the year ended December 31, 1996
relating to this plan was $660,000.
Retirement Benefits
During 1996, a Company-sponsored 401(k) plan was implemented
for employees that have been employed by the Company for at least
one year. Employees of the Company can contribute up to 15% of
their salary, on a before-tax basis, with a maximum 1996
contribution of $9,500 (as set by the Internal Revenue Service).
The Company matches participant contributions up to a maximum of
50% of the first 3% of a participant's salary contributed.
All participant contributions and earnings are fully vested upon
contribution and Company contributions and earnings vest 20% per
year of employment with the Company, becoming fully vested after
five years. The Company's matching contributions for the year
ended December 31, 1996 were $42,636.
9. Fair Value of Financial Instruments
The Company has a number of financial instruments, none of
which are held for trading purposes. The fair value of all
financial instruments at December 31, 1996, approximates the
aggregate carrying values as recorded in the accompanying balance
sheet. Fair market estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore
cannot be determined with precision. Changes in assumptions
could significantly affect these estimates.
The following method and assumptions were used by the Company
to estimate the fair values of financial instruments as disclosed
herein:
9. Fair Value of Financial Instruments (continued)
Cash, Subscriber Accounts Receivable, Other Receivables,
Accounts Payable and Accrued Liabilities and Subscriber Deposits
and Prepayments: The carrying value amount approximates fair value
because of the short period to maturity.
Debt: The fair value of bank debt is estimated based on
interest rates for the same or similar debt offered to the Company
having the same or similar remaining maturities and collateral
reauirements. The fair value of public Senior Subordinated Notes
is based on the market quoted trading value. The fair value of the
Company's debt is estimated at $201,362,500 and is carried on the
balance sheet at $198,500,000.
10. Cable Reregulation
On September 14, 1992, Congress enacted the Cable Television
Consumer Protection and Competition Act of 1992 (the Cable Act).
On April 1, 1993, the Federal Communications Commission (FCC)
adopted, with effect from September 1, 1993, rules for implementing
regulation of CATV subscriber rates. On March 30, 1994, the FCC
released revised rate regulation rules relating to the
implementation of the Cable Act (the Rules). The Rules included a
number of significant changes to the Cable Act with the intent
of achieving a further overall reduction in cable rates.
Management, using its best interpretation of the Rules, developed
cost-of-service showings for its systems, which support rates in
excess of those in place.
On June 5, 1995, the FCC released additional revisions to the
Rules. The Rules were amended to redefine a small cable system and
provide small operator rate relief. Accordingly, the FCC
implemented a streamlined cost-of-service calculation form for use
by small cable systems. All but one of the Company's cable systems
meet the revised definition of a small cable system. The Company
has performed the required calculations for the applicable systems
and has filed the form where appropriate. All resulting
calculations supported rates in excess of the current rates.
On February 8, 1996, the 1996 Telecom Act was signed into law.
The total effects of the new law are, at this time, still unknown.
However, one provision of the law further redefines a small cable
system, and exempts these systems from rate regulation on the upper
tiers of cable service. Management anticipates that it will qualify
as a small operator when the rulemaking is completed and final
rules are issued.
11. Summarized Financial Information
CEM, CEI, CEC, FNI and RTL (collectively, the "Guarantors") are
all wholly-owned subsidiaries of the Company and, together with
RACC, constitute all of the Partnership's direct and indirect
subsidiaries. Each of the Guarantors provides a full,
unconditional, joint and several guaranty of the obligations under
the Notes discussed in Note 5. Separate financial statements of
the Guarantors are not presented because management has
determined that they would not be material to investors.
The following tables present summarized financial information
of the Guarantors on a combined basis as of December 31, 1996 and
1995 and for the year ended December 31, 1996, the four months
ended December 31, 1995, the eight months ended August 31, 1995 and
the year ended December 31, 1994. In conjunction with the
reorganization discussed in Note 1, certain assets previously owned
by the Guarantors were transferred to the Partnership. The
following information has been retroactively adjusted to give
effect to such transfers.
11. Summarized Financial Information (continued)
Company
Balance Sheet 12/31/96 12/31/95
Cash $ 824,144 $ 243,797
Accounts and other
receivables, net 1,796,495 1,131,030
Prepaid expenses 971,279 602,038
Property, plant
and equipment net 60,563,044 57,796,186
Franchise costs
and other intangible
assets, net 116,725,497 130,007,213
Accounts payable
and accrued
liabilities (9,643,646) (4,707,285)
Other liabilities (962,492) (1,159,285)
Deferred taxes
payable (17,473,000) (21,127,000)
Notes payable (147,147,500)(121,437,500)
Equity (5,653,821) (41,349,194)
Company RAP L.P.
Statements of Operations Year 4 Months 8 Months Year
Ended Ended Ended Ended
12/31/96 12/31/95 8/31/95 12/31/94
Total revenue $42,845,044 $12,956,900 $24,500,604 $32,993,677
Total costs and expenses (43,578,178) (13,278,953) (19,576,065) (28,084,308)
Interest expense (16,238,221) (3,804,440) (12,921,627) (14,532,058)
Income tax(expense)benefit 3,645,719 1,674,000 1,558,000 (1,558,000)
Net loss $(13,325,636) $(2,452,493) $(6,439,088)$(11,180,689)
12. Quarterly Information (Unaudited)
The following interim financial information of the Company and
RAP L.P. presents the 1996 and 1995 consolidated results of
operations on a quarterly basis (in thousands):
Quarters Ended 1996
March 31 June 30 Sept. 30 Dec. 31
Revenue $15,483 $18,303 $18,646 $18,853
Operating income (loss) 135 (1,343) (958) (1,504)
Net loss (4,173) (5,857) (5,676) (5,925)
Quarters Ended 1995
March 31 June 30 Sept. 30 Dec. 31
Revenue $11,820 $12,584 $12,753 $13,051
Operating income (loss) 2,221 3,087 1,715 (366)
Loss before
extraordinary item (2,545) (2,472) (2,081) (1,884)
Extraordinary item - - 1,699 -
Net loss (2,545) (2,472) (3,780) (1,884)
<PAGE>
ITEM 9 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no disagreements with the Accountants.
<PAGE>
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
General Partner
The General Partner of the Partnership is Rifkin Acquisition
Management, L.P., a Colorado limited partnership that is
controlled by Monroe M. Rifkin. As General Partner, it has
responsibility for the overall management of the business and
operations of the Company. The Company has entered into a
Management Agreement with Rifkin & Associates. See "Certain
Relationships and Related Transactions."
Rifkin & Associates
The Company has entered into a Management Agreement with Rifkin &
Associates with respect to the day-today management and operation
of the Company's cable television systems. The principal offices
of Rifkin & Associates are located at 360 South Monroe Street,
Suite 600, Denver, Colorado, 80209, and the telephone number is
(303) 333-1215.
Advisory Committee
The Advisory Committee of the Partnership consults with and
advises the General Partner with respect to the business and
affairs of the Company and any subsidiary thereof. Without the
prior approval of the Advisory Committee, the General Partner
cannot amend the Company's budget in any material respect,
materially increase capital expenditures in any fiscal year,
amend or waive any provision of the Management Agreement, or
adopt or amend the management incentive plan provided for by the
Partnership Agreement. The Advisory Committee consists of one
designee of the General Partner, three designees of VS&A, two
designees of Greenwich Street Capital Partners, one designee of
IEP Holdings I LLC and one designee of PaineWebber Capital, Inc.
Members of the Advisory Committee are not compensated for their
services, but are reimbursed for all reasonable out-of-pocket
expenses incurred by them in performing services relating to the
Company. The members of the Advisory Committee are Monroe M.
Rifkin, Jeffrey T. Stevenson, S. Gerard Benford, John S. Suhler,
Nicholas E. Somers, Alfred C. Eckert III, David H. Morse and
Dhananjay Pai. The Advisory Committee has adopted a policy of
having Mr. Rifkin abstain from any Advisory Committee votes that
may present a conflict of interest between Mr. Rifkin and the
Company. In addition, the Partnership Agreement requires that Mr.
Rifkin first present to the Partnership any acquisition
opportunities of cable television systems that are similar and
reasonably contiguous to the Company's Systems.
RACC
RACC does not have any operations, and accordingly does not have
any management personnel other than its corporate officers.
Director and Executive Officers of Rifkin & Associates; Director
and Executive Officers of RACC:
Advisory Committee of the Partnership
Monroe M. Rifkin is the sole director of Rifkin & Associates and
RACC. The executive officers of Rifkin & Associates and RACC and
the members of the Advisory Comniittee are listed on the
following page.
Rifkin & Associates
Name Age Position
----------------- --- -----------------------------------------
Monroe M. Rifkin 66 Director, Chairman and Chief Exec Officer
Jeffrey D. Bennis 38 President and Chief Operating Officer
Kevin Allen 35 President, R & A Enterprises
Stephen E. Hattrup 44 Sr Vice President-Operations
Dale D. Wagner 47 Sr Vice President-Finance and Admin.
Paul A. Bambei 42 Vice President-Operations
Suzanne M. Cyman 37 Vice President-Marketing/Programniing
Kathryn L. Hale 47 Vice President-Controller
Catherine G. Hicks 40 Vice President, R & A Enterprises
Bruce A. Rifkin 39 Vice Pres.-Opers and Advertising Sales
Peter N. Smith 47 Vice President-Engineering
Jeffrey P. Kramp 39 Managing Director, International Division
RACC
Name Age Position
----------------- --- -----------------------------------------
Monroe M. Rifkin 66 Director, President and Treasurer
Jeffrey D. Bennis 38 Vice President
Stephen E. Hattrup 44 Vice President
Dale D. Wagner 47 Vice Pres., Secretary, and Asst Treasurer
Advisory Committee
Name Age
--------------------- ---
S. Gerard Benford 58
Alfred C. Eckert III 49
David H. Morse 35
Dhananjay Pai 34
Monroe M. Rifkin 66
Nicholas E. Somers 34
Jeffrey T. Stevenson 36
John S. Suhler 51
Executive Officers
Monroe M. Rifkin is a cable television industry executive with
over 30 years of industry experience. He founded Rifkin &
Associates in 1982 and has served as its Chairman and Chief
Executive Officer since that time. Prior to that, he founded
American Television and Communications Corporation ("ATC") in
1968 and served as its Chief Executive Officer from 1968 to 1982
and as its Chairman from 1974 to 1982. Mr. Rifkin served as a
board member of the National Cable Television Association from
1968 to 1984 and as its Chairman from 1983 to 1984. Mr. Rifkin
has been Director, President and Treasurer of RACC since its
formation on January 24, 1996.
Jeffrey D. Bennis has been President and Chief Operating Officer
of Rifkin & Associates since April 1994. Prior thereto, Mr.
Bennis served as Vice President-Marketing/Programming of Rifkin &
Associates from July 1991 to March 1994. Mr. Bennis was elected
to the boards of directors of The National Cable Television
Association and C-Span in May 1995. Prior to joining Rifkin &
Associates, Mr. Bennis was with Clairol Inc., a subsidiary of
Bristol-Myers Squibb Company, from June 1980 to June 1991, where
he most recently served as Director of Marketing for the Hair
Care and Skin Care Divisions. Mr. Bennis is the son-in-law of
Monroe M. Rifkin. Mr. Bennis has been Vice President of RACC
since its formation on January 24, 1996.
Kevin Allen has been President of R & A Enterprises since August
1996. Prior thereto, Mr. Allen served as Vice President of BT
Securities Corporation where he was responsible for developing
and maintaining a range of corporate finance relationships with
clients around the world.
Stephen E. Hattrup has been Senior Vice President-Operations of
Rifkin & Associates since May 1994. He joined Rifkin &
Associates in September 1988 as Vice President-Operations and
served in that position until May 1994. Prior to joining Rifkin
& Associates, Mr. Hattrup was employed by ATC from 1982 to 1988
in various positions, including Vice President and Treasurer.
Mr. Hattrup has been Vice President of RACC since its formation
on January 24, 1996.
Dale D. Wagner is Senior Vice President-Finance and
Administration of Rifkin & Associates, a position he has held
since May 1994. From January 1986 until May 1994, Mr. Wagner was
Vice President-Finance of Rifkin & Associates. Prior to joining
Rifkin & Associates, Mr. Wagner was employed by ATC from 1981 to
1986 in various positions including Vice President-Finance and
Administration for ATC's National Division. Prior to joining
ATC, Mr. Wagner was employed by Cable Com-General, Inc. in
various capacities, including Vice President-Finance for that
company's cable television division. Mr. Wagner has been Vice
President, Secretary and Assistant Treasurer of RACC since its
formation on January 24, 1996.
Paul A. Bambei has served as Vice President-Operations of Rifkin
& Associates since January 1987. Mr. Bambei was Vice President-
Marketing of Rifkin & Associates from March 1984 until December
1986. Prior to joining Rifkin & Associates, Mr. Bambei was
employed by ATC from 1974 to 1984 in various capacities in
marketing and operations.
Suzanne Cyman has been Vice President-Marketing/Programming of
Rifkin & Associates since July 1994. Prior thereto, Ms. Cyman
held positions as Vice President-Marketing at Vista Cablevision
from May 1988 until September 1992 and Fanch Communications from
September 1992 until December 1994.
Kathryn L. Hale is Vice President-Controller of Rifkin &
Associates, a position she has held since July 1991. Prior
thereto, Ms. Hale was the Controller of Rifkin & Associates from
March 1986 to July 1991. Prior to joining Rifkin & Associates,
Ms. Hale was employed by ATC in various financial management
positions from 1981 to 1986.
Catherine G. Hicks has been Vice President-R & A Enterprises
since August 1996. Prior thereto, Ms. Hicks served as Vice
President-Tax of Rifkin & Associates from July 1991 to July 1996.
Bruce A. Rifkin is Vice President-Operations and Advertising
Sales, a position he has held since January 1994. Mr. Rifkin
joined Rifkin & Associates in 1988 as Director-Advertising Sales.
Prior to joining Rifkin & Associates, Mr. Rifkin was employed in
commercial real estate management and development. Bruce A.
Rifkin is a son of Monroe M. Rifkin.
Peter N. Smith has served as Vice President-Engineering of Rifkin
& Associates since March 1984. Prior to joining the Company, Mr.
Smith was employed by ATC from 1973 to 1984 in various
engineering capacities, including Vice President--Engineering of
the National Division.
Jeffrey P. Kramp has served as Managing Director of Rifkin &
Associates' International Division since May 1995 and as
President and Chief Executive Officer of InterComm Holdings,
L.L.C., a Rifkin & Associates international affiliate, since
October 1995. Prior to joining Rifkin & Associates in May 1995,
Mr. Kramp served as President of The Windom Group, Inc., a
company he founded which offered investment banking and
consulting services to the telecommunications industry. From
1989 to 1993, Mr. Kramp served as President and Chief Operating
Officer of Vista Cablevision, Inc.
Advisory Committee
S. Gerard Benford has served as Executive Vice President of VS&A
Communications Partners, L.P. since 1990. Since November 1994,
Mr. Benford has also been Executive Vice President of VS&A
Communications Partners II, L.P. and General Partner of VS&A
Equities II, L.P. Mr. Benford has been Vice President of VS&A
RAP, Inc. since August 1995.
Alfred C. Eckert III has served as President of Greenwich Street
Capital Partners, Inc. since January 1994. Since 1991, Mr.
Eckert has been a general partner of Greycliff Partners. From
1984 to 1991, Mr. Eckert was a general partner of Goldman, Sachs
& Co.
David H. Morse has been employed by Equity Partners, L.P., I, the
parent organization of IEP Holdings I LLC, or its predecessors
and their affiliates since 1993 and currently serves as Partner
responsible for originating, structuring and managing equity and
debt investments. From August 1989 to February 1993, Mr. Morse
worked in the Corporate Finance Group of General Electric Capital
Corporation most recently as a Vice President. From 1984 through
1987, Mr. Morse worked at Chemical Bank in New York City most
recently as Assistant Treasurer. Mr. Morse also serves as a
director of Reid Plastics, Inc.
Dhananjay M. Pai is President of PaineWebber Capital Inc., which
is a principal investment affiliate of PaineWebber Incorporated.
Mr. Pai is also a First Vice President of PaineWebber
Incorporated. Before joining PaineWebber in April 1990, Mr. Pai
was a Vice President in the Mergers and Acquisitions Department
at Drexel Burnham Lambert, Inc.
Nicholas E. Somers has served as a Managing Director of Greenwich
Street Capital Partners, Inc. since December 1993. Mr. Somers
worked at Smith Barney in the Investment Banking Division from
June 1993 to December 1993. Prior to that, he spent five years
at Morgan Stanley in the Mergers & Acquisitions and Corporate
Finance Departments from June 1988 to June 1993.
Jeffrey T. Stevenson has been the President of VS&A
Communications Partners, L.P. since 1989. Since November 1994 he
has served as President of VS&A Communications Partners II, L.P.
and General Partner of VS&A Equities II, L.P. Mr. Stevenson has
been President of VS&A RAP, Inc. since August 1995.
John S. Suhler has been the President and Co-Chief Executive
Officer of Veronis, Suhler & Associates Inc. since October 1981.
He has served as a General Partner of VS&A Equities, L.P. since
March 1987. VS&A Equities, L.P. is the general partner of VS&A
Communications, L.P. Mr. Suhler is also a founding General
Partner of VS&A Equities II, L.P., a position he has held since
November 1994. VS&A Equities II, L.P. is the general partner of
VS&A Communications Partners II, L.P.
ITEM 11 - EXECUTIVE COMPENSATION
General. No employee of the Partnership or any of the Guarantors
is an executive officer of the Company. The executive officers
of RACC, in their capacity as such, do not serve as executive
officers of the Partnership or any of the Guarantors. Services of
the executive officers and other employees of Rifkin & Associates
are provided to the Company, and the Company pays Rifkin &
Associates a fee pursuant to the Management Agreement for such
services. The executive officers and other employees of Rifkin &
Associates and/or RACC who provide services to the Company are
compensated solely in their capacity as executive officers of
Rifkin & Associates and therefore receive no compensation from
the Company except as provided by the Equity Incentive Plan
described below. Rifkin & Associates engages in certain
management services for other affiliates of Monroe M. Rifkin. No
portion of the management fee paid by the Company is allocated to
specific employees for the services performed by Rifkin &
Associates for the Company. The general partner of the Company
receives no compensation for its services to the Company in such
capacity. See "Certain Relationships and Related Transactions--
Management Agreement with Rifkin & Associates."
Equity Incentive Plan. In 1996, the Company implemented an
Equity Incentive Plan (the "Plan") in which certain Rifkin &
Associates' executive officers and key employees, and certain key
employees of the Company, are eligible to participate. Plan
participants in the aggregate, have the right to receive (i) cash
payments of up to 2.0% of the aggregate value of all partnership
interests of the Company (the "Maximum Incentive Percentage"),
based upon the achievement of certain annual Operating Cash Flow
(as defined in the Plan) targets for the Company for each of the
calendar years 1996 through 2000, and (ii) an additional cash
payment equal to up to 0.5% of the aggregate value of all
partnership interests of the Company (the "Additional Incentive
Percentage"), based upon the achievement of certain cumulative
Operating Cash Flow targets for the Company for the five-year
period ended December 31, 2000. Subject to the achievement of
such annual targets and the satisfaction of certain other
criteria based on the Company's operating performance, up to 20%
of the Maximum Incentive Percentage will vest in each such year,
provided, that in certain events vesting may accelerate.
Payments under the Plan are subject to certain restrictive
covenants contained in the Notes.
No amounts are payable under the Plan except upon (i) the sale of
substantially all of the assets or partnership interests of the
Company or (ii) termination of a Plan participant's employment
with Rifkin & Associates or the Company, as applicable, due to
(a) the decision of the Advisory Committee to terminate such
participant's employment due to disability, (b) the retirement of
such participant with the Advisory Committee's approval or (c)
the death of such Participant. The value of amounts payable
pursuant to clause (i) above will be based upon the aggregate net
proceeds received by the holders of all of the partnership
interests in the Company, as determined by the Advisory
Committee, and the amounts payable pursuant to clause (ii) above
will be based upon the Enterprise Value determined at the time of
such payment. For purposes of the Plan, Enterprise Value
generally is defined as Operating Cash Flow for the immediately
preceding calendar year times a specified multiple and adjusted
based on the Company's working capital.
The provision relating to the Plan for the year ended December
31, 1996 was $660,000.
Retirement Benefits. During 1996, a Company-sponsored 401(k)
plan was implemented for its employees that have been employed by
the Company for at least one year. Employees of the Company can
contribute up to 15% of their salary, on a before-tax basis, with
a maximum 1996 contribution of $9,500 (as set by the Internal
Revenue Service). The Company matches participant contributions
up to a maximum of 50% of the first 3% of a participant's salary
contributed. All participant contributions and earnings are
fully vested upon contribution and Company contributions and
earnings vest 20% per year of employment with the Company,
becoming fully vested after five years. The Company's matching
contributions for the year ended December 31, 1996 were $42,636.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The Partnership
The following table sets forth certain information, as of March
31, 1996, concerning the beneficial ownership of partnership
interests in the Partnership owned by each person known by the
Company to own beneficially more than five percent interests and
by the executive officers of Rifkin & Associates as a group.
