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, 1997 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 or other jurisdiction of (I.R.S. Employer Identification
Incorporation or organization) No.
360 South Monroe St., Suite 600
Denver, Colorado 80209
(Address of principal executive offices) (zip code)
Registrant's Telephone Number including 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: No.
<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 Stock 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 7A. Quantitative and Qualitative Disclosures about
Market Risk .......................................... 26
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 ("RAP, L.P.") 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, 1997, the Systems of the Company passed approximately
266,500 homes and served approximately 199,500 basic customers, at a
basic penetration level of 74.9%. 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,
1997. All of the Systems have capacities of 30 or more channels.
For the year ended December 31, 1997, the Company had revenue of
approximately $84.3 million, and Adjusted EBITDA (see footnote (b) on
page 20) of approximately $39.7 million.
The Recapitalization
In August 1995, the Company effected a recapitalization (the
"Recapitalization") in which a group led 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
Rifkin Acquisition Partners, L.P. ("RAP LP") 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,
Inc. ("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, 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 Security Ownership of
Certain Beneficial Owners and Management and "Certain Relationships and
Related Transactions." As a condition to the investment in the
Partnership made by the 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
Manchester Systems
On April 1, 1997, the Company acquired certain operating assets
comprising two cable television systems of American Cable TV Investors
5, Ltd. located in Manchester and Shelbyville, Tennessee (the "Manchester
Systems"). The purchase price for the Manchester Systems was
approximately $19.7 million including approximately $21,000 of net
working capital assumed. Upon acquisition (the "Manchester
Acquisition"), the Manchester Systems passed approximately 14,600 homes
with approximately 360 miles of plant, and served approximately 11,700
basic service customers. The revenues related to the Manchester Systems
acquisition included in the year ended December 31, 1997 results were
approximately $3.3 million.
Subsequent Property Sale
On October 16, 1997, the Company entered into definitive purchase
agreement with Bresnan Communications Company ("Bresnan") to sell all
the operating assets comprising the Company's properties within Michigan
(the "Michigan Systems"). On February 4, 1998, the sale was finalized
with an effective date of January 31, 1998. The purchase price is $17.0
million subject to normal closing adjustments. At December 31, 1997, the
Michigan Systems passed approximately 14,300 homes with 370 miles of
plant and served approximately 11,200 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 (as defined
herein) 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 Shelbyville and
Manchester Systems with certain of the operations of the Company's
existing systems in Tennessee. 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 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,
product tiers, high speed data access and digitally delivered
programming.
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 three 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 systems 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 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 is
expected to 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 The
Movie Channel, 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 by the
cable system.
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 has 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 231 retransmission consents with 44 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 4.9 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 65% of the Systems'
programming contracts are negotiated directly with the networks by Rifkin
& Associates; the remaining 35% 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, in 1997, the Company began replacing more
expensive networks with lower priced product of similar content and
quality. The Company plans to continue cost-reducing product switchouts.
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 92.5% of the
customers in the Systems subscribed to both tiers of service as of
December 31, 1997.
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, Columbia and
Lebanon, 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. The Georgia system launched a new product tier in June 1997, and
the Lebanon, Tennessee system launched a new product tier in November
1997.
A multi-channel digital cable service is planned to be launched in the
Cookeville, Tennessee system in mid-1998. 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.
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 Federal Communication Commission ("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, 1997, the Systems maintained over 6,000 miles of cable
distribution plant that passed approximately 266,500 homes. The
following table sets forth certain information with regard to the channel
capacities of the Systems as of December 31, 1997.
54 or
30 to 53 More
Channels Channels Total
Number of Systems 29 16 45
Percent of Systems 64.4% 35.6% 100.0%
Miles of plant 2,475 3,546 6,021
Customers 72,273 127,182 199,455
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. 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 not yet widely implemented by cable system operators.
There can be no assurance as to whether or when such technology can or
will be fully developed and 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 as an
addition to the rates for cable television service. The Cable
Communications Policy Act of 1984 ("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, 1997.
Year of Percentage
Franchise Number of Percentage of Number of of Total
Expiration Franchises Total Franchises Customers Customers
1998-2000 22 18.5% 27,496 13.8%
2001-2003 24 20.2% 30,830 15.5%
After 2003 73 61.3% 141,129 70.7%
Total 119 100.0% 199,455 100.0%
No single franchise represents more than 11.4% of total customers of the
Systems, and the largest five franchises represent less than 32% 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."
During 1997, the Company experienced a competitive impact 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. Three other DBS operators, DirectTV, a subsidiary of GM
Hughes Electronics, United States Satellite Broadcasting, a subsidiary
of Hubbard Broadcasting, Inc., and EchoStar Communications Corporation
offer video services that can be received by HSDs that measure
approximately eighteen inches in diameter. Additionally, these DBS
operators have acquired the right to distribute all of the significant
cable television programming services.
DBS has advantages 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.
The primary disadvantage of DBS is its inability to provide local
broadcast television stations to customers in their local markets.
However, EchoStar and other potential DBS providers have announced their
intention to retransmit local broadcast television stations back into a