Name and Address
of Beneficial Owners Percentage
VS&A Communications Partners II, L.P 28.7(1)
350 Park Avenue
New York, NY 10022
Greenwich Street (RAP) Partners I, L.P 27.5
388 Greenwich Street
New York, NY 10003
IEP Holdings I LLC 22.0
135 E. 57th Street
New York, NY 10002
PaineWebber Capital, Inc 11.0
1285 Avenue of the Americas
New York, NY 10019
Monroe M. Rifkin 8.0(2)
360 S. Monroe Street
Denver, CO 80209
Other executive officers of Rifkin &
Associates as a group (5 persons) 2.4
(1) Includes a 0.4% interest held by VS&A RAP, Inc., a wholly-
owned subsidiary of VS&A Communications Partners II, L.P.
(2) Includes a 7.0% limited partnership interest held by Mr.
Rifkin and the Rifkin Trusts. Mr. Rifkin is a cotrustee of such
trusts and exercises shared voting power with respect to the
interests held therein. Also includes a 1.0% general partnership
interest held by the General Partner. The beneficial ownership
of such interest is attributed to Mr. Rifkin by virtue of his
ownership of 80% of the voting stock of the general partner of
the General Partner.
RACC
All issued and outstanding shares of RACC's Common Stock, par
value $1.00 per share, are directly owned by the Partnership.
Consequently, none of the executive officers of RACC own any
equity interests therein.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Agreement With Rifkin & Associates
Rifkin & Associates manages the Company's cable systems pursuant
to the Management Agreement among the Company, Rifkin Tennessee
Ltd., Cable Equities of Colorado, Ltd. (collectively, the
"Owners") and Rifkin & Associates, as manager. Rifkin &
Associates serves as the central manager for the Owners and
provides, among other services, operational management direction;
accounting; monthly revenue collection and bill payment;
programming negotiation and related services; marketing and
public relations assistance; engineering assistance; and
strategic planning. Under the terms of the Management Agreement,
the Company pays an annual management fee to Rifkin & Associates
equal to 3.5% of the Company's gross revenues and reimburses
certain costs. The Company has established a $1 million escrow
account for the payment of any management fees to Rifkin &
Associates in the event that payment of management fees would
otherwise be prohibited by the Amended and Restated Credit
Agreement or any other loan agreement of the Company or any
subsidiary. The aggregate management fees paid by the Company to
Rifkin & Associates for the years ended December 31, 1996, 1995
and 1994 were $2.5 million, $1.8 million, and $2.2 million,
respectively. In addition, the Company accrued but did not pay
$483,000 of management fees during 1994 and 1995 that were
prohibited by certain provisions of the Company's prior credit
facility. Pursuant to the Partnership Agreement, the Company is
required to pay such accrued management fees to Rifkin &
Associates in 24 equal monthly installments. These installments
commenced on October 1, 1995. Neither Rifkin & Associates nor
any of its affiliated entities may compete with the Company in
offering cable television or competing services in any geographic
area in which the Company holds a cable television franchise or
operates a cable television system.
The Management Agreement will continue in effect with respect to
each cable television system owned by the Company, including the
Mid-Tennessee Systems and the RCT Systems, for the duration of
the Company's cable television franchise for that system and any
extension or renewal of such franchise, unless earlier
terminated. The Management Agreement may be terminated by the
Owners if the General Partner is removed pursuant to the
Partnership Agreement as a result of Mr. Rifkin's death or
disability or his failure to serve as Chief Executive Officer or
exercise active control over day-to-day operations of the General
Partner or the Company, provided, however, that the Management
Agreement may not be terminated prior to September 1, 2000 if
such removal is the result of Mr. Rifkin's death or disability.
If the Management Agreement is ten-ninated other than as a result
of the removal of the General Partner as described above (other
than as a result of Mr. Rifkin's death or disability), or for
cause (if Rifkin & Associates takes action which causes
substantial detriment to the cable systems), then the Company is
obligated to make a severance payment of $500,000 to Rifkin &
Associates.
Services to be Rendered by VS&A
Pursuant to the Partnership Agreement and subject to the approval
of the Advisory Committee, VS&A will provide management and media
industry advisory services to the Company from time to time with
respect to debt and equity funding and the evaluation of
potential acquisitions. VS&A will be paid reasonable
compensation not to exceed $50,000 in any year in consideration
for such services and is reimbursed for all reasonable out-of-
pocket expenses incurred by it in connection therewith. No
amounts were paid pursuant to this provision during 1996.
Senior Subordinated Debt Held by Monroe M. Rifkin
Until January 1996, the Company had outstanding senior
subordinated debt (the "Old Rifkin Note") of $3 million payable
to Monroe M. Rifkin, Chairman and Chief Executive Officer of
Rifkin & Associates. Aggregate interest payments made by the
Company in respect of the Old Rifkin Note were $200,000 and
$364,000 in 1994 and 1995, respectively. On January 26, 1996, in
connection with the Notes offering, the Company amended and
restated the Old Rifkin Note and issued a new Note to Mr. Rifkin
(the "New Rifkin Note"). The New Rifkin Note bears a rate of
interest and has a scheduled maturity identical to that of the
Exchange Notes and ranks pari passu with the Notes.
The New Rifkin Note contains no covenants other than the
obligation to pay principal and interest thereon. Aggregate
interest payments made by the Company related to the New Rifkin
Note in 1996 were $176,000. Events of default under the New
Rifkin Note are limited to the failure to pay principal and
interest thereunder, and a right to accelerate the Rifkin Note
upon an acceleration of the Notes. Any rescission of
acceleration by the Trustee or the holders of the Notes operates
to rescind acceleration of the New Rifkin Note provided that
there is no then existing payment default under the Rifkin Note.
In the event of any redemption, defeasance or other retirement
for value of the Notes or any portion thereof prior to their
scheduled maturity, Mr. Rifkin shall have the right to require
the Company to redeem, defease or retire the New Rifkin Note to
the same extent as the Notes, subject to the limitations in the
Indenture regarding restricted payments. See "Description of
Exchange Notes-Covenants."
Except for any redemption, repurchase or retirement of the New
Rifkin Note by the Company as described above, Mr. Rifkin has
agreed for as long as any Notes are outstanding not to sell,
transfer, pledge, hypothecate, encumber, or otherwise dispose of
the New Rifkin Note, provided that Mr. Rifkin may transfer the
New Rifkin Note to any trust controlled by him or any corporation
wholly and directly owned by him.
Acquisitions of Affiliated Cable Systems; Fee Paid to Rifkin &
Associates
On March 1, 1996, the Company acquired for approximately $61.9
million (including approximately $32,000 of assumed working
capital) the Mid-Tennessee Systems, which were owned by Mid-
Tennessee Cable Limited Partnership ("MTCLP"), an affiliate of
the Company and Rifkin & Associates. Prior to that acquisition,
the general partner of MTCLP owned 99.999% of the partnership
interests in MTCLP. Monroe M. Rifkin controls the ultimate
general partner of such general partner. Prior to the Mid-
Tennessee Acquisition, based on the acquisition price therefor,
Mr. Rifkin and entities controlled by Mr. Rifkin beneficially
owned in the aggregate approximately 15.1% of the partnership
interests in the Mid-Tennessee Systems. The Company paid to
Rifkin & Associates a fee of approximately $619,000 in connection
with the assignment of a right of first refusal to acquire the
Mid-Tennessee Systems.
On April 1, 1996, the Company acquired for approximately $10.2
million (including approximately $377,000 of assumed liabilities)
the RCT Systems which were owned by Rifkin Cablevision of
Tennessee, Ltd., ("RCTL") an affiliate of the Company and Rifkin
& Associates. Monroe M. Rifkin controls the ultimate general
partner of RCTL. Prior to the RCT Acquisition, based upon the
acquisition price therefor, Mr. Rifkin and entities controlled by
Mr. Rifkin beneficially owned approximately 3.4% of the
partnership interests in RCTL. The purchase price for the RCT
Systems was reached through negotiations with an unaffiliated
majority limited partner.
Certain Relationships with Legal Counsel
Baker & Hostetler, Denver, Colorado, has acted as legal counsel
to the Company in connection with the offering of the Old Notes
and has acted as legal counsel to the Company in connection with
the Exchange Offer and may from time to time be engaged by the
Company with respect to other matters. A partner of Baker &
Hostetler is a son of Monroe M. Rifkin. The company paid
approximately $550,000 to Baker & Hostetler in connection with
the public offering of the Notes in 1996.
Certain Other Relationships
The Company, the Subsidiary Guarantors and the Initial Purchasers
entered into a Purchase Agreement pursuant to which the Company
sold to the Initial Purchasers all of the Old Notes (the
"Purchase Agreement"). The net proceeds to the Company from the
offering of the Old Notes were $121.5 million before deducting
expenses of approximately $650,000. PaineWebber Incorporated,
one of the Initial Purchasers, is an affiliate of PaineWebber
Capital, Inc. which holds an 11.0% limited partnership interest
in the Company.
<PAGE>
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Exhibits:
The following exhibits are filed pursuant to Item 601 of
Regulation S-K.
Exhibit
Number Description
- ------ ----------------------------------------------
2.1 Asset Sale Agreement dated as of January 2, 1996, between
Mid-Tennessee Cable Limited Partnership and Rifkin/MT
Management, L.P. (1)
2.2 Assignment and Assumption Agreement dated January 2, 1996
between Rifkin Acquisition Partners, L.L.L.P. and Rifkin/MT
Management,L.P. (1)
2.3 Amended and Restated Purchase and Sale Agreement dated March
29, 1996 by and between Rifkin Cablevision of Tennessee,
Ltd. and Rifkin Acquisition Partners, L.L.L.P. (1)
2.4 Purchase Agreement dated January 31, 1996 among BT
Securities Corporation, Smith Barney Inc., First Union
Capital Markets Corp., PaineWebber Incorporated, Rifkin
Acquisition Partners, L.L.L.P., Rifkin Acquisition Capital
Corp., Cable Equities of Colorado, Ltd., Rifkin/Tennessee,
Ltd., Cable Equities of Colorado Management Corp., Cable
Equities, Inc., and FNI Management Corp. (1)
3.1 Certificate of Limited Partnership and Registration
Statement of Rifkin Acquisition Partners, L.L.L.P. (1)
3.2 Second Amended and Restated Limited Partnership Agreement of
Exhibit
Number Description
- ------ --------------------------------------------------
Rifkin Acquisition Partners, L.L.L.P. dated August 31, 1995
as amended. (1)
3.3 Amendment No. 1 to the Second Amended and Restated Limited
Partnership Agreement of Rifkin Acquisition Partners,
L.L.L.P. dated January 31, 1996.
3.4 Articles of Incorporation of Rifkin Acquisition Capital
Corp. (1)
3.5 Bylaws of Rifkin Acquisition Capital Corp. (1)
3.6 Articles of Incorporation of RT Investments Corp. (1)
3.7 Bylaws of RT Investments Corp. (1)
3.8 Amended and Restated Agreement of Limited Partnership of
Rifkin Acquisition Management, L.P. dated May 12 1989, as
amended.(1)
3.9 Certificate of Limited Partnership of Rifkin Acquisition
Management, L.P. (1)
4.1 Indenture dated January 15, 1996 among Rifkin Acquisition
Partners, L.L.L.P., Rifkin Acquisition Capital Corp., as
Issuers, Cable Equities of Colorado Mangement Corp., FNI
Management Corp., Cable Equities of Colorado, Ltd., Cable
Equities, Inc. and Rifkin/Tennessee, Ltd., as Subsidiary
Guarantors, and Marine Midland Bank as Trustee related to
the 11 1/8% Senior Subordinated Notes due 2006 (including
form of certificate to be delivered in connection with
transfers to the institutional accredited investors). (1)
4.2 Registration Rights Agreement dated as of January 31, 1996
among Rifkin Acquisition Partners, L.L.L.P., Rifkin
Acquisition Capital Corp., Cable Equities of Colorado
Management Corp., FNI Management Corp., Cable Equities of
Colorado., Ltd., Cable Equities, Inc., Rifkin/Tennessee,
Ltd., BT Securities Corporation, Smith Barney Inc., First
Union Capital Markets Corp.and PaineWebber Incorporated. (1)
4.3 Pledge Agreement dated as of January 31, 1996 made by Rifkin
Acquisition Partners, L.L.L.P. and Rifkin Acquisition
Capital Corp. to Marine Midland Bank. (1)
4.4 Amended and restated Promissory Note dated January 31, 1996
Exhibit
Number Description
- ------ -----------------------------------------------
in the principal amount of $3,000,000 payable by Rifkin
Acquisition Partners to Monroe M. Rifkin (pursuant to Item
601(b)(4))(iii)(A) of Regulation S-K, the Registrants are
not filing Exhibit with this Registration Statement. The
Registrants agree to furnish a copy of Exhibit 4.4 to the
Securities and Exchange Commission upon request).
4.5 Amended and restated Credit Agreement dated as of March 1,
1996 among Rifkin Acquisition Partners, L.L.L.P., as
Borrower, the several banks and other financial institutions
from time to time parties thereto, First Union National Bank
of North Carolina, as administrative agent and Bankers Trust
Company, as syndication agent. (1)
4.6 11 1/8% Senior Subordinated Note due 2006 in the principal
sum of $118,750,000 payable by Rifkin Acquisition Partners,
L.L.L.P. and Rifkin Acquisition Capital Corp. to Cede & Co.
or registered assigns. (1)
4.7 11 1/8% Senior Subordinated Note due 2006 in the principal
sum of $4,250,000 payable by Rifkin Acquisition Partners,
L.L.L.P. and Rifkin Acquisition Capital Corp. to Cede & Co.
or registered assigns. (1)
4.8 11 1/8% Senior Subordinated Note due 2006 in the principal
sum of $2,000,000 payable to Rifkin Children Trust III or
registered assigns. (1)
10.1 Amended and Restated Management Agreement dated August 31,
1995 among Rifkin Acquisition Partners, L.P.,
Rifkin/Tennessee, Ltd., Cable Equities of Colorado, Ltd. and
Rifkin & Associates, Inc., as amended by the Amendment of
Management Agreement dated as of January 26, 1996 among
Rifkin Acquisition Partners, L.L.L.P., Rifkin/Tennessee,
Ltd., Cable Equities of Colorado, Ltd. and Rifkin &
Associates, Inc. (1)
10.2 Franchise Agreement to Provide Cable and Noncable Services
between County of Gwinnett, Georgia and Cable Equities of
Colorado, Ltd. dated December 5, 1995. (1)
10.3 Franchise Agreement to Provide Cable and Noncable Services
between City of Roswell, Georgia and Cable Equities of
Colorado, Ltd. dated February 5, 1996. (1)
10.4 Ordinance of City of Columbia, Tennessee granting
Rifkin/Tennessee, Ltd the right to erect, maintain and
Exhibit
Number Description
- ------ -------------------------------------------------
operate a cable television system in the City of Columbia,
Tennessee passed and adopted January 3, 1991. (1)
10.5 Cable Television Franchise Ordinance between
Rifkin/Tennessee, Ltd. and City of Cookeville, Tennessee,
passed January 19, 1995. (1)
10.6 Form of Exchange Agreement by and between Bankers Trust
Company, Rifkin Acquisition Partners, L.L.L.P. and Rifkin
Acquisition Capital Corp. (1)
10.7 Asset Purchase Agreement by and between American Cable
Investors 5, Ltd. and Rifkin Acquisition Partners, L.L.L.P.
dated as of November 29, 1996.
21.1 Subsidiaries of the Registrants. (1)
-------------------------------------------------
(1) Incorporated by reference from Registration Statement on
Form S-1, as amended, Registration No. 333-3084.
(b) Financial Statement Schedules:
None.
(c) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered
by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver,
State of Colorado, as of March 31, 1997.
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By: Rifkin Acquisition Management, L.P.
a Colorado limited partnership, its
general partner
By: RT Investments Corp., a Colorado
corporation, its general partner
By: /s/Monroe M. Rifkin
Monroe M. Rifkin
Its: President/Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
Name and Title Date
- -------------------------- -----------------
By: /s/Monroe M. Rifkin March 31, 1997
Monroe M. Rifkin
President, Treasurer & Director of RT
Investments Corp. (Principal Executive
Officer)
By: /s/Dale D. Wagner March 31, 1997
Dale D. Wagner
Vice President & Assistant Treasurer of
RT Investments Corp. (Principal Financial
Officer)
By: /s/Jeffrey D. Bennis March 31, 1997
Jeffrey D. Bennis
Vice President & Director of RT
Investments Corp.
By: /s/Kathryn L. Hale March 31, 1997
Kathryn L. Hale
(Principal Accounting Officer)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Act of 1934, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Denver,
State of Colorado, as of March 31, 1997.
RIFKIN ACQUISITION CAPITAL CORP.
By: /s/Monroe M. Rifkin
Monroe M. Rifkin
Its: President/Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
Name and Title Date
- ---------------------------- -----------------
By: /s/Monroe M.Rifkin March 31, 1997
Monroe M. Rifkin
Its: President/Treasurer and Director
(Principal Executive Officer)
By: /s/Dale D. Wagner March 31, 1997
Dale D. Wagner
Its: Vice President, Secretary &
Assistant Treasurer (Principal
Financial Officer)
By: /s/Kathryn L. Hale March 31, 1997
Kathryn L. Hale
(Principal Accounting Officer)
<PAGE>
EXHIBIT 3.3
AMENDMENT NO. I
TO
SECOND AMENDED AND RESTATED LIMITED PARTNERSHIP AGREEMENT
OF
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
Dated as of January 31, 1996
On January 22, 1996 Rifkin Acquisition Management, L.P. (the
"General Partner"), the general partner of Rifkin Acquisition
Partners, L.L.L.P. (the "Partnership"), made a $15 million
capital call pursuant to section 15.1(a) of the Second Amended
and Restated Limited Partnership Agreement of the Partnership
(the "Partnership Agreement") to finance, in part, the
Partnership's acquisition of the cable systems of Mid-Tennessee
Cable Limited Partnership. All of the partners of the
Partnership, other than Charles R. Morris, III, met the capital
call.
To cover the deficiency in the capital call, The 360 Group, Inc.
contributed an additional amount in proportion to its interest in
the Partnership and, after obtaining all approvals required under
section 15.1(a) of the Partnership Agreement, the General Partner
admitted Jeffrey D. Bennis, Stephen E. Hattrup and Dale D. Wagner
as additional limited partners of the Partnership.
Accordingly, the General Partner and the undersigned limited
partners of the Partnership hereby amend schedule I of the
Partnership Agreement to adjust the Percentages of Charles R.
Morris, III and The 360 Group, Inc. and to allocate Percentages
to the additional limited partners so that their Percentages
shall be as follows:
Percentages
Charles R. Morris, III 1.728%
The 360 Group, Inc. .768%
Jeffrey D. Bennis .159%
Stephen E. Hattrup .076%
Dale D. Wagner .024%
Except as amended hereby, the Partnership Agreement, including
the Percentages of the other partners set forth on schedule 1,
shall remain in full force and effect.
RIFKIN ACQUISITION MANAGEMENT, L.P.
By: RT Investments Corp.,
its general partner
By:__________________________________
Monroe M. Rifkin, President
VS&A COMMUNICATIONS PARTNERS II, L.P. GREENWICH STREET (RAP)
PARTNERS I, L.P.
By: VS&A EQUITIES II, L.P.
its general partner By: GREENWICH STREET
(RAP) PARTNERS II, L.P.,
its general partner
By:___________________________
By: GREENWICH STREET
(RAP) CORPORATION,
its general partner
IEP HOLDINGS I LLC
By: ING EQUITY PARTNERS, L.P.I
By:____________________
By: LEXINGTON PARTNERS, L.P.,
its general partner
PAINEWEBBER CAPITAL INC.
By: LEXINGTON PARTNERS, INC.,
its general partner
By:_____________________
The undersigned agree to be bound by the Second Amended and
Restated Limited Partnership Agreement of Rifkin Acquisition
Partners, L.L.L.P., as amended by Amendment No. 1 as of this
date.
Dated as of January 1, 1997
LIMITED PARTNERS
________________________
Jeffrey D. Bennis
_________________________
Stephen E. Hattrup
_________________________
Dale D. Wagner
By:___________________________
<PAGE>
EXHIBIT 10.7:
SOUTHERN TENNESSEE
=================================================================
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN CABLE TV INVESTORS 5, LTD.
AND
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
DATED AS OF
NOVEMBER 29, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I..................................................... 1
1. Definitions.............................................. 1
Accountants.............................................. 1
Accounts Receivable...................................... 1
Adjustment Time.......................................... 1
Affiliate................................................ 1
Alternative Transaction.................................. 1
Assets................................................... 2
Assumed Liabilitie....................................... 2
Basic Services........................................... 2
Basic Subscriber Rate.................................... 2
Best of Seller's Knowledge............................... 2
Business................................................. 2
Business Day............................................. 2
Buyer.................................................... 2
Buyer Financial Statement................................ 2
Buyer Interim Financial Statement........................ 2
Cable Act................................................ 2
Closing.................................................. 3
Closing Date............................................. 3
Code..................................................... 3
Communications Act....................................... 3
Consents................................................. 3
Copyright Act............................................ 3
Deposit.................................................. 3
Employer................................................. 3
Employer Plans........................................... 3
Encumbrance.............................................. 3
Environmental Law........................................ 3
Equipment................................................ 3
Equivalent Basic Subscribers............................. 4
ERISA.................................................... 4
Escrow Agent............................................. 4
Escrow Agreement......................................... 4
Exchange Act............................................. 4
Excluded Assets.......................................... 4
Excluded Liabilities..................................... 4
Exhibits................................................. 4
Extension................................................ 5
FCC...................................................... 5
Final Adjustments Report................................. 5
Franchise Areas.......................................... 5
Franchise Fee............................................ 5
GAAP..................................................... 5
General Partner.......................................... 5
Governmental Authority................................... 5
Governmental Permits..................................... 5
Hazardous Substances..................................... 5
Homes Passed............................................. 6
HSR Act.................................................. 6
Indemnity Escrow Agent................................... 6
Indemnity Escrow Agreement............................... 6
Intangibles.............................................. 6
IRS...................................................... 6
Legal Requirement........................................ 6
Limited Partners......................................... 6
Management Agreement..................................... 6
Must Carry Election...................................... 6
1996 Financial Statements................................ 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................................... 7
Required Consents........................................ 7
Retransmission Consent Agreements........................ 8
Schedules................................................ 8
SEC...................................................... 8
Securities Act........................................... 8
Seller................................................... 8
Seller Contracts......................................... 8
Seller's Escrow.......................................... 8
Seller Financial Statements.............................. 8
System................................................... 8
Taking................................................... 8
Tax Return............................................... 8
Taxes.................................................... 8
TCI...................................................... 8
Telecom Act.............................................. 9
Termination Date......................................... 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.......................... 9
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.................. 12
3.5 Disputed Liabilities............................... 14
3.6 Allocation of Purchase Price....................... 14
ARTICLE IV.................................................... 14
4. Assumed Liabilities and Excluded Assets............ 14
4.1 Assignment and Assumption.......................... 14
4.2 Excluded Assets.................................... 15
ARTICLE V..................................................... 15
5. Representations and Warranties of Seller........... 15
5.1 Organization and Qualification..................... 15
5.2 Authority and Validity............................. 16
5.3 Consents and Approvals; No Violation............... 16
5.4 Complete Systems................................... 16
5.5 Title.............................................. 17
5.6 Real Property...................................... 17
5.7 Environmental Matters.............................. 17
5.8 Compliance with Law; Governmental Permits.......... 17
5.9 Seller Contracts................................... 18
5.10 Copyright Compliance............................... 18
5.11 Financial Statements............................... 19
5.12 Legal Proceedings.................................. 19
5.13 Employment Matters................................. 19
5.14 System Information................................. 21
5.15 Finders and Brokers................................ 21
5.16 Tax Matters........................................ 21
5.17 Condition of Assets................................ 21
5.18 Regulation of Rates................................ 21
5.19 Insurance.......................................... 21
5.20 No Other Commitment to Sell........................ 21
ARTICLE VI.................................................... 22
6. Buyer's Representations and Warranties............. 22
6.1 Organization and Qualification..................... 22
6.2 Authority and Validity............................. 22
6.3 No Breach or Violation............................. 22
6.4 Litigation......................................... 23
6.5 Financial Statements............................... 23
6.6 Adequate Financing................................. 23
6.7 Finders and Brokers................................ 23
6.8 Qualification of Buyer............................. 24
ARTICLE VII................................................... 24
7. Additional Covenants............................... 24
7.1 Access to Premises and Records..................... 24
7.2 Continuity and Maintenance of Operations;
Financial Statements; Correspondence.......... 24
7.3 Employee Matters................................... 26
7.4 Franchise Extension................................ 26
7.5 Environmental Report............................... 26
7.6 Consents........................................... 27
7.7 HSR Notification................................... 27
7.8 Notification of Certain Matters.................... 28
7.9 Risk of Loss; Condemnation......................... 28
7.10 Adverse Changes.................................... 28
7.11 Action By Limited Partners......................... 29
7.12 No Solicitation.................................... 29
7.13 Sales and Transfer Taxes and Fees.................. 30
7.14 Commercially Reasonable Efforts.................... 30
7.15 Title Insurance.................................... 30
7.16 FCC Form 626....................................... 31
7.17 Forms 394.......................................... 31
ARTICLE VIII.................................................. 31
8. Conditions Precedent to Obligations of Buyer....... 31
8.1 HSR Act............................................ 31
8.2 Governmental or Legal Action....................... 31
8.3 Accuracy of Representations and Warranties......... 31
8.4 Performance of Agreements.......................... 31
8.5 No Material Adverse Change......................... 32
8.6 Consents and Extensions............................ 32
8.7 Transfer Documents................................. 32
8.8 Opinions of Seller's Counsel....................... 32
8.9 Opinion of Seller's FCC Counsel.................... 32
8.10 Discharge of Liens................................. 32
8.11 Noncompete Agreement............................... 32
8.12 Additional Documents and Acts...................... 32
8.13 Indemnity Escrow Agreement......................... 33
8.14 1996 Financial Statements.......................... 33
8.15 Certificates....................................... 33
ARTICLE IX.................................................... 33
9. Conditions Precedent to Obligations of
Seller............................................. 33
9.1 HSR Act............................................ 33
9.2 Governmental or Legal Actions...................... 33
9.3 Accuracy of Representations and Warranties......... 33
9.4 Performance of Agreements.......................... 33
9.5 Consents........................................... 34
9.6 Opinions of Buyer's Counsel........................ 34
9.7 Limited Partner Approval........................... 34
9.8 Payment of Purchase Price.......................... 34
9.9 Assumption of Liabilities.......................... 34
9.10 Additional Documents and Acts...................... 34
9.11 Certificate........................................ 34
9.12 Fairness Opinion................................... 34
9.13 Indemnity Escrow Agreement......................... 34
9.14 Environmental Remediation.......................... 34
ARTICLE X..................................................... 35
10. Termination........................................ 35
10.1 Events of Termination.............................. 35
10.2 Manner of Exercise................................. 37
10.3 Effect of Termination.............................. 37
10.4 Liquidated Damages................................. 37
ARTICLE XI.................................................... 38
11. Nature and Survival of Representations, Warranties
and Agreemets.................................... 38
11.1 Nature of Representations, Warranties and
Agreements....................................... 38
11.2 Survival of Representations and Warranties......... 38
11.3 Time Limitations................................... 38
11.4 Limitations as to Amount........................... 38
ARTICLE XII................................................... 39
12. Indemnification..................................... 39
12.1 Rights to Indemnification.......................... 39
12.2 Procedure for Indemnification...................... 39
12.3 Indemnity Escrow................................... 40
ARTICLE XIII.................................................. 40
13. Miscellaneous...................................... 40
13.1 Parties Obligated and Benefitted................... 40
13.2 Press Releases..................................... 41
13.3 Notices............................................ 41
13.4 Waiver............................................. 42
13.5 Captions........................................... 42
13.6 CHOICE OF LAW...................................... 42
13.7 Nonrecourse........................................ 42
13.8 Dispute Resolution................................. 42
13.9 Power of Attorney.................................. 43
13.10 Terms.............................................. 43
13.11 Rights Cumulative.................................. 43
13.12 Further Actions.................................... 43
13.13 Time............................................... 43
13.14 Expenses........................................... 43
13.15 Specific Performance............................... 43
13.16 Schedules.......................................... 44
13.17 Counterparts....................................... 44
13.18 Entire Agreement................................... 44
13.19 Severability....................................... 44
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 Indemnity Escrow Agreement
Exhibit G Form of Opinion of Seller s FCC Counsel
Exhibit H Form of Noncompetition Agreement
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 5.12 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
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made as of the 29th
day of November, 1996, by and between AMERICAN CABLE TV INVESTORS
5, LTD., a Colorado limited partnership ("Seller"), and RIFKIN ACQUISITION
PARTNERS, L.L.L.P., a Colorado limited liability limited partnership ("Buyer").
R E C I T A L S:
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(d).
"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.
"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.
"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
Marvin Jones, Ramona Whitman, Greg Butler, Deborah Amacher and
Marie Ferris.
"Business" shall mean the cable television business conducted by
Seller on the date of this Agreement 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.
"Buyer Financial Statement" shall have the meaning set forth in
Section 6.5.
"Buyer Interim 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).
"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, all of which are 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, encroach-
ments, 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.
"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 two months of the services ordered 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.
"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.
"Extension" shall have the meaning set forth in Section 7.4.
"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.
"Franchise Fee" shall mean the percentage of Seller s
gross revenues to be paid to a Governmental Authority as specified
in the applicable franchise agreement.
"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, including those described on Schedule 1.5.
"Hazardous Substances" shall mean any pollutant,
contaminant, chemical, industrial, toxic, hazardous or noxious
substance or waste which is regulated by any Governmental
Authority, including (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 laws, regulations or ordinances of federal, state or applicable
local governments, (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. 2601
et seq., (d) any materials or substances designated as "hazardous
substances" pursuant to the Clean Water Act, 33 U.S.C. 1251
et seq., (e) "economic poison," as defined in the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. 135 et seq.,
(f) "chemical substance," "new chemical substance" or "hazardous
chemical substance or mixture" pursuant to the Toxic Substances
Control Act, referred to above, (g) "hazardous substances" pursuant
to the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. 9601 et seq. and (h) "hazardous waste"
pursuant to the Resource Conservation and Recovery Act, 42 U.S.C.
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.
"Indemnity Escrow Agent" shall mean The Chase Manhattan Bank.
"Indemnity Escrow Agreement" shall mean the Indemnity
Escrow Agreement to be entered into at Closing among Buyer, Seller
and the Indemnity Escrow Agent, in the form attached as Exhibit F.
"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.).
"Must Carry Election" shall mean the exercise by WXMT of
its must carry rights pursuant to Section 4 of the Cable Act.
"1996 Financial Statements" shall have the meaning set
forth in Section 7.2.
"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 (f) 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 the fee and
leasehold interests described on Schedule 1.7.
"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).
"Required Consents" shall mean the Consents designated as
such on Schedule 1.2 by an asterisk.
"Retransmission Consent Agreements" shall mean the
retransmission consent agreements with respect to the carriage of
broadcast television signals between TCI Cable Management and each
of WSMV and WTVF.
"Schedules" shall mean the schedules prepared and
delivered pursuant to this Agreement.
"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's Escrow" shall have the meaning set forth in
Section 3.1.
"Seller Financial Statements" shall have the meaning set
forth in Section 5.11.
"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).
"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 June 27, 1997; provided,
however, Seller and Buyer shall each have the right, upon five days
notice to the other, to extend the Termination Date to a date
designated in such notice, which date shall in no event be later
than August 26, 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 November 24, 1997.
"WARN Act" shall mean the Worker Adjustment and Retraining Notification Act.
<PAGE>
ARTICLE II
1. Purchase and Sale of Assets.
1.1 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
free and clear of and expressly excluding all debts, liabilities,
obligations, taxes, liens and encumbrances (other than Permitted
Encumbrances) of any kind, character or description, whether
accrued, absolute, contingent or otherwise (and whether or not
reflected or reserved against in the balance sheets, books of
account and records of the Seller), except as otherwise expressly
provided in Section 4.1 hereof.
1.2 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 (the
"Closing Notice") from Seller to Buyer (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), 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 the Closing Notice shall not be less than 10
nor more than 30 days after the date the Closing Notice is given;
provided, further that if the Termination Date would otherwise
occur within such 10-day period, the Termination Date shall be
extended to the date which is 10 days after the date the Closing
Notice is given (or the next Business Day if such date is not a
Business Day).
<PAGE>
ARTICLE III
2. Consideration.
2.1 Consideration for the Assets. The aggregate
consideration for the Assets shall consist of (i) an amount equal
to $19,750,000, 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) $493,750 (such
amount, as increased by any earnings thereon and as reduced by any
disbursements or losses on investments, 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 trust account of Kaye, Scholer, Fierman,
Hays & Handler, LLP (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) $19,750,000 payable by Buyer to
Seller, or Seller's designee, at Closing in cash by means of wire
or interbank transfer in immediately available funds, reduced by
the amount, if any, of the Deposit actually released to Seller, or
Seller's designee. At Closing, Seller and Buyer shall direct the
Escrow Agent to release the Deposit to Seller, or Seller's
designee, in accordance with the terms of the Escrow Agreement.
Simultaneously with the payment of the Purchase Price, Seller shall
deposit $493,750 (such amount, as increased by any earnings thereon
and as reduced by any disbursements or losses on investments,
"Seller's Escrow") in cash by means of wire or interbank transfer
of immediately available funds to the account of the Indemnity
Escrow Agent, to be held, administered, and distributed in
accordance with the terms of this Agreement and the Indemnity
Escrow Agreement.
2.2 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 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.
2.3 Purchase Price Adjustments. (a) The Purchase
Price shall be increased by an amount equal to the aggregate of the
following:
(i) (a) 95% of the face amount of all Accounts
Receivable which, as of the Adjustment Time, 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 Adjustment Time, 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 aggregate of the following:
(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
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;
(iii) if, as of the Closing Date, the aggregate
number of Equivalent Basic Subscribers served by the System is less
than 11,500, an amount equal to (x) the difference between 11,500
and the aggregate number of Equivalent Basic Subscribers served by
the System as of the Closing Date times (y) $1,717; and
(iv) 100% of the dollar amount of any
deductibles paid, or to be paid, under insurance policies for which
insurance proceeds are payable to Buyer pursuant to Section
7.9(a).
(c) If the Purchase Price is decreased pursuant to
Section 3.3(b)(iii), Seller shall deliver to Buyer at Closing a
list of each of the System s subscribers who, as of the Closing
Date, have not qualified as an Equivalent Basic Subscriber because
they have not paid in full at least two months of the services
ordered. The Purchase Price shall be increased by an amount equal
to (x) the number of subscribers on such list who, as of the date
which corresponds to the Closing Date for the month following the
month during which the Closing occurs, qualify as Equivalent Basic
Subscribers, times (y) $1,717; provided, that, the amount by which
the Purchase Price is increased pursuant to this Section 3.3(c)
shall not exceed the amount by which the Purchase Price is
decreased pursuant to Section 3.3(b)(iii). Any increase to the
Purchase Price pursuant to this Section 3.3(c) shall be reflected
as an adjustment to the Purchase Price on the Final Adjustments
Report.
2.4 Preliminary and Final Settlements. Preliminary and
final adjustments to the Purchase Price will be determined as
follows:
(a) At least five 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 a pro forma
determination as of the Closing Date of the prorations set forth in
Section 3.2 and the adjustments set forth in Section 3.3 (other
than Section 3.3(c)). 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.
(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
(including Section 3.3(c)). 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.
(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 five Business Days of such
acceptance, make the following payments: (i) if the Purchase Price
calculated based on the Final Adjustments 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,
and such amounts to be paid by Seller shall not be subject to the
limitations of Article XII or reduce the Seller's Escrow; provided
that Buyer may, at its option, seek payment of such amounts from
Seller's Escrow. 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 three 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 Seller and Buyer which has not regularly rendered
accounting or auditing services to Seller or Buyer or any of their
respective Affiliates within two years prior to the date of this
Agreement (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 by 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
five 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%.
2.5 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 Buyer 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%.
2.6 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
3. Assumed Liabilities and Excluded Assets.
3.1 Assignment and Assumption. (a) Seller will
assign, and Buyer will assume and perform as they become due, for
all periods on or after the Adjustment Time (and prior to the
Adjustment Time with respect to liabilities and obligations for
which a Purchase Price Adjustment is made in Buyer s favor under
Section 3.3), the following liabilities and obligations of Seller
(collectively, the "Assumed Liabilities"): (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; (D) any taxes accrued on
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; and (E) all other liabilities of Seller arising out of or
relating to the conduct of the Business and incurred in the
ordinary course of business.
(b) Except for the Assumed Liabilities, 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 is made under Section 3.3(b))
(collectively, the "Excluded Liabilities"). Seller shall indemnify
Buyer, in accordance with Article XII, against any claim that Buyer
is liable for the Excluded Liabilities.
3.2 Excluded Assets. Excluded from the assets which
will be transferred from Seller to Buyer pursuant to this Agreement
(collectively, the "Excluded Assets") are all 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 7.7(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 90 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 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; (l) the retransmission
consent agreements relating to the carriage of WKRN and WZTV; and
(m) those properties, rights and interests set forth on Schedule 4.2.
<PAGE>
ARTICLE V
4. Representations and Warranties of Seller.
Seller represents and warrants to Buyer as follows:
4.1 Organization and Qualification. 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 Tennessee.
4.2 Authority and Validity. 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.
4.3 Consents and Approvals; No Violation. (a) Except
for (i) the Consents, (ii) the consent of the Limited Partners with
respect to the transactions contemplated by 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
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
the Partnership 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
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 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.
4.4 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 which Buyer acknowledges may
need to be replaced in order for Buyer to continue to operate the
Business), agreements, commitments and arrangements reasonably
necessary for the conduct of the Business in the ordinary course in
the same manner as that in which such business is currently
conducted by Seller.
4.5 Title. Except as set forth on Schedule 5.5 and for
the Permitted Encumbrances, Seller has, and on the Closing Date
will have, 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.
4.6 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 material 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, to the Best of Seller's Knowledge, Seller
has not received any notice with respect to the termination or
breach of any of those rights.
4.7 Environmental Matters. (a) Except as set forth on
Schedule 5.7, 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, or prior to Closing will
provide, Buyer with complete and correct copies of (i) all studies,
reports, surveys or other materials in Seller's possession relating
to the presence or alleged presence of Hazardous Substances at, on
or affecting the Real Property, (ii) all notices or other materials
in Seller's possession 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 Seller's possession relating to any
claim, allegation or action by any private third party under any
Environmental Law.
4.8 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 Business. Seller
has not received any notice claiming a 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, together with the expiration date of each
Governmental Permit and any Franchise Fee charged, as of June 30,
1996, by the applicable Governmental Authority. Complete and
correct copies of all such Governmental Permits as currently in
effect have been, or prior to the 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.
(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 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. All broadcast
television signals carried by the System pursuant to the
Retransmission Consent Agreements and Must Carry Election are being
carried in compliance in all material respects with the
Communications Act and the Cable Act. Copies of the Retransmission
Consent Agreements and Must Carry Election have been provided to
Buyer by Seller.
(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.
4.9 Seller Contracts. Schedule 1.8 lists all Seller
Contracts that are material to the conduct of the Business as it is
now conducted. Complete and correct copies of the Seller Contracts
as currently in effect have been, or prior to the Closing will be,
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.
4.10 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. 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.
4.11 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 six-month period ended June 30, 1996
(collectively, 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, and with respect to
the Seller Financial Statements for the six-month period ended June
30, 1996, subject to normal year-end adjustments (none of which are
expected to be material in amount).
(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.
4.12 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.
4.13 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 after
inquiry of Employer, 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.
(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. 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, 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 the employees salaries or wages as of June 30, 1996.
Except as provided on Schedule 5.13(d), 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.
4.14 System Information. (i) The number of Equivalent
Basic Subscribers served by the System, the number of subscribers
served by the System taking Expanded Basic Services, thebandwidth
of the System and channel line up of the System and (ii) to the
Best of Seller's Knowledge, the 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. The Basic Subscriber Rate and rate for Expanded
Basic Services, each as of June 30, 1996, are as set forth on Schedule 1.1.
4.15 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.
4.16 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.
4.17 Condition of Assets. The tangible Assets, taken as
a whole, are in generally good working condition and repair, normal
wear and tear excepted, and are capable of being used to deliver
CATV services to the present subscriber base in a manner consistent
with past practices of Seller.
4.18 Regulation of Rates. As of the date hereof, none
of the political entities or authorities which have granted a
Governmental Permit have been, or have applied to be, certified to
regulate CATV rates charged by the Seller pursuant to the Cable Act
and the rules and regulations of the FCC. Solely as of the date
hereof, Seller has not received any notice of receipt by the FCC of
any complaints on Form 329 of tier rates. Seller has not received
any notice that it has any obligation or liability to refund any
portion of the revenue received by Seller from the subscribers of
the System as of the date hereof. There has been no correspondence
sent by or delivered to Seller within the past year or, to the Best
of Seller's Knowledge, within the past three years, in any way
relating to the regulation of CATV rates (other than transmittal of
rules themselves, regulations and rulemakings and general
announcements that are not specifically related to the regulation
of rates of the System), from the FCC or any other Governmental
Authority.
4.19 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.
4.20 No Other Commitment to Sell. No material part of
the System or the Assets is directly or indirectly subject in any
manner to any written or oral commitment or any arrangement for the
sale, transfer, assignment, or disposition thereof, in whole or in
part, except pursuant to this Agreement.
ARTICLE VI
5. Buyer's Representations and Warranties.
Buyer represents and warrants to Seller as follows:
5.1 Organization and Qualification. Buyer is a limited
liability limited partnership duly organized, validly existing and
in good standing under the laws of its state of formation and has
all requisite partnership 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.
5.2 Authority and Validity. Buyer has all requisite
partnership 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 partnership
action of Buyer and no other partnership 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.
5.3 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 Certificate of Incorporation
or By-Laws or partnership agreement, as the case may be, (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 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.
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 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.
5.5 Financial Statements. Buyer has delivered to
Seller copies of its audited financial statements for its last
fiscal year ("Buyer Financial Statement"). The Buyer Financial
Statement and the notes thereto 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. Buyer has delivered to Seller copies of
its unaudited financial statements for its last fiscal quarter
("Buyer Interim Financial Statement"). Except as noted therein,
the Buyer Interim Financial Statement was prepared on a basis
consistent with the Buyer Financial Statement and fairly presents,
in conformity with GAAP consistently applied, the financial
position of Buyer as of such date and the results of operations and
cash flows or changes in financial position, as applicable, for
such period, 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.
5.6 Adequate Financing. Buyer is able to obtain,
through borrowings under existing lines of credit, 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.
5.7 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.
5.8 Qualification of Buyer. Buyer knows of no reason
why it cannot obtain the licenses and permits necessary for it to
own and operate the Business in the manner in which it is currently
conducted by Seller.
<PAGE>
ARTICLE VII
6. 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 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.
6.2 Continuity and Maintenance of Operations; Financial
Statements; Correspondence Relating to CATV Rates. 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 operating condition;
(c) Maintain adequate inventories of spare
Equipment consistent with past practice;
(d) Maintain 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
connection of service and 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;
(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 in excess of $50,000 other than
in the ordinary course of business;
(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; or
(k) Not extend either of two leases for the Real
Property located at 209 Thompson Street, Shelbyville, Tennessee or
2161 Hillsboro Boulevard, Manchester, Tennessee for a period beyond
one year from its current date of expiration or extension, as
applicable, without Buyer s written consent, which consent 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 three Business Days of Buyer s receipt of Seller's
written request for consent; provided, further, that Buyer's
refusal to give consent to an increase in rental rate to reflect
current market conditions at the time of extension of such lease
shall be deemed to be unreasonable.
Seller shall deliver to Buyer, promptly after such
statements and reports become available to Seller, correct and
complete copies of the unaudited income statement and operating
reports for the Business for the year ended December 31, 1996 (the
1996 Financial Statements ) and unaudited monthly income
statements and operating reports (the Monthly Financial
Statements ) and unaudited quarterly income statements and
operating reports (the Quarterly Financial Statements ) for the
Business that are prepared by or for Seller at any time between the
date of this Agreement and the Closing. Except for the absence of
footnote disclosures, cash flow statements and statements of equity
and except for estimated, annualized or projected financial
information, the 1996 Financial Statements and Quarterly Financial
Statements shall 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, and with respect to the Quarterly Financial Statements,
subject to normal year-end adjustments (none of which are expected
to be material in amount); 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 the
Quarterly Financial Statements for the nine months ended September
30, 1996 or the Monthly Financial Statements.
Seller shall deliver to Buyer any correspondence received
by Seller between the date of this Agreement and the Closing Date,
in any way relating to the regulation of CATV rates (other than
transmittal of rules themselves, regulations and rulemakings and
general announcements that are not specifically related to the
regulation of rates of the System), from the FCC or any other
Governmental Authority.
6.3 Employee Matters. (a) Buyer may offer employment
to the employees of Employer listed on Schedule 5.13(d) who
primarily perform services with respect to the operation of the
Business as of the Closing Date. Not later than February 27, 1997,
Buyer shall deliver to Seller a notice containing the names of
employees of the Business whom Buyer intends to hire on the Closing
Date; provided, that if the Termination Date is extended by Seller
or Buyer, Buyer may deliver to Seller a notice no later than 60
Business Days prior to the extended Termination Date updating the
lists of employees which Buyer intends to hire on the Closing Date.
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 the
employees of Employer, including severance.
(b) 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.
6.4 Franchise Extension. 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 "Extension") of the franchise described on
Schedule 1.5 with an expiration date prior to June 30, 2000.
Seller shall use commercially reasonable efforts to obtain the
Extension for such franchise to an expiration date of March 10,
2005, but in no event shall the Extension have an expiration date
earlier than June 30, 2000. The Extension may include
modifications customarily imposed by Governmental Authorities
issuing cable television franchises as a condition to obtaining the
Extension but in any event such modifications shall not impose any
conditions or obligations which are materially more burdensome than
contained in the current franchise.
6.5 Environmental Report. Buyer may cause to be
prepared and delivered at its expense, within 30 days after the
date of this Agreement, a Phase I environmental report and, within
60 days after the date of this Agreement, a Phase II environmental
report for the Real Property described on Schedule 1.7. 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 or Phase II
environmental report. Buyer shall deliver to Seller a copy of each
environmental report within three Business Days of receipt of such
report by Buyer. Subject to Section 10.1(b)(vi), if such
environmental reports disclose one or more adverse environmental
conditions, Seller shall assume full responsibility for remediation
of each such environmental condition and shall bear all expenses
incurred in connection therewith; provided, that Seller concludes,
in its reasonable judgment, that the cost of all such remediation
shall not exceed $200,000 in which case Seller shall have the sole
right to direct such remediation; provided, further, that if Buyer
agrees to bear any costs of remediation in excess of $200,000,
Buyer shall assume responsibility for overseeing the remediation of
each such environmental condition in consultation with Seller.
6.6 Consents. Seller will use commercially reasonable
efforts to obtain, as soon as practicable and at its expense, (i)
all the Required Consents, in form and substance reasonably
satisfactory to Buyer; provided, that "commercially reasonable
efforts" for purposes of this Section 7.6 and for purposes of
Section 7.4 shall not require Seller to undertake extraordinary or
unreasonable 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 (other than any costs that may be
incurred to remedy any noncompliance with the terms of any
Governmental Permit). Buyer will use commercially reasonable
efforts to assist Seller in its efforts to obtain all the Required
Consents and the Extensions, and in connection therewith will
consent to such modifications to any Governmental Permit that a
Governmental Authority may request as a condition to (i) the
transfer of such 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 contained
in any such Governmental Permit. If Buyer gives Seller notice that
Buyer desires to grant a security interest in Buyer's rights under
any agreement or instrument that is the subject of a Required
Consent, Seller will use commercially reasonable efforts to obtain,
and Buyer will use commercially reasonable efforts to assist Seller
in its effort to obtain, the consent required to grant a security
interest, provided, that Buyer shall be responsible for the payment
of any fees in connection therewith, and provided further that no
such consent shall be a condition to the obligations of Buyer under
this Agreement.
6.7 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. Buyer and
Seller shall each bear one-half of any required filing fee under
the HSR Act.
6.8 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.
6.9 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 (other than a Purchase Price
adjustment under Section 3.3(b)(iv)) 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. In the event that any Assets
are damaged or destroyed prior to the Closing Date but such loss or
damage is not so substantial as to prevent normal operation of any
material portion of the System, Seller shall use commercially
reasonable efforts to repair or replace, prior to the Closing Date,
any such Assets with items of like value and quality.
(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 10.1(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.
6.10 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 material 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.
6.11 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 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"). Seller and Buyer shall cooperate
in the preparation of any Proxy Statement; without limiting the
generality of the foregoing, Buyer shall furnish to Seller the
information relating to Buyer 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 thereof with the
SEC.
6.12 No Solicitation. (a) Seller shall not, and shall
cause the General Partner, 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) Each of TCI and Tele-Communications, Inc. 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.
6.13 Sales and Transfer Taxes and Fees. Buyer and
Seller shall each pay one-half 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 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.
6.14 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.
6.15 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. Seller shall
deliver to Buyer, prior to Closing, complete and correct copies of
all deeds, surveys and title insurance policies, in Seller's
possession, on any Real Property
6.16 FCC Form 626. Seller shall file on a timely basis
a Form 626 with the applicable Governmental Authority for each
franchise with an expiration date earlier than the third anniversary
of the Closing Date.
6.17 Forms 394. At Seller s option, Buyer shall
prepare, in form and substance reasonably satisfactory to Seller,
within 15 Business Days after receipt of Seller s written request,
and Seller shall file, Forms 394 with the applicable Governmental
Authorities.
<PAGE>
ARTICLE VIII
7. 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.
7.1 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.
7.2 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.
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, 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.
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 Seller 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, financial condition or operations of the Business, taken
as a whole, 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.
7.6 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, and no Required Consent shall impose
upon Buyer any conditions or obligations which are materially more
burdensome than are contained in the underlying document for which
consent has been obtained, provided, that the Required Consents for
the leases for the Real Property located at 209 Thompson Street,
Shelbyville, Tennessee and 2161 Hillsboro Boulevard, Manchester,
Tennessee may provide for an increased rental rate to reflect
current market conditions.
7.7 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.
7.8 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.
7.9 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 G.
7.10 Discharge of Liens. Seller shall have secured the
termination of all Encumbrances of any nature on the Assets, other
than Permitted Encumbrances.
7.11 Noncompete Agreement. Each of TCI, Tele-
Communications, Inc., Seller and the General Partner shall have
executed and delivered to Buyer a noncompetition agreement,
substantially in the form attached as Exhibit H.
7.12 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.
7.13 Indemnity Escrow Agreement. Seller shall have
executed and delivered the Indemnity Escrow Agreement.
7.14 1996 Financial Statements. Seller shall have
delivered to Buyer correct and complete copies of the 1996
Financial Statements.
7.15 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.
ARTICLE IX
8. 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.
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
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.
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, 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. 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.
8.5 Consents. All Required Consents shall have been
obtained or given.
8.6 Opinions of Buyer's Counsel. Seller shall have
received the opinion or opinions of Baker & Hostetler, outside
counsel for Buyer, dated the Closing Date, substantially in the
form of Exhibit E.
8.7 Limited Partner Approval. The transactions
contemplated by this Agreement shall have been approved by the
affirmative vote of or consent by the Limited Partners to the
extent required by the Partnership Agreement or if Seller otherwise
elects as permitted by Section 7.9.
8.8 Payment of Purchase Price. Buyer shall have paid
to Seller the Purchase Price as set forth in Section 3.1.
8.9 Assumption of Liabilities. Buyer shall have
delivered to Seller a customary assumption of liabilities agreement
which is sufficient to cover Buyer's obligations as set forth in
Section 4.1.
8.10 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.
8.11 Certificate. 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.
8.12 Fairness Opinion. On or before February 1, 1997,
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.
8.13 Indemnity Escrow Agreement. Buyer shall have
executed and delivered to Seller the Indemnity Escrow Agreement.
8.14 Environmental Remediation. In the event that any
Phase I environmental report or Phase II environmental report
prepared at Buyer s request pursuant to Section 7.5 discloses one
or more adverse environmental conditions which Seller shall have
concluded, in its reasonable judgment, that the cost of such
remediation shall not exceed $200,000, Seller and Buyer shall have
agreed that remediation of such condition(s) has been completed and
Seller has no further obligation with respect thereto.
ARTICLE X
9. Termination.
9.1 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;
(ii) following receipt by Seller or the General
Partner of an unsolicited proposal for an
Alternative Transaction with a proposed purchase
price greater than or equal to $21,725,000 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;
provided, however, that Seller may not terminate
this Agreement pursuant to this clause (ii) with
respect to an unsolicited proposal for an
Alternative Transaction submitted by a Person, or
a Person known by the General Partner in its
reasonable business judgment to be an Affiliate of
such Person, who submitted a written proposal on
October 7, 1996 to purchase the System pursuant to
the competitive auction conducted by Daniels &
Associates;
(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; or
(vi) if any Phase I environmental report or Phase
II environmental report for the Real Property
prepared at Buyer s request pursuant to Section
7.5 discloses one or more adverse environmental
conditions and Seller concludes, in its reasonable
judgment, that the cost of remediation of such
condition(s) will exceed $200,000; provided that
termination pursuant to this Section 10.1(b)(vi)
shall not be effective, and shall be void ab
initio, in the event that within three Business
Days after receipt of Seller's notice of
termination pursuant to Section 10.2 Buyer
delivers notice to Seller that Buyer will bear all
costs in connection with such remediation in
excess of $200,000.
(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;
(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); or
(vi) following a Taking, as contemplated by the
first sentence of Section 7.9(b).
(d) Unless the Closing shall have theretofore taken
place, by either party after the Termination Date, provided that
the terminating party is not otherwise in default or breach of
this Agreement.
9.2 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.
9.3 Effect of Termination. (a) Subject to
paragraph (b) 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 13.14; provided, however, that no termination of this
Agreement shall (i) except as set forth in Section 10.3(b) 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.
(b) If this Agreement is terminated by Seller
pursuant to Section 10.1(b)(ii), Seller shall promptly pay to Buyer
a termination fee of $493,750 (the "Termination Fee"). If (i) the
Termination Date is extended by Seller or Buyer to a date later
than August 26, 1997, (ii) this Agreement is terminated by Seller
pursuant to Section 10.1(d) prior to the date which is 360 days
from the date of this Agreement, and (iii) Buyer is not in default
or breach of this Agreement, Seller shall promptly pay Buyer a
Termination Fee in the event Seller accepts a proposal for an
Alternative Transaction on or before November 24, 1997. The
Termination Fee shall be liquidated damages and not a penalty, and
upon receipt thereof Buyer shall be precluded from exercising any
other right or remedy available under this Agreement or applicable
law.
9.4 Liquidated Damages. Provided Seller is not in
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, 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 as liquidated damages as set forth in this
Section 10.4, Buyer shall promptly (but in no event more than two
Business Days after receipt of such notice) take all action
required under the Escrow Agreement to cause the Deposit 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, be precluded from exercising any
other right or remedy available under this Agreement or applicable law.
<PAGE>
ARTICLE XI
10. Nature and Survival of Representations,
Warranties and Agreements.
10.1 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 or in any certificate or other instruments to be
delivered by Seller or Buyer pursuant to 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.
10.2 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.
10.3 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 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.
10.4 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 such failure or
breach exceeds $50,000 but then for the entire amount of such
damages, including those not 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 such failure or breach exceeds $50,000 but
then for the entire amount of such damages, including those not 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.
<PAGE>
ARTICLE XII
11. Indemnification.
11.1 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 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 Agreement or any document, certificate or agreement
delivered pursuant to this Agreement. 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
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 or (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 or any document, certificate or agreement delivered
pursuant to this Agreement.
11.2 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
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
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 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).
11.3 Indemnity Escrow. Buyer acknowledges and agrees
that recourse against the Seller's Escrow 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 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 Seller's Escrow, to the extent there are funds
available.
ARTICLE XIII
12. Miscellaneous.
12.1 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) Employer shall be deemed a third party
beneficiary of Buyer's obligations as set forth in Section 7.3(b).
(c) 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, further,
that notwithstanding any such assignment Buyer shall remain
obligated to Seller pursuant to the terms and conditions of this
Agreement.
12.2 Press Releases. Except as required by applicable
law based on the advice of independent 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.
12.3 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:
Rifkin Acquisition Partners, L.L.L.P.
360 South Monroe Street, Suite 600
Denver, Colorado 80209
Attention: Kevin Allen
Facsimile No.: (303) 322-3553
With a copy to:
Baker & Hostetler
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203
Attention: Stuart G. Rifkin
Facsimile No.: (303) 861-7805
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.
12.4 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.
12.5 Captions. The article and section captions of this
Agreement are for convenience only and do not constitute a part of
this Agreement.
12.6 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 THE PERFORMED IN THAT STATE,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
12.7 Nonrecourse. Notwithstanding anything in this
Agreement to the contrary, subject only to the proviso of Section
12.3, 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 in any action brought by
reason of this Agreement or the transactions contemplated hereby.
12.8 Dispute Resolution. Any dispute relating to this
Agreement, or the breach thereof, shall in the first instance be
the subject of a meeting between Seller and Buyer within 30 days
following written notice of the dispute. The meeting shall be
attended by individuals with decision-making authority regarding
the matter in question. If the parties cannot agree upon a
resolution of the dispute within the 30-day period referenced
above, the dispute may be submitted by Seller or Buyer to
arbitration. Such arbitration shall be conducted in Denver,
Colorado before a single arbitrator appointed by the American
Arbitration Association then in effect. The award of such
arbitrator shall be final and may be entered by Seller or Buyer in
any court of competent jurisdiction. The arbitration award may
grant a reimbursement to the prevailing party of all of its fees
and expenses, including reasonable attorneys fees.
12.9 Power of Attorney. Seller agrees that, effective
as of the Closing Date, it hereby constitutes and appoints Buyer,
its successors and assigns, the true and lawful attorney of Seller
in the name of Buyer or in the name of Seller, to endorse, collect
and deposit any checks, drafts or other instruments payable to
Seller which relate to payments for goods and/or services provided
by Seller or Buyer in connection with the System.
12.10 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.
12.11 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.
12.12 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 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.
12.13 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.
12.14 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.
12.15 Specific Performance. The parties 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 by Seller. It is accordingly
agreed that 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.
12.16 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.
12.17 Counterparts. This Agreement may be executed in
one or more counterparts, each of which will be deemed an
original.
12.18 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.
12.19 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.
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:___________________________
Name:
Title:
BUYER: RIFKIN ACQUISITION PARTNERS,
L.L.L.P.
By: Rifkin Acquisition
Management, L.P., General Partner
By: RT Investments Corp.,
its General Partner
By:__________________
Name:
Title:
With respect to Section 7.12(b) only:
TELE-COMMUNICATIONS, INC.
By:_________________________________
Name:
Title:
With respect to Section 7.12(b) only:
TCI COMMUNICATIONS, INC.
By:_________________________________
Name:
Title:
List of Schedules and Exhibits
Pursuant to
Asset Purchase Agreement
of American Cable TV Investors 5, Ltd.
for AMERICAN CABLE TV OF SOUTHERN TENNESSEE
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 Indemnity Escrow Agreement
Exhibit G Form of Opinion of Seller s FCC Counsel
Exhibit H Form of Noncompetition Agreement
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 5.12 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
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Exhibit A
Geographic Areas of Seller's Business
City of Shelbyville, Tennessee
Bedford County, Tennessee
Bell Buckle, Tennessee
Wartrace, Tennessee
City of Manchester, Tennessee
Coffee County, Tennessee
<PAGE>
AMERICAN CABLE TV
INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Exhibit B
Escrow Agreement
ESCROW AGREEMENT, dated as of November __, 1996, by and
among American Cable TV Investors 5, Ltd., a Colorado limited
partnership ( Seller ) and Rifkin Acquisition Partners, L.L.L.P., a
Colorado limited liability limited partnership ( Buyer ), and Kaye,
Scholer, Fierman, Hays & Handler, LLP, a New York limited liability
partnership, as escrow agent ( Escrow Agent ).
Seller and Buyer have entered into an Asset Purchase
Agreement, dated as of November __, 1996, to sell and purchase
certain cable television assets (the Agreement ). Pursuant to the
Agreement, Kaye, Scholer, Fierman, Hays & Handler, LLP, was
designated as the escrow agent thereunder. Escrow Agent has agreed
to act as an escrow agent pursuant to the terms of this Escrow
Agreement. Capitalized terms used but not defined herein shall have
the meanings set forth in the Agreement.
It is agreed as follows:
13. Escrow Fund. Buyer has, pursuant to Section 3.1 of the Agreement,
deposited $493,750 in cash by means of wire or interbank transfer in
immediately available funds in Escrow Agent s Kaye, Scholer, Fierman,
Hays & Handler, LLP Attorney Trust Account No. 040-0251-95;
Attention: Gregory Ciolek, at The Chase Manhattan Bank, 55 Water
Street, New York, New York 10041 -- ABA No. 021000128 to be held in
escrow pursuant to the terms of the Agreement (such amount, together
with any earnings thereon, being the Escrow Fund ), to be held and
disbursed by Escrow Agent in accordance with this Escrow Agreement.
14.Disbursement.
14.1 Notices. Escrow Agent shall pay over the Escrow Fund upon
receipt of a written notice, in the form attached hereto as
Exhibit I, as follows: (a) upon receipt of such notice executed by
Seller directing the Escrow Agent to pay the Escrow Fund over to
Buyer, to Buyer; (b) upon receipt of such notice executed by Buyer
directing the Escrow Agent to pay the Escrow Fund over to Seller, to
Seller; or (c) upon receipt of such notice executed by Buyer and
Seller, to the parties and in the amounts specified in the notice.
14.2 Agreement of Seller and Buyer. Seller and Buyer have agreed
that (i) the Escrow Fund shall be disbursed in accordance with the
terms of this Escrow Agreement and the Agreement, (ii) at the Closing
Seller and Buyer shall instruct Escrow Agent to disburse the Escrow
Fund to Seller or Seller s designee and (iii) unless the Closing
shall theretofore have taken place or unless an unresolved claim
against the Escrow Fund remains outstanding, on the date which is
five Business Days after the termination of the Agreement pursuant to
Article X thereof, Seller and Buyer shall instruct Escrow Agent to
disburse the Escrow Fund to Buyer.
14.3 Reliance on Notice. Upon receipt of the appropriate notice
described in Section 2.1, Escrow Agent shall pay the Escrow Fund in
accordance with Section 2.1, and Escrow Agent shall not be subject to
any liability to any party for doing so. Seller and Buyer each
agrees not to assert (and shall actively resist any attempt to assert
on their behalf) any claim against Escrow Agent for making a payment
in accordance with this Section.
15. Investment of Escrow Fund. Escrow Agent shall invest the Escrow
Fund in (a) interest bearing accounts in, or certificates of deposit
of, The Chase Manhattan Bank or (b) (i) obligations of the United
States of America, (ii) United States government securities of
agencies of the United States government which are guaranteed by the
United States government or (iii) securities of governmental
agencies, if the same are covered by a bank repurchase agreement.
Escrow Agent may invest the Escrow Fund in one or more of the invest-
ments permitted by the preceding sentence, and may change those
investments from time to time, all as it may determine in its sole
and absolute discretion. Escrow Agent shall have no duty to maximize
the return on the Escrow Fund and shall be fully protected in making
any investment or combination of investments permitted by this Section.
16. Escrow Agent as Counsel to Seller. Buyer hereby acknowledges that
it is aware that Escrow Agent is acting as counsel to Seller in
connection with the Agreement, this Escrow Agreement and other
matters, and agrees that Escrow Agent s acting under this Escrow
Agreement shall not affect its ability to act as counsel to Seller in
any matter, including, but not limited to, any claim, action or
proceeding with respect to this Escrow Agreement or the disposition
of or entitlement to the Escrow Fund.
17. Escrow Agent.
17.1 General. Escrow Agent shall act as escrow agent and hold
and disburse the Escrow Fund pursuant to the terms and conditions of
this Escrow Agreement. Its duties under this Escrow Agreement shall
cease upon disbursement of the Escrow Fund.
17.2 Liquidation of Investments. Unless otherwise directed
by notice executed by Seller and Buyer, all payments required by Section
2 shall be made in cash by means of wire or interbank transfer in
immediately available funds. When necessary to provide funds in
order to make any payments required by Section 2, Escrow Agent shall
liquidate any investments held by it as it may, in its sole and
absolute discretion, determine to be necessary to make such payments.
Escrow Agent shall have no liability for losses upon the liquidation
of any such investments.
17.3 Limited Duties. Escrow Agent undertakes to perform only
such duties as are expressly set forth in this Escrow Agreement.
Escrow Agent shall incur no liability whatsoever to any other party
hereto, except for Escrow Agent s own willful misconduct in its
capacity as escrow agent.
17.4 Reliance on Notices. Escrow Agent may rely and shall be
protected in acting or refraining from acting upon any written
notice, instruction or request furnished to it hereunder and believed
by it to be genuine and to have been signed or presented by the
proper party or parties. Escrow Agent may conclusively presume that
the undersigned have full power and authority to instruct Escrow
Agent on behalf of the respective party for which they have signed.
17.5 Limited Responsibilities. Escrow Agent s sole
responsibility upon receipt of the notice specified in Section 2.1
requiring payment pursuant to the terms of this Escrow Agreement is
to pay the Escrow Fund to such party as is specified in accordance
with Section 2.1, and Escrow Agent shall have no duty to determine
(and shall not be affected by any knowledge concerning) the validity,
authenticity or enforceability of any specification, certification
made in or information contained in such notices.
17.6 Action in Good Faith. Escrow Agent shall not be liable for
any action taken by it in good faith and believed by it to be
authorized or within the rights or powers conferred upon it by this
Escrow Agreement, and may consult with counsel (including partners or
any attorneys employed by Escrow Agent) of its own choice and shall
have full and complete authorization and protection for any action
taken or suffered by it hereunder in good faith and in accordance
with the opinion of such counsel.
17.7 Resignation. Escrow Agent may resign and be discharged from
its duties or obligations hereunder by giving notice of such
resignation to Seller and Buyer specifying a date upon which such
resignation shall take effect, whereupon a successor escrow agent,
which shall be a bank or trust company with an office in New York
City, shall be appointed by Seller. Escrow Agent shall be entitled
to pay the Escrow Fund to any successor escrow agent so appointed.
In the event no successor escrow agent has been appointed by the date
specified in the notice of resignation given by Escrow Agent, Escrow
Agent shall be entitled (but not required) to deliver the Escrow Fund
to The Chase Manhattan Bank, who shall be deemed the successor escrow
agent.
17.8 Disputes. In the event of a dispute between the parties, or
if Escrow Agent shall be uncertain as to the proper disposition of
the Escrow Fund, Escrow Agent shall be entitled (but not required) to
retain the Escrow Fund pending direction as to the disposition
thereof by a final and unappealable order of a court of competent
jurisdiction or an award of an arbitrator or panel of arbitrators.
17.9 Indemnification; Escrow Agent s Interest in Escrow Fund.
(a) Seller and Buyer hereby jointly and severally agree to indemnify
Escrow Agent and all partners and employees thereof for, and to hold
such persons harmless against, any loss, liability, damage or expense
incurred without bad faith on the part of such persons arising out of
or in connection with the Escrow Agent s entering into and/or
performing under this Escrow Agreement, including, but not limited
to, the cost and expense (including, but not limited to, attorneys
fees, which may consist in whole or in part of the time charges at
their standard rates of partners of and attorneys employed by Escrow
Agent) of investigation and defending themselves against any claim or
liability, and including taxes, penalties, additions to tax or
interest that are incurred by the Escrow Agent with respect to taxes
imposed on the Escrow Fund or any income earned or derived therefrom.
(b) Seller and Buyer hereby (i) jointly and severally agree
that Escrow Agent shall be entitled to (x) withdraw from the Escrow
Fund all sums due or reasonably likely to become due to Escrow Agent
on account of Seller s and Buyer s indemnification obligations set
forth above, and (y) withhold a portion of the income earned on or
derived from the Escrow Fund and pay such withheld amount to the
proper taxing authorities on behalf of the Escrow Fund to satisfy any
tax imposed on such income, and (ii) grant to Escrow Agent a first
priority lien on and security interest in and to the Escrow Fund for
the purposes of securing satisfaction by Seller and Buyer of their
indemnification obligations to Escrow Agent.
18. Escrow Agent Not Affected By Other Agreements. This Escrow
Agreement expressly sets forth all the duties of Escrow Agent with
respect to any and all matters pertinent hereto. No implied duties
or obligations shall be read into this Escrow Agreement against
Escrow Agent. Escrow Agent, in its capacity as such, shall not be
bound by the provisions of any agreement among the parties to this
Escrow Agreement and shall have no duty to inquire into, or to take
into account its knowledge of, the terms and conditions of any
agreement made or entered into in connection with this Escrow
Agreement, including, but not limited to, the Agreement.
19. Authorized Signatories. Seller hereby authorizes Marvin Jones,
and Buyer hereby authorizes Kevin Allen, to receive and execute all
notices required to be given hereunder, and either party may
authorize other officers to sign on its behalf by notice to the other
party.
20.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 Escrow 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:
(a) If to Seller:
American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Marvin Jones
Facsimile No.: (303) 488-3219
with a copy to:
Lynn Toby Fisher, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Facsimile No.: (212) 836-7152
(b) If to Buyer:
Rifkin Acquisition Partners, L.L.L.P.
360 South Monroe Street, Suite 600
Denver, Colorado 80209
Attention: Kevin Allen
Facsimile No.: (303) 322-3553
with a copy to:
Baker & Hostetler
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203-1264
Attention: Stuart G. Rifkin, Esq.
Facsimile No.: (303) 861-7805
(c) If to Escrow Agent:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Lynn Toby Fisher, Esq. and
Alan Capilupi, Director of Finance
Facsimile No.: (212) 836-8689
21. Miscellaneous.
21.1 Dispute Resolution. Any dispute relating to this Escrow
Agreement, or the breach thereof, shall in the first instance be the
subject of a meeting between Seller and Buyer within 15 days
following written notice of the dispute. The meeting shall be
attended by individuals with decision-making authority regarding the
matter in question. If the parties cannot agree upon a resolution of
the dispute within the 30-day period following receipt of notice
referenced above, the dispute may be submitted by Seller or Buyer to
arbitration. Such arbitration shall be conducted in Denver, Colorado
before a single arbitrator appointed by the American Arbitration
Association then in effect. The award of such arbitrator shall be
final and may be entered by Seller or Buyer in any court of competent
jurisdiction. The arbitration award may grant a reimbursement to the
prevailing party of all of its fees and expenses, including reasonable
attorneys fees.
21.2 Jurisdiction. Any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, this Escrow
Agreement which is not submitted to arbitration as set forth in
Section 9.1 shall be brought against any of the parties in the courts
of the State of New York in the County of New York, or, if it has or
can acquire jurisdiction, in the United States District Court for the
Southern District of New York, and each of the parties hereby
consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and
waives any objection to venue laid therein. Process in any such
action or proceeding may be served anywhere in the world, whether
within or without the State of New York.
21.3 Captions. The captions in this Escrow Agreement are for
convenience or reference only and shall not be given any effect in
the interpretation of this Escrow Agreement.
21.4 No Waiver. The failure of a party to insist upon strict
adherence to any term of this Escrow Agreement on any occasion hall
not be considered a waiver or deprive that party of the right
thereafter to insist upon strict adherence to that term or any other
term of this Escrow Agreement. Any waiver must be in writing.
21.5 Exclusive Agreement; Amendment; Assignment; No Third Party
Rights. This Escrow Agreement supersedes all prior agreements among
the parties with respect to its subject matter, is intended as a
complete and exclusive statement of the terms of the agreement among
the parties with respect thereto, and cannot be changed or terminated
orally. No party may assign any rights or delegate any of its duties
under this Escrow Agreement, but this Escrow Agreement shall be
binding upon and inure to the benefit of the successors to the
business and assets of Seller and Buyer and to any successor escrow
agent appointed in accordance with Section 5.7. No third party shall
have any rights hereunder.
21.6 Counterparts. This Escrow Agreement may be executed in
counterparts, each of which shall be considered an original, but all
of which together shall constitute the same instrument.
21.7 Governing Law. This Escrow Agreement and all amendments
hereof and waivers and consents hereunder shall be governed by, and
all disputes arising hereunder shall be resolved in accordance with,
the internal law of the State of New York, without regard to the
conflicts of law principles thereof.
21.8 Treatment of Escrow Fund. It is understood and agreed among
the parties hereto that Buyer will be treated as the owner of the
Escrow Fund and Escrow Agent shall report the income, if any, that is
earned on, or derived from, the Escrow Fund as income of Buyer in the
taxable year or years in which such income is properly includible.
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:___________________________
Name:
Title:
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By: Rifkin Acquisition Management, L.P.,
its General Partner
By: RT Investment Corp., its
General Partner
By:
Name:
Title:
KAYE, SCHOLER, FIERMAN,
HAYS & HANDLER, LLP
as Escrow Agent
By:
Name:
Partner
<PAGE>
EXHIBIT I
FORM OF JOINT NOTICE
TO ESCROW AGENT
[Date]
To: Kaye, Scholer, Fierman, Hays & Handler, LLP
as Escrow Agent ( Escrow Agent ) under
the Escrow Agreement dated ________, 1996,
by and among American Cable TV Investors 5, Ltd.,
Rifkin Acquisition Partners, L.L.L.P. and the
Escrow Agent (the Escrow Agreement )
Dear Sirs:
You are hereby instructed and directed to pay the Escrow
Fund (as defined in the Escrow Agreement) to the following corporation:
Payee: _______[Name]_________
_____[ ]________
Very truly yours,
AMERICAN CABLE TV INVESTORS 5, LTD.
By:_______________________________________
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By:_______________________________________
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
<PAGE>
Exhibit C
Form of Engagement Letter
[ACCOUNTANT S LETTERHEAD]
_______ __, 1997
American Cable TV Investors 5, Ltd.
c/o TCI Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Rifkin Acquisition Partners, L.L.L.P.
306 South Monroe Street, Suite 600
Denver, Colorado 80209
Dear _____________:
This letter is to confirm our understanding of the agreed-upon
procedures to be performed in connection with the sale of assets
by
American Cable TV Investors 5, Ltd. (the Seller ) to Rifkin
Acquisition Partners, L.L.L.P. (the Buyer ) pursuant to the
Asset
Purchase Agreement dated _______ __, 1996 (the Agreement ).
Capitalized terms not otherwise defined in this Letter shall have
the
meanings set forth in the Agreement.
This letter describes the objective of the review and nature of
the
services we will provide. It also includes an overview of the
procedures we intend to perform, describes the type of report we
intend to issue, and includes an estimate of our fees.
Based upon our discussions with you, we believe the following
proposed procedures are those requested by you in connection with
the
Final Adjustments Report, as described in Section 3.4 of the
Agreement:
1. Obtain the Preliminary and Final Adjustments Reports, prepared
by the Partnership (the Adjustments ) as contemplated by
Sections 3.4(a) and 3.4(b) of the Agreement.
2. Obtain the appropriate Accounts Receivable aging and recalculate
the adjustment as contemplated by Section 3.3(a)(i) of the
Agreement.
3. Obtain third party invoice or other appropriate documentation of
prepaid real and personal property taxes and other prepaid fees
and expenses identified by you. Recalculate the relevant
adjustments, as contemplated by Section 3.3(a)(ii) of the
Agreement, based on a proration as of the Closing Date on the
basis of the period covered by such payment.
4. Agree advance payments to, or deposits with, third parties;
advance payments to, or monies of third parties on deposit with,
Seller; accrued and unpaid real and personal property taxes; and
other accrued and unpaid expenses, as defined in Sections
3.3(a)(ii) and 3.3(b) of the Agreement, to the appropriate
account(s) per the most recent general ledger of Seller.
We will perform the aforementioned procedure(s) and report our
findings to you. We will report to you any differences noted in
performing Steps 2 through 4, regardless of amount.
Due to the nature of the engagement our fees will be based upon time
and expenses required to complete the engagement. We estimate that
our total fees including expenses will not exceed $_____.
Because the above procedures do not constitute an audit made in
accordance with generally accepted auditing standards, we will not be
expressing an opinion on any of the accounts specified or items
referred to above. Our report is intended solely for the information
and use of the managements of Seller and Buyer and should not be used
for any other purpose.
If the foregoing is in accordance with your understanding please sign
the copy of this letter in the space provided and return it to us.
Very truly yours,
ACCOUNTANT
ACCEPTED BY:
______________________ ______________________
Seller s Signature Title Date
______________________ ______________________
Buyer s Signature Title Date
[Paragraphs 2, 3 and 4 above will only be included in the Engagement
Letter to the extent that any amounts about which Seller and Buyer
disagree pursuant to Section 3.4(d) of the Agreement fall within the
categories described in those Paragraphs. The parties acknowledge
that the procedures to be followed by the nationally recognized
accounting firm to be selected by Seller and Buyer ( the Accountant )
will depend on what the Accountant is requested to perform by Seller
and Buyer and the Accountant s concurrence that such procedures can
be performed by them.]
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Exhibit D
Form of Opinion of Seller's Counsel
___________________, 1997
Rifkin Acquisition Partners, L.L.L.P.
306 South Monroe Street, Suite 600
Denver, Colorado 80209
Gentlemen:
We have acted as counsel to American Cable TV Investors 5,
Ltd., a Colorado limited partnership ( Seller ), in connection with
the sale today by Seller of certain of Seller's assets (the Assets )
delineated in the Asset Purchase Agreement dated __________, 1996
(the Agreement ) between you and Seller. This opinion is given
pursuant to Section 8.8 of the Agreement. Capitalized terms not
otherwise defined herein are defined as set forth in the Agreement.
This Opinion Letter is governed by, and shall be
interpreted in accordance with, the Legal Opinion Accord (the
Accord ) of the ABA Section of Business Law (1991). As a consequence,
it is subject to a number of qualifications, exceptions,
definitions, limitations on coverage and other limitations, all as more
particularly described in the Accord, and this Opinion Letter should
be read in conjunction therewith. Except as herein provided, the law
covered by the opinions expressed herein is limited to the Federal
Law of the United States and the Law of the State of New York.
Insofar as our opinion pertains to matters of Colorado law, we have
relied upon the opinion of Colorado counsel, Cohen, Brame and Smith,
P.C., dated _________, 1997, a copy of which is attached hereto.
Based on the foregoing it is our opinion that:
1. Seller is a validly existing limited partnership under
the laws of the State of Colorado.
2. The Agreement is enforceable against Seller.
3. The execution and delivery of the Agreement and the
Other Agreements identified on Schedule 1 hereto by Seller and the
performance by Seller of their terms do not breach or result in a
violation of the Certificate of Limited Partnership or the agreement
of limited partnership of Seller.
We hereby confirm to you that, there are no actions or
proceedings against Seller, pending or overtly threatened in writing,
before any court, governmental agency or arbitrator, which (i) seek
to affect the enforceability of the Agreement or (ii) involve or
affect any of the Assets or the Business which, if adversely
determined would have a material adverse effect on the Assets or the
Business.
This opinion is rendered solely for your information and
assistance in connection with the above transaction, and may not be
relied upon by any other person or for any other purpose without our
prior written consent.
Very truly yours,
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Exhibit E
Form of Opinion of Buyer's Counsel
________________________, 1997
American Cable TV Investors 5, Ltd.
c/o TCI Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Gentlemen:
We have acted as counsel to Rifkin Acquisition Partners,
L.L.L.P., a Colorado limited liability limited partnership (the
Buyer ), in connection with the purchase today by Buyer of certain
of your assets (the Assets ) delineated in the Asset Purchase
Agreement dated _________, 1996 (the Agreement ) between you and
Buyer. This opinion is given pursuant to Section 9.6 of the
Agreement. Capitalized terms not otherwise defined herein are
defined as set forth in the Agreement.
This Opinion Letter is governed by, and shall be
interpreted in accordance with, the Legal Opinion Accord (the
Accord ) of the ABA Section of Business Law (1991). As a consequence,
it is subject to a number of qualifications, exceptions, definitions,
limitations on coverage and other limitations, all as more
particularly described in the Accord, and this Opinion Letter should
be read in conjunction therewith.
Based on the foregoing, it is our opinion that:
1. Buyer is validly existing in good standing under the
laws of the State of Colorado.
2. The Agreement is enforceable against Buyer.
3. The execution and delivery of the Agreement by Buyer
and the performance by Buyer of its terms do not breach with or
result in a violation of the Certificate of Limited Liability Limited
Partnership or the agreement of limited partnership of Buyer.
This opinion is rendered solely for your information and
assistance in connection with the above transaction, and may not be
relied upon by any other person or for any other purpose without our
prior written consent.
Very truly yours,
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Exhibit F
Indemnity Escrow Agreement
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attn: Barbara L. Strohmeier
Re: Indemnity Escrow Agreement
Ladies and Gentlemen:
This Indemnity Escrow Agreement is hereby accepted as
of
___________, 1997, by and between American Cable TV Investors 5,
Ltd., a Colorado limited partnership ("Seller") and Rifkin
Acquisition Partners, L.L.L.P., a Colorado limited liability limited
partnership ("Buyer"), who have entered into an Asset Purchase
Agreement, dated as of ____________, 1996, to sell and purchase
certain cable television assets (the "Asset Purchase Agreement").
Capitalized terms used but not otherwise defined in this Indemnity
Escrow Agreement shall have the meanings set forth in the Asset
Purchase Agreement.
It is agreed as follows:
1. Deposit and Investments. Buyer and Seller have,
pursuant to Section 3.1 of the Asset Purchase Agreement, deposited
$493,750 (such amount, together with any earnings thereto, being the
"Deposit") in an account at The Chase Manhattan Bank, as escrow agent
(the "Escrow Agent"). The Deposit may be invested in Investment
Securities (as defined below). The Deposit shall be held in escrow
(the "Escrow") by Escrow Agent pursuant to this Indemnity Escrow
Agreement. The Escrow Agent shall continue to invest the Deposit in
Investment Securities in accordance with the joint written
instructions of Seller and Buyer or, if no instructions are given, in
interest bearing accounts at The Chase Manhattan Bank. The term
"Investment Securities" means (a) interest bearing accounts in, or
certificates of deposit of, The Chase Manhattan Bank or, (b) (i)
obligations of the United States of America, (ii) United States
government securities of agencies of the United States government
which are guaranteed by the United States government or (iii)
securities of governmental agencies, if the same are covered by a
bank repurchase agreement.
2. Holdings of Deposit. The Escrow Agent shall hold and
disburse the Deposit pursuant to the terms of this Indemnity Escrow
Agreement and the Asset Purchase Agreement.
3. Disbursement of Earnings, Etc. All interest,
earnings, and gains received by the Escrow Agent from the investment
of the Deposit shall be distributed pursuant to the terms of this
Indemnity Escrow Agreement. In connection with the investment of the
Deposit, Seller and Buyer shall provide the Escrow Agent with their
taxpayer identification number.
4. Disbursement Instructions.
a. Anything in this Indemnity Escrow Agreement to the
contrary notwithstanding, Escrow Agent is authorized and directed to
deliver and disburse the Deposit, or any part of the Deposit, as
directed from time to time in joint written instructions of Buyer and
Seller.
b. Seller and Buyer have agreed that the Deposit will be
disbursed in accordance with the terms of this Indemnity Escrow
Agreement and the Asset Purchase Agreement.
c. Unless a claim against the Deposit, or any part of the
Deposit remains outstanding, Seller and Buyer have agreed that on the
fifth Business Day after the first anniversary of the Closing Date,
Seller and Buyer shall instruct Escrow Agent to disburse the Deposit,
or any part of the Deposit which is not subject to a claim, to Seller
or Seller's designee.
5. Claims Against the Deposit by Buyer. The following
provisions shall control with respect to claims made against the
Deposit by Buyer:
a. If Buyer wishes to make a claim against the Deposit,
Buyer will send a notice of such claim to Escrow Agent and Seller.
Any such notice will state that Buyer is making a claim under
Article XII of the Asset Purchase Agreement. Any notice of a claim
made shall specify the factual basis of such claim in reasonable
detail to the extent known by Buyer.
b. If Seller disputes the right of Buyer to obtain the
Deposit, or any part of the Deposit, Seller, within ten Business Days
after receipt of the notice as provided in Paragraph 4(a), shall send
a notice to Escrow Agent and Buyer stating that Seller disputes the
right of Buyer to obtain the Deposit, or any part of the Deposit, and
will include in such notice a description in reasonable detail of the
basis for disputing such claim. Escrow Agent shall continue to hold
the Deposit (or the part thereof which is subject to a dispute) until
advised in writing by Seller and Buyer that such dispute has been
resolved, in which case Escrow Agent shall disburse the Deposit
pursuant to said writing; provided that, if a suit, action or
arbitration proceeding (as provided for in the Asset Purchase
Agreement) is commenced for collection of the Deposit or part thereof
and Escrow Agent is so advised in writing, Escrow Agent shall, unless
otherwise advised in writing by Seller and Buyer, continue to hold
the Deposit or the part thereof which is the subject of such suit,
action or arbitration proceeding until final disposition of such
suit, action or arbitration proceeding. Upon the final disposition
of such suit, action or arbitration proceeding, Escrow Agent shall
disburse the Deposit or part thereof which is subject to such suit,
action or arbitration proceeding in accordance with the determination
of (i) the court in which such suit or action was pending or (ii) the
arbitrator.
c. If Seller fails to notify Escrow Agent within the
period described in Paragraph 4(b) that it contests Buyer's claim to
the Deposit (or any part thereof), Escrow Agent shall, within 5
Business Days, disburse the Deposit (or any part thereof which is
subject to a claim by Buyer that Seller fails to timely contest) to
Buyer.
6. Termination. If no claims have been made against the
amount of the Deposit remaining in the Escrow on the fifth Business
Day after the first anniversary of the Closing Date, Escrow Agent
shall disburse such remaining amount of the Deposit (together with
all interest thereon) to Seller at the address set forth below.
7. Rights, Duties, and Liabilities of Escrow Agent.
a. Escrow Agent shall have no duty to know or determine
the performance or non-performance of any provision of any agreement
between the parties to this Indemnity Escrow Agreement, including,
but not limited to, the Asset Purchase Agreement, which shall not
bind Escrow Agent in any manner. Escrow Agent assumes no
responsibility for the validity or sufficiency of any document or
paper or payment deposited or called for under this Indemnity Escrow
Agreement except as may be expressly and specifically set forth in
this Indemnity Escrow Agreement, and the duties and responsibilities
of Escrow Agent under this Indemnity Escrow Agreement are limited to
those expressly and specifically stated in this Indemnity Escrow Agreement.
b. Escrow Agent shall not be personally liable for any
act it may do or omit to do under this Indemnity Escrow Agreement as
such agent while acting in good faith and in the exercise of its own
best judgment, and any act done or omitted by it pursuant to the
written advice of its counsel shall be conclusive evidence of such
good faith. Escrow Agent shall have the right at any time to consult
with its counsel upon any question arising under this Indemnity
Escrow Agreement and shall incur no liability for any delay
reasonably required to obtain the advice of counsel.
c. Other than those notices or demands expressly provided
in this Indemnity Escrow Agreement, Escrow Agent is expressly
authorized to disregard any and all notices or demands given by
Seller or Buyer, or by any other person, firm, or corporation,
excepting only orders or process of court, and Escrow Agent is
expressly authorized to comply with and obey any and all final
process, orders, judgments, or decrees of any court, and to the
extent Escrow Agent obeys or complies with any thereof of any court,
it shall not be liable to any party to this Indemnity Escrow
Agreement or to any other person, firm, or corporation by reason of
such compliance.
d. In consideration of the acceptance of this Escrow by
Escrow Agent (as evidenced by its signature below), Seller and Buyer
agree, for themselves and their successors and assigns, to pay Escrow
Agent its charges, fees, and expenses as contemplated by this
Indemnity Escrow Agreement. As between Buyer and Seller, they shall
each be responsible for one-half of such charges, fees and expenses.
The escrow fees or charges, as distinguished from other expenses
under this Indemnity Escrow Agreement, shall be as written below the
Escrow Agent's signature at the time of acceptance of this Indemnity
Escrow Agreement. Such sum is intended as compensation for Escrow
Agent's ordinary services as contemplated by this Indemnity Escrow
Agreement and shall be paid as described above. In the event Escrow
Agent renders services not provided for in this Indemnity Escrow
Agreement, Escrow Agent shall be entitled to receive from Buyer and
Seller reasonable compensation and reasonable costs, if any, for such
extraordinary services, and such compensation and costs shall be
borne equally by Buyer and Seller.
e. Escrow Agent shall be under no duty or obligation to
ascertain the identity, authority, or right of Seller or Buyer (or
their agents) to execute or deliver or purport to execute or deliver
this Indemnity Escrow Agreement or any documents or papers or
payments deposited or called for or given under this Indemnity Escrow
Agreement.
f. Escrow Agent shall not be liable for the outlawing of
any rights under any statute of limitations or by reason of laches in
respect of this Indemnity Escrow Agreement or any documents or papers
deposited with Escrow Agent.
g. In the event of any dispute among the parties to this
Indemnity Escrow Agreement as to the facts or as to the validity or
meaning of any provision of this Indemnity Escrow Agreement, or any
other fact or matter relating to this Indemnity Escrow Agreement or
to the transactions between Seller and Buyer, Escrow Agent is
instructed that it shall be under no obligation to act, except in
accordance with this Indemnity Escrow Agreement or under process or
order of court or, if there by no such process or order, until it has
filed or caused to be filed an appropriate action interpleading the
Seller and Buyer and delivering the Deposit (or the portion of the
Deposit in dispute) to such court, and Escrow Agent shall sustain no
liability for its failure to act pending such process of court or
order or interpleader of action.
8. Modification of Indemnity Escrow Agreement. The
provisions of this Indemnity Escrow Agreement may be supplemented,
altered, amended, modified, or revoked by writing only, signed by
Buyer and Seller and approved in writing by Escrow Agent, and upon
payment of all fees, costs and expenses incident thereto.
9. Assignment of Indemnity Escrow Agreement. No
assignment, transfer, conveyance, or hypothecation of any right,
title, or interest in and to the subject matter of this Indemnity
Escrow Agreement shall be binding upon any party, including Escrow
Agent, unless all fees, costs, and expenses incident thereto shall
have been paid and then only upon the assent thereto by all parties
in writing.
10. Notice. Any notice required or desired to be given to
Buyer or Seller shall be deemed to have been given only if it is
given in the manner set forth in Section 13.3 of the Asset Purchase
Agreement. Notice to Escrow Agent may be given in the manner set
forth in Section 13.3 of the Asset Purchase Agreement to Escrow
Agent's address set forth above (Facsimile No.: (212) 270-4823) or
at such other address as Escrow Agent may direct by giving notice to
Buyer and Seller.
11. Indemnity Escrow Agreement Binding. The undertakings
and agreements contained in this Indemnity Escrow Agreement shall
bind and inure to the benefit of the parties to this Indemnity Escrow
Agreement and their respective heirs, personal representatives,
successors, and assigns.
12. Counterparts. This Indemnity Escrow Agreement may be
executed in one or more counterparts, each of which will be deemed an
original. Whenever pursuant to this Indemnity Escrow Agreement Buyer
and Seller are to deliver a jointly signed writing to Escrow Agent or
jointly advise Escrow Agent in writing, such writing may in each and
all cases be signed jointly or in counterparts and such counterparts
shall be deemed to be one instrument.
Very truly yours,
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:________________________
Name:
Title:
BUYER:
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By: Rifkin Acquisition Management, L.P.,
its General Partner
By: RT Investment Corp., its
General Partner
By:
Name:
Title:
ACCEPTED this ___ day of ____________, 1997.
THE CHASE MANHATTAN BANK
By: __________________________
Name:
Title:
Fee: [$2,000] Inception Fee.
<PAGE>
ACT 5
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Exhibit G
Form for Opinion of Seller's FCC Counsel
__________, 1997
Rifkin Acquisition Partners, L.L.L.P
360 South Monroe Street, Suite 600
Denver, Colorado 80209
Re: American Cable TV Investors 5, Ltd.
Ladies and Gentlemen:
This letter is furnished to you pursuant to Section 8.9 of
the Asset Purchase Agreement, dated as of ____________ __, 1996 (the
"Agreement"), between American Cable TV Investors 5, Ltd., a Colorado
limited partnership ("Seller") and Rifkin Acquisition Partners, a
Colorado limited liability limited partnership ("Buyer").
As communications counsel for Seller, we are engaged in the
representation of Seller before the Federal Communications Commission
("FCC") in connection with its cable television business in the
communities identified in Schedule I hereto (the "System"). We have
examined such records, certificates and other documents and have
considered such questions of law as relate to the Seller and the
System as we have deemed necessary or appropriate for purposes of
this opinion. This opinion is limited to the Communications Act of
1934, as amended (the "Communications Act"), the Rules and
Regulations of the FCC (the "FCC Regulations") and Section 111 of the
Copyright Act of 1976 (17 U.S.C. 111) (the "Copyright Act") as
applicable to the System as operated by Seller. Except as
specifically provided, we offer no opinion as to the Seller's
compliance with the Cable Television Consumer Protection and
Competition Act of 1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992),
or those FCC regulations promulgated pursuant to such Act.
In rendering this opinion, we have assumed the genuineness
of signatures on documents and the conformity to the original of all
copies examined by or submitted to us of photocopies or conformed
copies. As to various questions of fact in connection with this
opinion, we have relied upon examination of available files of our
office, those of the FCC and the United States Copyright Office (the
"Copyright Office"), and pertinent statements and representations of
officers, directors and responsible representatives of the Seller.
We have not undertaken an independent field investigation to verify
the accuracy of this information, and express no opinion regarding
technical matters or matters that would require on-scene knowledge of
the System's operations, technical or engineering matters, or local
franchising matters.
Based upon and limited by the foregoing and except as set
forth in Schedule II hereto, we are of the opinion that, as of the
date set forth above:
1. Seller holds all licenses, permits and authorizations
required from the FCC to operate the System in the manner in which we
have been advised that it is being operated, which licenses, permits
and authorizations are listed in Schedule I hereto. Each such
license, permit and authorization has been issued by the FCC, remains
in full force and effect, and transfer thereof to Buyer on the
Closing Date as defined in the Agreement has been approved by the
FCC, to the extent such approval is required.
2. All materially required FCC filings required to be made by
Seller in connection with its operation of the System have been made,
including, but not limited to, Registration Statements and FCC Annual
Report Forms 325, Schedule A, to the extent such forms are required.
All FCC authorizations needed to utilize the frequencies currently
used by the Systems have been obtained.
3. Basic Signal Leakage Performance Reports (FCC Annual Report
Forms 320) for 1990-1996, are on file with the FCC for each community
unit operated by the System. Although those forms indicate passing
test results, we render no opinion as to the methodology or accuracy
of the actual measurements taken.
4. EEO Annual Report Forms 395(A) have been filed with the FCC
for each employment unit associated with the System for calendar
years 1988-1996. Except as noted in Schedule II, the employment unit
has been certified by the FCC for calendar years 1988-1996.
5. To the best of our knowledge, Seller has provided subscriber
privacy notices to subscribers of the System on an annual basis since
1986. Seller also provides these notices to new subscribers at the
time of installation. Our opinion is limited to the fact that such
notices have been provided, and we express no opinion as to whether
the contents of such notices comply with the requirements of the
Communications Act or FCC regulations.
6. To the best of our knowledge, based on information provided
by Seller, the System is carrying all of the "must-carry" signals
required to be carried pursuant to Federal Law. To the best of our
knowledge, based on information provided by Seller, Seller has
obtained all necessary retransmission consents for the broadcast
signals currently carried on the system. Except as set forth in
Schedule II hereto, to the best of our knowledge, based on
information provided by Seller, there have been no "must carry"
complaints filed at the FCC against the System.
7. Based solely upon the information provided by Seller as to
antenna structure, height, location and proximity to any aircraft
landing areas, all antenna structures that we have been advised as
being utilized by Seller in connection with its operation of the
System are in compliance with the FCC s tower registration
requirements. These antenna structures are listed in Schedule I
hereto. We express no opinion as to compliance with any requirements
of Part 17 of the FCC s rules (such as antenna structure, marking and
lighting requirements) other than those delineating the circumstances
under which notification to the Federal Aviation Administration and
FCC is required.
8. There is no FCC judgment, decree or order which has been
issued against Seller with respect to the system, nor is there any
FCC action, proceeding or investigation pending or, to the best of
our knowledge, threatened by the FCC against Seller with respect to
the System.
9. The timely filing of the periodic Statements of Account and
accompanying royalty fees qualifies the Seller for a compulsory
license for the carriage of the broadcast signals utilized by the
System. Seller has filed all required Statements of Account and
supplements thereto, and, to the best of our knowledge, has timely
paid its statutory royalties for all accounting periods beginning at
least as early as the first accounting period of 1993, and all
primary transmissions listed in the latest Statements of Account
qualify for a compulsory copyright license. Although we render no
opinion as to the methodology or calculations used to determine
"gross receipts" for copyright purposes, there have been no inquiries
received from the Copyright Office or any other party which challenge
or question either the computation or amount of any royalty payments
or the validity of the Statements of Account, and there is no claim,
action or demand for copyright infringement or for non-payment of
royalties, pending or, to the best of our knowledge, threatened
against the Seller.
10. Except for any necessary FCC approvals which have been
obtained, the execution, delivery and performance of this Agreement
does not require the approval of the FCC, will not result in any
violation of the rules and regulations of the FCC, and will not cause
any forfeiture or impairment of any FCC license, authorization or
permit of Seller.
This opinion has been prepared solely for your use in
connection with the closing of transactions under the Agreement, and
may not be relied upon by, filed with or furnished to any other
person or entity without the prior written consent of this firm.
Very truly yours,
COLE, RAYWID & BRAVERMAN, L.L.P.
By:_________________________
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Exhibit H
Noncompetition Agreement
NONCOMPETITION AGREEMENT dated as of _____________, 1997 (the
"Closing Date") among TCI Communications, Inc., a Delaware
corporation ("TCIC"), Tele-Communications, Inc. ( TCI ) and Rifkin
Acquisition Partners, L.L.L.P., a Colorado limited liability limited
partnership ("Rifkin").
Recitals
A. Each of TCI and TCIC is an indirect parent entity of the
general partner of American Cable TV Investors 5, Ltd. ("ACT 5").
B. ACT 5 and Rifkin have entered into an Asset Purchase
Agreement, dated as of __________, 1996 (the "Agreement"), pursuant
to which on the date hereof ACT 5 has conveyed to Rifkin
substantially all of the assets of ACT 5's cable television system
operating in the Franchise Areas set forth on Exhibit A attached
hereto (the "System").
C. The Agreement provides that, as a condition to Rifkin's
obligation to perform each of its obligations at Closing under the
Agreement, TCI and TCIC will execute and deliver this Noncompetition
Agreement.
D. As consideration for TCI and TCIC, in addition to ACT 5 and
IR-TCI Partners V, L.P., each entering into a covenant not to
compete, Rifkin will pay to ACT 5 a portion of the Purchase Price
equal to $_____________ [to be agreed upon by Rifkin and ACT 5 prior
to Closing].
E. All capitalized terms not otherwise defined herein shall
have the meanings ascribed in the Agreement.
Accordingly, the parties agree as follows:
7. Acknowledgements. Each of TCI, TCIC and Rifkin
acknowledges that the agreements and covenants contained herein are
essential to protect the Business of ACT 5 acquired by Rifkin
pursuant to the Agreement.
8. Covenant Not to Compete. For the period commencing on the
Closing Date and expiring on the third anniversary thereof, each of
TCI and TCIC shall not, and shall cause its Affiliates which it
controls, not to, without the prior written consent of Rifkin, to
compete with Rifkin by selling or attempting to provide any wireline
cable television services, data transmission, telephone services or
security alarm monitoring (but specifically excluding video
programming provided by TCI or its Affiliates to other cable
television operators) delivered by means of terrestrial cable within
a 20 mile radius of the areas served by the System on the Closing
Date. This paragraph 2 shall not be applicable to InterMedia
Partners or any Affiliate of InterMedia Partners of which Leo J.
Hindrey, Jr. is currently, directly or indirectly, the managing
general partner.
3. Scope of Noncompetition Agreement. The scope of this
Noncompetition Agreement in time, geography and types and limits of
activities is reasonable and necessary for the protection of
Buyer.
4. Rights and Remedies Upon Breach; Specific Performance.
Because of the unique nature of the assets comprising the System,
Rifkin will not have an adequate remedy at law if TCI or TCIC
breaches this Noncompetition Agreement. Accordingly, Rifkin shall be
entitled upon application to any court of competent jurisdiction, to
an injunction prohibiting any violation of this Noncompetition
Agreement, in addition to any other rights or remedies to which
Rifkin may be entitled at law or in equity. Each of TCI and TCIC
hereby waives and covenants not to assert in any action or
proceeding, any claim or defense that there exists an adequate remedy
at law for breach of this Noncompetition Agreement.
5. Blue-Penciling. If this Noncompetition Agreement is found
by any court of competent jurisdiction to be too broad in extent,
whether as to activities restricted, the time period of such
restrictions or geographic areas in which such activities are
restricted, this Noncompetition Agreement shall nevertheless remain
effective but shall be deemed amended to the extent considered by
such court to be reasonable, and shall be fully enforceable as so
amended.
6. Assignment; Amendment. All of the terms and provisions of
this Noncompetition Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns. This Noncompetition
Agreement shall not be assignable by TCI or TCIC without the prior
written consent of Rifkin. This Noncompetition Agreement may be
amended only by written agreement of the parties hereto.
7. Applicable Law. The validity, performance and enforcement
of this Noncompetition Agreement shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties have executed this
Noncompetition Agreement as of the date first written above.
TELE-COMMUNICATIONS, INC.
By:__________________________
Name:
Title:
TCI COMMUNICATIONS, INC.
By:__________________________
Name:
Title:
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By:__________________________
Name:
Title:
<PAGE>
EXHIBIT A
Shelbyville System:
City of Shelbyville
Bell Buckle
Wartrace
Bedford County
Manchester System:
City of Manchester
Coffee County
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 1.1
Subscriber Rates
Shelbyville: Monthly Subscriber Rates
Effective June 30, 1996
Basic Subscriber Rate: $ 9.94
Expanded Basic Services Rate: 10.65
Total Basic and Expanded Basic: $20.59
Manchester: Monthly Subscriber Rates
Effective June 30, 1996
Basic Subscriber Rate: $ 10.33
Expanded Basic Services Rate: 10.83
Total Basic and Expanded Basic: 21.16
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 1.2
Consents
1. City of Shelbyville.
2. City of Bell Buckle.*
3. Town of Wartrace*
4. City of Manchester.
5. Coffee County.**
6. Bedford County (expiring 10/7/2006) **
7. Bedford County (expiring 4/10/97)**
8. Duck River Electric Membership Corporation, pursuant to a
License Agreement for Pole Attachments, dated May 14, 1988,
between Duck River Electric Membership Corporation and American
Cable TV Investors 5, Ltd.
9. Shelbyville Electric Power, Water & Sewerage System, pursuant to
a Pole Attachment Agreement, dated June 1, 1994, between
Shelbyville Electric Power, Water & Sewerage System and American
Cable TV Investors 5, Ltd.
10. BellSouth Telecommunications, Inc., pursuant to a License
Agreement for Pole Attachments, dated June 1, 1993, between
BellSouth Telecommunications, Inc. and American Cable TV
Investors 5, Ltd.
11. Omkar, Inc. d/b/a Hampton Inn, pursuant to a Bulk Cable
Television Multiple Unit Agreement, dated January 1, 1995,
between Omkar, Inc. d/b/a Hampton Inn and American Cable TV
Investors 5, Ltd.**
12. Ambassador Motel, pursuant to a Bulk Cable Television Multiple
Unit Agreement, dated January 1, 1996, between American Cable TV
Investors 5, Ltd. and Ambassador Motel.**
13. Travelers Inn, pursuant to a Bulk Multiple Unit Service
Agreement, dated January 1, 1995, between Travelers Inn and
American Cable TV Investors 5, Ltd.**
14. Scottish Inn, pursuant to a Cable Television Multiple Unit
Agreement, dated January 1, 1995, between Scottish Inn and
American Cable TV Investors 5, Ltd.**
15. D and M Associates, Inc. d/b/a Days Inn of Manchester, pursuant
to a Bulk Cable Television Multiple-Unit Agreement, dated
January 1, 1995, between D and M Associates, Inc. d/b/a Days Inn
of Manchester and American Cable TV Investors 5, Ltd.**
16. Cumberland Inn, pursuant to a Bulk Cable Television Multiple-
Unit Agreement, dated January 1, 1995, between Cumberland Inn
and American Cable TV Investors 5, Ltd.**
17. Comfort Inn, pursuant to a Bulk Cable Television Multiple-Unit
Agreement, dated January 1, 1995, between Comfort Inn and
American Cable TV Investors 5, Ltd.**
18. R.K. Corporation, pursuant to a Bulk Cable Television Multiple-
Unit Agreement, dated January 1, 1995, between R.K. Corporation
(Econolodge) and American Cable TV Investors 5, Ltd.**
19. Lenders, pursuant to a Revolving Credit Agreement, dated
June 30, 1992, among American Cable TV Investors 5, Ltd.,
Various Financial Institutions and Bank of America f/k/a
Continental Bank, N.A. and NationsBank of Texas, N.A., inclding
all financing and security documents relating thereto.
20. Glenoak Convalescent Center, pursuant to a Bulk Cable Television
Multiple Unit Agreement, dated January 1, 1995, between American
Cable TV Investors 5, Ltd. and Glenoak Convalescent Center.**
21. Shelbyville Inn, pursuant to a Bulk Cable Television Multiple
Unit Agreement, dated January 1, 1995, between American Cable TV
Investors 5, Ltd. and the Shelbyville Inn.**
22. Shelbyville Housing Authority, pursuant to a Bulk Cable
Television Multiple Unit Agreement, dated January 1, 1995,
between Shelbyville Housing Authority and American Cable TV
Investors 5, Ltd.**
23. Federal Communications Commission for the transfer of licenses
listed on Schedule 1.5.*
24. TCI Cablevision Associates, Inc. f/k/a Daniels & Associates,
Inc., pursuant to a Management Agreement, dated May 14, 1987,
between TCI Cablevision Associates, Inc. f/k/a Daniels &
Associates, Inc. and American Cable TV Investors 5, Ltd.
25. Lloyd Simmons and Peggy Simmons, pursuant to a Lease Agreement,
dated January 16, 1992, between Lloyd Simmons and Peggy Simmons
and American Cable TV Investors 5, Ltd.*
26. Manchester Partners, pursuant to a Lease, dated November 12,
1991, between Manchester Partners and American Cable TV
Investors 5, Ltd. d/b/a United Artists Cable of Tennessee, as
amended December 1, 1993.*
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 1.3
Equipment
DISTRIBUTION EQUIPMENT:
Shelbyville Manchester
----------- ----------
Year Upgraded/Rebuilt: 1988 1980
Homes Passed at 12/31/95: 7,796 6,628
Miles of Plant:
Aerial 160.1 183.7
Underground 2.3 7.7
----- ------
Total 162.4 191.4
Density: 48 35
Channels:
Channel Capacity:
In Use:
Basic: 14 15
Expanded Tier: 17 17
Premium: 5 5
PPV/Other: 1 1
--- --
Total: 37 38
Bandwidth: 300 MHz 300MHz
Cable:
Fiber: 12.8 miles 6 count 5.8 miles 6 count
Trunk: CommScope .875 and .750 CommScope .875 and
.750
Feeder: CommScope .625 and .500 CommScope .625 and
.500
Drops: RG-6, RG-11 RG-6
Plant Electronics:
Amplifiers SA push/pull SA
Longest Amplifier
Cascade 23 27
Taps: Regal, Magnavox SA, Regal,
Magnavox, RMS
Premium Security:
Addressable No No
Positive/ Eagle Negative E,G,H,I Positive traps
Channels
Negative Traps Positive 12 7,12,R,F,H
Converters:
Addressable Jerrold 550 Jerrold 550
Standard Regal RR-92 Regal, Hamlin
<PAGE>
HEADEND EQUIPMENT:
Shelbyville Manchester
----------- ----------
Headend Location: 823 Wartrace Bell Buckle Rd 596 Perry
Road
Wartrace, TN Manchester,
TN
Headend Site -
Owned/Leased: Owned Owned
Tower Type/Size: 180' Guyed 250' Guyed
Earth Stations: 1-SA 4.5 meter 2-6 meter
1-Anixter 5.0 meter 1-5 meter
1-Comtek 3.8 meter 1-4.5 meter
1-2.8 meter
Receivers: 29-SA 6600 30-SA 6600
3-Jerrold Commander IV 2-Wegener
1601
Processors: 75-SA 6150 8-SA 6150
Stereo Encoders: N/A 1-Jerrold
Commander IV
Scrambler/Encoders: 1-Pico 5-Eagle
EE-2001
Descramblers: 29-Videocipher II 28-Eagle
Videocipher I
Ad Insertion 2-Sony 3/4 inch
2-Channelmatic
Equipment: Switcher
CCV-202A
1-Channel control unit 202 2-Sony
Player VP-7020
1-Channelmatic Network
1-B-Mac/Compression
Switcher DRD
2-SA
Modulator 6330
Backup Power Supply 1 General propane generator General
93A04822-S
1-AT&T
Lightguide
Distribution Shelf
1-AT&T
LaserLink II
Laser
1-Weather Star
<PAGE>
VEHICLE LIST:
-------------
MAKE/ VEHICLE IDENTIFICATION OWNED/
SYSTEM YEAR MODEL NUMBER LEASED
------ ---- ----- ------ ------
Shelbyville
1993 GMC 1GTEC14H1PZ537176 Owned
1500
1993 GMC 1GTEC14H7PZ537036 Owned
1500
1992 GMC 1GDKC34N6NJ522040 Owned
1500
1992 GMC 1GTEC14H3NZ532428 Owned
1500
----
Total Number of 4
Vehicles
Manchester
1996 GMC 1GDKC34J9TJ513228 Owned
3500
HDCC
bucket
truck
1995 GMC 1GTEC14H5SZ517814 Owned
1500
Sierra
1994 GMC 1GTEC14H8CE541378 Owned
1500
Sierra
1993 GMC 1GTEC14H9PZ537216 Owned
1500
Sierra
1992 GMC 1GTEC14H8NZ532294 Owned
1500
Sierra
------
Total Number of 5
Vehicles
TOTAL VEHICLES 9
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV SOUTHERN TENNESSEE
Schedule 1.4
Franchise Areas
Shelbyville System:
Franchise Authority
-----------------------
City of Shelbyville
City of Bell Buckle
Town of Wartrace
Bedford County
Manchester System:
Franchise Authority
-----------------------
City of Manchester
Coffee County
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 1.5
Governmental Permits
Franchise Authority: Expiration Date: Franchise
Fee:
- ---------------------- ---------------- --------------
City of Shelbyville cable 03/10/2005 5%
television francise.*
City of Bell Buckle cable 08/08/2000 None
television franchise.*
Town of Wartrace cable 08/08/2000 None
television franchise.*
City of Manchester cable 01/19/2026 3%***
television franchise.**
Coffee County cable 01/19/2006 3%***
television franchise.*
County of Bedford cable 10/07/2006 5%
television franchise.**
County of Bedford cable 04/10/1997 None
television franchise.**
FCC Licenses and Registrations:
- --------------------------------------
Type Call Sign City, State Expiration Date
- ------ --------- -------------- ----------------
ES WJ78 Shelbyville, TN 8/28/2001
ES WU36 Manchester, TN 9/19/2004
IB * WSZ739 Shelbyville, TN 9/02/97
* Consent required to transfer.
** Notice only required.
*** The relevant franchise agreements allow the respective franchise
authority, with proper notice, to increase the franchise fee up to 5%.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 1.6
Permitted Encumbrances
None.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 1.7
Real Property
LEASED PROPERTY:
System Lessor Use Address
- ----------- ----------------- ------- --------------------
Shelbyville Lloyd Simmons and Office 209 Thompson Street
Peggy Simmons Shelbyville
Manchester Manchester Partners Office 2161 Hillsboro Blvd.
Manchester
OWNED PROPERTY:
System Use/System Address
- ----------- ------------------ -------------------
Shelbyville Headend 823 Bell Buckle/
Wartrace Road
Wartrace
Manchester* Headend 596 Perry Road
Manchester
* Lease expired. Request for renewal has been made, but lessor
has not responded.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 1.8
Seller Contracts
1. License Agreement for Pole Attachments, dated May 14, 1988,
between Duck River Electric Membership Corporation and American
Cable TV Investors 5, Ltd.
2. License Agreement for Pole Attachments, dated June 1, 1993,
between BellSouth Telecommunications, Inc. and American Cable TV
Investors 5, Ltd.
3. Pole Attachment Agreement, dated June 1, 1994, between
Shelbyville Electric Power, Water & Sewerage System and American
Cable TV Investors 5, Ltd.
4. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between Omkar, Inc. d/b/a Hampton Inn and American Cable
TV Investors 5, Ltd.
5. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1996, between American Cable TV Investors 5, Ltd. and Ambassador
Motel.
6. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between Travelers Inn and American Cable TV Investors 5, Ltd.
7. Cable Television Multiple Unit Agreement, dated January 1, 1995,
between Scottish Inn and American Cable TV Investors 5, Ltd.
8. Bulk Cable Television Multiple-Unit Agreement, dated January 1,
1995, between D and M Associates, Inc. d/b/a Days Inn of
Manchester and American Cable TV Investors 5, Ltd.
9. Bulk Cable Television Multiple-Unit Agreement, dated January 1,
1995, between Cumberland Inn and American Cable TV Investors 5,
Ltd.
10. Bulk Cable Television Multiple-Unit Agreement, dated January 1,
1995, between Comfort Inn and American Cable TV Investors 5,
Ltd.
11. Bulk Cable Television Multiple-Unit Agreement, dated January 1,
1995, between R.K. Corporation (Econolodge) and American Cable
TV Investors 5, Ltd.
12. Revolving Credit Agreement, dated June 30, 1992, among American
Cable TV Investors 5, Ltd., Various Financial Institutions and
Bank of America, Illinois f/k/a Continental Bank, N.A. and
NationsBank of Texas, N.A., and all financing and security
arrangements relating thereto.
13. Management Agreement, dated May 14, 1987, between TCI
Cablevision Associates, Inc. f/k/a Daniels & Associates, Inc.
and American Cable TV Investors 5, Ltd.
14. Easement and Construction Agreement, dated September 21, 1993,
between American Cable TV Investors 5, Ltd. d/b/a United Artists
Cable of Tennessee and Pat Marsh.
15. Easement and Construction Agreement, dated September 1, 1993,
between American Cable TV Investors 5, Ltd. d/b/a United Artists
Cable of Tennessee and R.S. Pollaek.
16. Letter Agreement Authorizing Right-of-Way, dated August 6, 1993,
between American Cable TV Investors 5, Ltd. d/b/a United Artists
Cable of Tennessee and George Dennis.
17. Easement and Construction Agreement, dated September 1, 1993,
between American Cable TV Investors 5, Ltd. d/b/a United Artists
Cable of Tennessee and Erine Dill.
18. Easement and Construction Agreement, dated September 24, 1993,
between American Cable TV Investors 5, Ltd. d/b/a United Artists
Cable of Tennessee and William D. Hart.
19. Lease Agreement, dated January 16, 1992, between Lloyd Simmons
and Peggy Simmons and American Cable TV Investors 5, Ltd.
20. Lease, dated November 12, 1991, between Manchester Partners and
American Cable TV Investors 5, Ltd. d/b/a United Artists Cable
of Tennessee, as amended December 1, 1993, as renewed November
27, 1993 between American Cable TV Investors 5, Ltd. d/b/a
United Artists Cable of Tennessee and Parkemoore Management
Corporation, as agent, as renewed October 11, 1994 between
American Cable TV Investors 5, Ltd. d/b/a United Artists Cable
of Tennessee and Brandywine Real Estate Management Services
Corporation, as agent.
21. Warranty Deed, dated April 21, 1993, between Vicki Bramblett and
American Cable TV Investors 5, Ltd.
22. Cable Television Easement and Maintenance Agreement, dated
September 15, 1993, between The Webb School and American Cable
TV Investors 5, Ltd, as amended on September 26, 1995.
23. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and Blue Ribbon Inn,
as amended on March 20, 1996.
24. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between Budget Motel and American Cable TV Investors 5, Ltd.
25. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and Suburban Motel.
26. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and the Magnolia
Motel, as amended on February 1, 1995.
27. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between American Cable TV Investors 5, Ltd. and Glenoak
Convalescent Center.
28. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between Shelbyville Housing Authority and American Cable
TV Investors 5, Ltd.
29. Amendment to Bulk Cable Television Agreement, dated January 1,
1995, between American Cable TV Investors 5, Ltd. and Shivani
Corporation.
30. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and Thompson Motel.
31. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between American Cable TV Investors 5, Ltd. and the
Shelbyville Inn.
32. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and A.L. Stephenson.
33. Bulk Multiple Unit Service Agreement, dated February 24, 1995,
between American Cable TV Investors 5, Ltd. and John Roche
(Oakwood Park).
34. Bulk Multiple Unit Service Agreement, dated March 3, 1995,
between American Cable TV Investors 5, Ltd. and Idrihd Vohre
(Bedford Motor Court).
35. Cable Television Bulk Billing Agreement, dated October 25, 1991,
between Bedford County General Hospital and American Cable TV
Investors 5, Ltd, as amended on March 14, 1996.
36. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and Trucker s Inn.
37. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and Best Western/Old
Fort Motor Inn.
38. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and Professional
Manor.
39. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and Coffee County
Medical Center.
40. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and Park Motel.
41. Retransmission Consent Agreement, dated September 17, 1993,
between WSMV and American Cable TV Investors 5, Ltd. d/b/a
United Artists Cable of Tennessee.
42. Retransmission Consent Agreement, dated September 2, 1993,
between WTVF and American Cable TV Investors 5, Ltd. d/b/a
United Artists Cable of Tennessee.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 1.9
System
American Cable TV of Southern Tennessee comprising the
System included in the Franchise Areas set forth in Schedule 1.4.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 4.2
Excluded Assets
Revolving Credit Agreement, dated June 30, 1992, among
American Cable TV Investors 5, Ltd., Various Financial Institutions
and Bank of America, Illinois f/k/a Continental Bank, N.A. and
NationsBank of Texas, N.A., and all financing and security
documents relating thereto.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 5.3(b)
Violations of Partnership Agreement and Legal Requirements
If consents to transfer the franchises and FCC licenses
listed on Schedule 1.5 are not obtained or notice is not given as
required by the terms of the underlying documents, Seller may be
deemed to have violated a Legal Requirement.
If consents to the assignment of the following agreements
are not obtained or notices are not given as required by the terms of
the agreements, such agreements may be terminated:
1. License Agreement for Pole Attachments, dated May 14, 1988,
between Duck River Electric Membership Corporation and American
Cable TV Investors 5, Ltd.
2. License Agreement for Pole Attachments, dated June 1, 1994,
between Shelbyville Electric Power, Water & Sewerage System and
American Cable TV Investors 5, Ltd.
3. License Agreement for Pole Attachments, dated June 1, 1993,
between BellSouth Telecommunications, Inc. and American Cable TV
Investors 5, Ltd.
4. Management Agreement, dated May 14, 1987, between TCI
Cablevision Associates, Inc. f/k/a Daniels & Associates, Inc.
and American Cable TV Investors 5, Ltd.
5. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between Omkar, Inc. d/b/a Hampton Inn and American Cable
TV Investors 5, Ltd.
6. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1996, between Ambassador Motel and American Cable TV Investors
5, Ltd.
7. Bulk Multiple Unit Service Agreement, dated January 1, 1995,
between Travelers Inn and American Cable TV Investors 5, Ltd.
8. Cable Television Multiple Unit Agreement, dated January 1, 1995,
between Scottish Inn and American Cable TV Investors 5, Ltd.
9. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between D and M Associates d/b/a Days Inn of Manchester
and American Cable TV Investors 5, Ltd.
10. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between Cumberland Inn and American Cable TV Investors 5,
Ltd.
11. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between Comfort Inn and American Cable TV Investors 5,
Ltd.
12. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between R.K. Corporation (Econolodge) and American Cable
TV Investors 5, Ltd.
13. Revolving Credit Agreement, dated June 30, 1992, among American
Cable TV Investors 5, Ltd., various financial institutions and
Bank of America f/k/a/ Continental Bank, N.A. and NationsBank of
Texas, N.A., including all financing and security documents
relating thereto.
14. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between Glenoak Convalescent Center and American Cable TV
Investors 5, Ltd.
15. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between the Shelbyville Inn and American Cable TV
Investors 5, Ltd.
16. Bulk Cable Television Multiple Unit Agreement, dated January 1,
1995, between Shelbyville Housing Authority and American Cable
TV Investors 5, Ltd.
17. The agreements marked with an asterisk on Schedule 1.2 represent
Required Consents.
18. Lease Agreement, dated January 16, 1992, between Lloyd Simmons
and Peggy Simmons and American Cable TV Investors 5, Ltd.
19. Lease, dated November 12, 1991, between Manchester Partners and
American Cable TV Investors 5, Ltd. d/b/a United Artists Cable
of Tennessee, as amended December 1, 1993, as renewed November
27, 1993 between American Cable TV Investors 5, Ltd. d/b/a
United Artists Cable of Tennessee and Parkemoore Management
Corporation, as agent, as renewed October 11, 1994 between
American Cable TV Investors 5, Ltd. d/b/a United Artists Cable
of Tennessee and Brandywine Real Estate Management Services
Corporation, as agent.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 5.4
Complete Systems
None.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 5.5
Encumbrances on Seller s Title
Assets of American Cable TV Investors 5, Ltd. have been
pledged as collateral under the Revolving Credit Agreement, dated as
of June 30, 1992, among American Cable TV Investors 5, Ltd., Various
Financial Institutions and Bank of America, Illinois f/k/a
Continental Bank, N.A. and NationsBank of Texas, N.A. (including all
financing and security documents relating thereto). All encumbrances
related to the foregoing shall be satisfied and removed at or prior
to Closing by Seller and the Lenders thereto.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 5.7
Environmental
None.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 5.8
Compliance with Law
As of the date of this Agreement, Seller may not have
paid the 5% franchise fee in connection with the County of
Bedford cable television franchise.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 5.12
Legal Proceedings
None.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 5.13(c)
Employment Matters
None.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 5.13(d)
Employees
SYSTEM NAME SALARY/WAGES
- ------ -------------- ------------
Office/Administration
Shelbyville Marie Faris $32,175/year
Shelbyville Sandy Gilmore $10.50/hour
Shelbyville Kristie Bryan $8.80/hour
Shelbyville Keri McCullough $7.50/hour
Manchester Deborah Amacher $32,175/year
Manchester Jeanette Gray $6.75/hour
Manchester Karen Paulsen $7.50/hour
Manchester Joy Malone $9.10/hour
Technical
Shelbyville Billy Watkins $15.50/hour
Shelbyville Stan Marsh $ 8.75/hour
Shelbyville Jamie Boyce $10.66/hour
Shelbyville Mark Bryant* $ 7.50/hour
Manchester Terry Sanders* $ 7.00/hour
Manchester Brian Langham $12.00/hour
Manchester Michael Jones $11.50/hour
Manchester Shannon Frame $ 7.75/hour
* Not employed as of June 30, 1996. Chris Stone was employeed
during such period, and earned $11.00/hour until his employment
terminated in August of 1996.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 5.13(e)
Employer Plans
CIGNA Health Maintenance Organization.
CIGNA Preferred Provider Organization Plan.
1995 TCI Benefits Plan.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 5.14
System Information
as of June 30, 1996
Number of Equivalent Basic Subscribers: 11,471
Number of Subscribers of Expanded
Basic Services: 10,555
Bandwidth: 300 MHz
Homes Passed by the System: 14,504
Number of Miles of Plant: 361.02
Channel Lineup:
SHELBYVILLE: MANCHESTER:
Budget Cable: Budget Cable:
2 WKRN ABC Nashville 2 WKRN Nashville
3 WZTV FOX Nashville 3 WZTV FOX Nashville
4 WSMV NBC Nashville 4 WSMV Nashville
5 WTVF CBS Nashville 5 WTVF CBS Nashville
6 QVC 6 LOCAL
7 LOCAL 7 SHOWTIME*
8 WDCN PBS Nashville 8 WDCN PBS Nashville
9 C-SPAn 9 Cspan
10 The Family Channel 10 WHTN
11 The Weather 11 The Weather
Channel Channel
12 Encore* 12 Encore*
13 CMT 13 CMT
14 WHTN 14 The Family Channel
15 Arts & 15 DISNEY*
Entertainment
16 WXMT-Channel 30 Nashville 16 WXMT
17 Arts & Entertainment
18 QVC
19 HBO*
20 Nickelodeon
SHELBYVILLE: MANCHESTER:
Plus Service: Plus Service:
17 USA 21 CINEMAX*
18 CINEMAX* 22 American
Movie Classics
20 HBO* 23 CNN Cable
News Network
21 SHOWTIME* 24 MTV
22 DISNEY* 25 TBS Atlanta
Superstation
23 CNN Cable
News Network 26 WGN Chicago
Superstation
24 TBS Atlanta 27 ESPN
Superstation
25 Discovery 28 Discovery
26 VH-1 29 TNN The
Nashville
Network
27 WGN Chicago 30 CNBC
Superstation
28 TNT Turner 31 VH-1/Comedy
Network Central
Television
29 American 32 The Nostalgia
Movie Classics Channel
30 TNN the Nashville 33 Headline News
Network
31 MTV 34 Sportsouth
32 CNBC 35 USA
33 Nickelodeon 36 TNT Turner
Network
Television
34 Headline News 37 Lifetime
35 Sportsouth 38 BET Black
Entertainment
Television
36 ESPN 40 Pay Per View
37 Lifetime
38 BET Black Entertainment TV
40 Pay Per View
* Available for an additional monthly fee.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 5.16
Taxes
All Tax Returns required to be filed for the year ended
December 31, 1996 and Taxes due or payable on such Tax Returns
are anticipated to be filed and paid by Seller no later than June
30, 1997.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Schedule 6.3(a)
Consents to be Obtained or Waived by Closing Date
None.
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Exhibit H
Noncompetition Agreement
NONCOMPETITION AGREEMENT dated as of _____________, 1997
(the "Closing Date") among TCI Communications, Inc., a Delaware
corporation ("TCIC"), Tele-Communications, Inc. ( TCI ) and
Rifkin Acquisition Partners, L.L.L.P., a Colorado limited
liability limited partnership ("Rifkin").
Recitals
A. Each of TCI and TCIC is an indirect parent entity of
the general partner of American Cable TV Investors 5, Ltd. ("ACT
5").
B. ACT 5 and Rifkin have entered into an Asset Purchase
Agreement, dated as of__________, 1996 (the "Agreement"),
pursuant to which on the date hereof ACT 5 has conveyed to Rifkin
substantially all of the assets of ACT 5's cable television
system operating in the Franchise Areas set forth on Exhibit A
attached hereto (the "System").
C. The Agreement provides that, as a condition to Rifkin's
obligation to perform each of its obligations at Closing under
the Agreement, TCI and TCIC will execute and deliver this
Noncompetition Agreement.
D. As consideration for TCI and TCIC, in addition to ACT 5
and IR-TCI Partners V, L.P.,each entering into a covenant not to
compete, Rifkin will pay to ACT 5 a portion of the Purchase Price
equal to $_____________ [to be agreed upon by Rifkin and ACT 5
prior to Closing].
E. All capitalized terms not otherwise defined herein
shall have the meanings ascribed in the Agreement.
Accordingly, the parties agree as follows:
17. Acknowledgements. Each of TCI, TCIC and Rifkin
acknowledges that the agreements and covenants contained herein
are essential to protect the Business of ACT 5 acquired by Rifkin
pursuant to the Agreement.
18. Covenant Not to Compete. For the period commencing on
the Closing Date and expiring on the third anniversary thereof,
each of TCI and TCIC shall not, and shall cause its Affiliates
which it controls, not to, without the prior written consent of
Rifkin, to compete with Rifkin by selling or attempting to
provide any wireline cable television services, data transmission,
telephone services or security alarm monitoring (but specifically
excluding video programming provided by TCI or its Affiliates to
other cable television operators) delivered by means of terrestrial
cable within a 20 mile radius of the areas served by the System on
the Closing Date. This paragraph 2 shall not be applicable to
InterMedia Partners or any Affiliate of InterMedia Partners of
which Leo J. Hindrey, Jr. is currently, directly or indirectly,
the managing general partner.
3. Scope of Noncompetition Agreement. The scope of this
Noncompetition Agreement in time, geography and types and limits of
activities is reasonable and necessary for the protection of Buyer.
4. Rights and Remedies Upon Breach; Specific Performance. Because
of the unique nature of the assets comprising the System, Rifkin will not
have an adequate remedy at law if TCI or TCIC breaches this Noncompetition
Agreement. Accordingly, Rifkin shall be entitled upon application to any
court of competent jurisdiction, to an injunction prohibiting any violation
of this Noncompetition Agreement, in addition to any other rights or
remedies to which Rifkin may be entitled at law or in equity. Each of TCI
and TCIC hereby waives and covenants not to assert in any action or
proceeding, any claim or defense that there exists an adequate remedy at
law for breach of this Noncompetition Agreement.
5. Blue-Penciling. If this Noncompetition Agreement is found by any
court of competent jurisdiction to be too broad in extent, whether as to
activities restricted, the time period of such restrictions or
geographic areas in which such activities are restricted, this
Noncompetition Agreement shall nevertheless remain effective
but shall be deemed amended to the extent considered by such court to be
reasonable, and shall be fully enforceable as so amended.
6. Assignment; Amendment. All of the terms and provisions of this
Noncompetition Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors
and permitted assigns. This Noncompetition Agreement shall not be
assignable by TCI or TCIC without the prior written consent of Rifkin.
This Noncompetition Agreement may be amended only by written agreement
of the parties hereto.
7. Applicable Law. The validity, performance and enforcement of
this Noncompetition Agreement shall be governed by the laws of the State of
New York.
IN WITNESS WHEREOF, the parties have executed this Noncompetition
Agreement as of the date first written above.
TELE-COMMUNICATIONS, INC.
By:__________________________
Name:
Title:
TCI COMMUNICATIONS, INC.
By:__________________________
Name:
Title:
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By:__________________________
Name:
Title:
<PAGE>
EXHIBIT A
Shelbyville System:
City of Shelbyville
Bell Buckle
Wartrace
Bedford County
Manchester System:
City of Manchester
Coffee County
<PAGE>
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Exhibit F
Indemnity Escrow Agreement
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attn: Barbara L. Strohmeier
Re: Indemnity Escrow Agreement
Ladies and Gentlemen:
This Indemnity Escrow Agreement is hereby accepted as
of
___________, 1997, by and between American Cable TV Investors 5, Ltd., a
Colorado limited partnership ("Seller") and Rifkin Acquisition Partners,
L.L.L.P., a Colorado limited liability limited partnership ("Buyer"),
who have entered into an Asset Purchase Agreement, dated as of
____________, 1996, to sell and purchase certain cable television assets
(the "Asset Purchase Agreement"). Capitalized terms used but not
otherwise defined in this Indemnity Escrow Agreement shall have the
meanings set forth in the Asset Purchase Agreement.
It is agreed as follows:
19. Deposit and Investments. Buyer and Seller have, pursuant to
Section 3.1 of the Asset Purchase Agreement, deposited $493,750 (such
amount, together with any earnings thereto, being the "Deposit") in an
account at The Chase Manhattan Bank, as escrow agent (the "Escrow
Agent"). The Deposit may be invested in Investment Securities (as defined
below). The Deposit shall be held in escrow (the "Escrow") by Escrow Agent
pursuant to this Indemnity Escrow Agreement. The Escrow Agent shall
continue to invest the Deposit in Investment Securities in accordance with
the joint written instructions of Seller and Buyer or, if no instructions
are given, in interest bearing accounts at The Chase Manhattan Bank. The
term "Investment Securities" means (a) interest bearing accounts in, or
certificates of deposit of, The Chase Manhattan Bank or, (b) (i)
obligations of the United States of America, (ii) United States government
securities of agencies of the United States government which are guaranteed
by the United States government or (iii) securities of governmental
agencies, if the same are covered by a bank repurchase agreement.
20. Holdings of Deposit. The Escrow Agent shall hold and
disburse the Deposit pursuant to the terms of this Indemnity Escrow
Agreement and the Asset Purchase Agreement.
21. Disbursement of Earnings, Etc. All interest, earnings, and
gains received by the Escrow Agent from the investment of the eposit shall
be distributed pursuant to the terms of this Indemnity Escrow agreement.
In connection with the investment of the Deposit, Seller and Buyer shall
provide the Escrow Agent with their taxpayer identification number.
22. Disbursement Instructions.
a. Anything in this Indemnity Escrow Agreement to the contrary
notwithstanding, Escrow Agent is authorized and directed to deliver and
disburse the Deposit, or any part of the Deposit, as directed from time to
time in joint written instructions of Buyer and Seller.
b. Seller and Buyer have agreed that the Deposit will be
disbursed in accordance with the terms of this Indemnity Escrow Agreement
and the Asset Purchase Agreement.
c. Unless a claim against the Deposit, or any part of the
Deposit remains outstanding, Seller and Buyer have agreed that on the fifth
Business Day after the first anniversary of the Closing Date, Seller and
Buyer shall instruct Escrow Agent to disburse the Deposit, or any
part of the Deposit which is not subject to a claim, to Seller or Seller's
designee.
23. Claims Against the Deposit by Buyer. The following
provisions shall control with respect to claims made against the Deposit by
Buyer:
a. If Buyer wishes to make a claim against the Deposit, Buyer
will send a notice of such claim to Escrow Agent and Seller. Any such
notice will state that Buyer is making a claim under Article XII of the
Asset Purchase Agreement. Any notice of a claim made shall specify
the factual basis of such claim in reasonable detail to the extent known by
Buyer.
b. If Seller disputes the right of Buyer to obtain the Deposit,
or any part of the Deposit, Seller, within ten Business Days after receipt
of the notice as provided in Paragraph 4(a), shall send a notice to Escrow
Agent and Buyer stating that Seller disputes the right of Buyer to
obtain the Deposit, or any part of the Deposit, and will include in such
notice a description in reasonable detail of the basis for disputing such
claim. Escrow Agent shall continue to hold the Deposit (or the part thereof
which is subject to a dispute) until advised in writing by
Seller and Buyer that such dispute has been resolved, in which case Escrow
Agent shall disburse the Deposit pursuant to said writing; provided that,
if a suit, action or arbitration proceeding (as provided for in the Asset
Purchase Agreement) is commenced for collection of the Deposit or part
thereof and Escrow Agent is so advised in writing, Escrow Agent shall,
unless otherwise advised in writing by Seller and Buyer, continue to hold
the Deposit or the part thereof which is the subject of such suit, action
or arbitration proceeding until final disposition of such suit, action or
arbitration proceeding. Upon the final disposition of such suit, action or
arbitration proceeding, Escrow Agent shall disburse the Deposit or part
thereof which is subject to such suit, action or arbitration proceeding in
accordance with the determination of (i) the court in which such suit or
action was pending or (ii) the arbitrator.
c. If Seller fails to notify Escrow Agent within the period
described in Paragraph 4(b) that it contests Buyer's claim to the Deposit
(or any part thereof), Escrow Agent shall, within 5 Business Days, disburse
the Deposit (or any part thereof which is subject to a claim by Buyer
that Seller fails to timely contest) to Buyer.
24. Termination. If no claims have been made against the amount
of the Deposit remaining in the Escrow on the fifth Business Day after the
first anniversary of the Closing Date, Escrow Agent shall disburse such
remaining amount of the Deposit (together with all interest thereon) to
Seller at the address set forth below.
25. Rights, Duties, and Liabilities of Escrow Agent.
a. Escrow Agent shall have no duty to know or determine the
performance or non-performance of any provision of any agreement between
the parties to this Indemnity Escrow Agreement, including, but not limited
to, the Asset Purchase Agreement, which shall not bind Escrow Agent in any
manner. Escrow Agent assumes no responsibility for the validity or
sufficiency of any document or paper or payment deposited or called for
under this Indemnity Escrow Agreement except as may be expressly and
specifically set forth in this Indemnity Escrow Agreement, and
the duties and responsibilities of Escrow Agent under this Indemnity Escrow
Agreement are limited to those expressly and specifically stated in this
Indemnity Escrow Agreement.
b. Escrow Agent shall not be personally liable for any act it
may do or omit to do under this Indemnity Escrow Agreement as such agent
while acting in good faith and in the exercise of its own best judgment,
and any act done or omitted by it pursuant to the written advice
of its counsel shall be conclusive evidence of such good faith. Escrow
Agent shall have the right at any time to consult with its counsel upon any
question arising under this Indemnity Escrow Agreement and shall incur no
liability for any delay reasonably required to obtain the advice of
counsel.
c. Other than those notices or demands expressly provided in
this Indemnity Escrow Agreement, Escrow Agent is expressly authorized to
disregard any and all notices or demands given by Seller or Buyer, or by
any other person, firm, or corporation, excepting only orders or process of
court, and Escrow Agent is expressly authorized to comply with and obey
any and all final process, orders, judgments, or decrees of any court, and
to the extent Escrow Agent obeys or complies with any thereof of any court,
it shall not be liable to any party to this Indemnity Escrow Agreement or
to any other person, firm, or corporation by reason of such compliance.
d. In consideration of the acceptance of this Escrow by Escrow
Agent (as evidenced by its signature below), Seller and Buyer agree, for
themselves and their successors and assigns, to pay Escrow Agent its
charges, fees, and expenses as contemplated by this Indemnity
Escrow Agreement. As between Buyer and Seller, they shall each be
responsible for one-half of such charges, fees and expenses. The escrow
fees or charges, as distinguished from other expenses under
this Indemnity Escrow Agreement, shall be as written below the Escrow
Agent's signature at the time of acceptance of this Indemnity Escrow
Agreement. Such sum is intended as compensation for Escrow Agent's
ordinary services as contemplated by this Indemnity Escrow Agreement and
shall be paid as described above. In the event Escrow Agent renders
services not provided for in this Indemnity Escrow Agreement, Escrow Agent
shall be entitled to receive from Buyer and Seller reasonable compensation
and reasonable costs, if any, for such extraordinary services, and such
compensation and costs shall be borne equally by Buyer and Seller.
e. Escrow Agent shall be under no duty or obligation to
ascertain the identity, authority, or right of Seller or Buyer (or their
agents) to execute or deliver or purport to execute or deliver this
Indemnity Escrow Agreement or any documents or papers or payments deposited
or called for or given under this Indemnity Escrow Agreement.
f. Escrow Agent shall not be liable for the outlawing of any
rights under any statute of limitations or by reason of laches in respect
of this Indemnity Escrow Agreement or any documents or papers deposited
with Escrow Agent.
g. In the event of any dispute among the parties to this
Indemnity Escrow Agreement as to the facts or as to the validity or meaning
of any provision of this Indemnity Escrow Agreement, or any other fact or
matter relating to this Indemnity Escrow Agreement or to the transactions
between Seller and Buyer, Escrow Agent is instructed that it shall be under
no obligation to act, except in accordance with this Indemnity Escrow
Agreement or under process or order of court or, if there by no such
process or order, until it has filed or caused to be filed an appropriate
action interpleading the Seller and Buyer and delivering the Deposit (or
the portion of the Deposit in dispute) to such court, and Escrow Agent
shall sustain no liability for its failure to act pending such process of
court or order or interpleader of action.
26. Modification of Indemnity Escrow Agreement. The provisions
of this Indemnity Escrow Agreement may be supplemented, altered, amended,
modified, or revoked by writing only, signed by Buyer and Seller and
approved in writing by Escrow Agent, and upon payment of all fees, costs
and expenses incident thereto.
27. Assignment of Indemnity Escrow Agreement. No assignment,
transfer, conveyance, or hypothecation of any right, title, or interest in
and to the subject matter of this Indemnity Escrow Agreement shall be
binding upon any party, including Escrow Agent, unless all fees, costs, and
expenses incident thereto shall have been paid and then only upon the
assent thereto by all parties in writing.
28. Notice. Any notice required or desired to be given to Buyer
or Seller shall be deemed to have been given only if it is given in the
manner set forth in Section 13.3 of the Asset Purchase Agreement. Notice
to Escrow Agent may be given in the manner set forth in Section 13.3
of the Asset Purchase Agreement to Escrow Agent's address set forth above
(Facsimile No.: (212) 270-4823) or at such other address as Escrow Agent
may direct by giving notice to Buyer and Seller.
29. Indemnity Escrow Agreement Binding. The undertakings and
agreements contained in this Indemnity Escrow Agreement shall bind and
inure to the benefit of the parties to this Indemnity EscrowAgreement and
their respective heirs, personal representatives, successors, and assigns.
30. Counterparts. This Indemnity Escrow Agreement may be
executed in one or more counterparts, each of which will be deemed an
original. Whenever pursuant to this Indemnity Escrow Agreement Buyer and
Seller are to deliver a jointly signed writing to Escrow Agent or
jointly advise Escrow Agent in writing, such writing may in each and all
cases be signed jointly or in counterparts and such counterparts shall be
deemed to be one instrument.
Very truly yours,
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:________________________
Name:
Title:
BUYER:
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By: Rifkin Acquisition Management, L.P.,
its General Partner
By: RT Investment Corp., its
General Partner
By:
Name:
Title:
ACCEPTED this ___ day of ____________, 1997.
THE CHASE MANHATTAN BANK
By: __________________________
Name:
Title:
Fee: [$2,000] Inception Fee.
<PAGE>
ACT 5
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
Exhibit G
Form for Opinion of Seller's FCC Counsel
__________, 1997
Rifkin Acquisition Partners, L.L.L.P
360 South Monroe Street, Suite 600
Denver, Colorado 80209
Re: American Cable TV Investors 5, Ltd.
Ladies and Gentlemen:
This letter is furnished to you pursuant to Section 8.9 of the
Asset Purchase Agreement, dated as of____________ __, 1996 (the "Agreement"),
between American Cable TV Investors 5, Ltd., a Colorado limited
partnership("Seller") and Rifkin Acquisition Partners, a Colorado limited
liability limited partnership ("Buyer").
As communications counsel for Seller, we are engaged in the
representation of Seller before the Federal Communications Commission
("FCC") in connection with its cable television business in the communities
identified in Schedule I hereto (the "System"). We have examined such
records, certificates and other documents and have considered such
questions of law as relate to the Seller and the System as we have deemed
necessary or appropriate for purposes of
this opinion. This opinion is limited to the Communications Act of 1934,
as amended (the "Communications Act"), the Rules and Regulations of the FCC
(the "FCC Regulations") and Section 111 of the Copyright Act of 1976 (17
U.S.C. 111)(the "Copyright Act") as applicable to the System as operated
by Seller. Except as specifically provided, we offer no opinion as to the
Seller's compliance with the Cable Television Consumer Protection and
Competition Act of 1992, Pub.L. No. 102-385, 106 Stat. 1460 (1992), or
those FCC regulations promulgated pursuant to such Act.
In rendering this opinion, we have assumed the genuineness of
signatures on documents and the conformity to the original of all copies
examined by or submitted to us of photocopies or conformed copies. As to
various questions of fact in connection with this opinion, we have relied
upon examination of available files of our office, those of the FCC and the
United States Copyright Office (the "Copyright Office"), and pertinent
statements and representations of officers, directors and responsible
representatives of the Seller. We have not undertaken an independent field
investigation to verify the accuracy of this information, and express no
opinion regarding technical matters or matters that would require on-scene
knowledge of the System's operations, technical or engineering matters,
or local franchising matters.
Based upon and limited by the foregoing and except as set forth
in Schedule II hereto, we are of the opinion that, as of the date set forth
above:
31. Seller holds all licenses, permits and authorizations required
from the FCC to operate the System in the manner in which we have been
advised that it is being operated, which licenses, permits and
authorizations are listed in ScheduleI hereto. Each such license, permit
and authorization has been issued by the FCC, remains in full force and
effect, and transfer thereof to Buyer on the Closing Date as defined in the
Agreement has been approved by the FCC, to the extent such approval is
required.
32. All materially required FCC filings required to be made by Seller
in connection with its operation of the System have been made, including,
but not limited to, Registration Statements and FCC Annual Report Forms
325, Schedule A, to the extent such forms are required. All FCC
authorizations needed to utilize the frequencies currently used
by the Systems have been obtained.
33. Basic Signal Leakage Performance Reports (FCC Annual Report Forms
320) for 1990-1996, are on file with the FCC for each community unit
operated by the System. Although those forms indicate passing test
results, we render no opinion as to the methodology or accuracy of the
actual measurements taken.
34. EEO Annual Report Forms 395(A) have been filed with the FCC for
each employment unit associated with the System for calendar years
1988-1996. Except as noted in Schedule II, the employment unit has been
certified by the FCC for calendar years 1988-1996.
35. To the best of our knowledge, Seller has provided subscriber
privacy notices to subscribers of the System on an annual basis since 1986.
Seller also provides these notices to new subscribers at the time of
installation. Our opinion is limited to the fact that such notices have
been provided, and we express no opinion as to whether the contents of such
notices comply with the requirements of the Communications Act or FCC
regulations.
36. To the best of our knowledge, based on information provided by
Seller, the System is carrying all of the "must-carry" signals required to
be carried pursuant to Federal Law. To the best of our knowledge,
based on information provided by Seller, Seller has obtained all necessary
retransmission consents for the broadcast signals currently carried on the
system. Except as set forth in Schedule II hereto, to the best of our
knowledge, based on information provided by Seller, there have
been no "must carry" complaints filed at the FCC against the System.
7. Based solely upon the information provided by Seller as to antenna
structure, height, location and proximity to any aircraft landing areas,
all antenna structures that we have been advised as being utilized by
Seller in connection with its operation of the System are in compliance
with the FCC s tower registration requirements. These antenna structures
are listed in Schedule I hereto. We express no opinion as to compliance
with any requirements of Part 17 of the FCC s rules(such as antenna
structure, marking and lighting requirements) other than those delineating
the circumstances under which notification to the Federal Aviation
Administration and FCC is required.
8. There is no FCC judgment, decree or order which has been issued
against Seller with respect to the system, nor is there any FCC action,
proceeding or investigation pending or, to the best of our knowledge,
threatened by the FCC against Seller with respect to the System.
9. The timely filing of the periodic Statements of Account and
accompanying royalty fees qualifies the Seller for a compulsory license for
the carriage of the broadcast signals utilized by the System. Seller has
filed all required Statements of Account and supplements thereto, and, to
the best of our knowledge, has timely paid its statutory royalties for all
accounting periods beginning at least as early as the first accounting
period of 1993, and all primary transmissions listed in the latest
Statements of Account qualify for a compulsory copyright license. Although
we render no opinion as to the methodology or calculations used to
determine "gross receipts" for copyright purposes, there have been no
inquiries received from the Copyright Office or any other party which
challenge or question either the computation or amount of any
royalty payments or the validity of the Statements of Account, and there is
no claim, action or demand for copyright infringement or for non-payment of
royalties, pending or, to the best of our knowledge, threatened against the
Seller.
10. Except for any necessary FCC approvals which have been obtained,
the execution, delivery and performance of this Agreement does not require
the approval of the FCC, will not result in any violation of the
rules and regulations of the FCC, and will not cause any forfeiture or
impairment of any FCC license, authorization or permit of Seller.
This opinion has been prepared solely for your use in connection
with the closing of transactions under the Agreement, and may not be relied
upon by, filed with or furnished to any other person or entity without the
prior written consent of this firm.
Very truly yours,
COLE, RAYWID & BRAVERMAN, L.L.P.
By:_________________________
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001011701
<NAME> RIFKIN ACQUISITION CAPITAL CORP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,387
<SECURITIES> 0
<RECEIVABLES> 1,184
<ALLOWANCES> 381
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 116,327
<DEPRECIATION> 14,265
<TOTAL-ASSETS> 299,833
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 198,500
0
0
<COMMON> 0
<OTHER-SE> 65,867
<TOTAL-LIABILITY-AND-EQUITY> 299,833
<SALES> 0
<TOTAL-REVENUES> 71,285
<CGS> 0
<TOTAL-COSTS> 73,597
<OTHER-EXPENSES> 1,357
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,608
<INCOME-PRETAX> (25,277)
<INCOME-TAX> (3,646)
<INCOME-CONTINUING> (21,631)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,631)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>The amount shown for current assets and current liabilities is
zero due to an unclassified balance sheet in the financial
statements.
</FN>
</TABLE>
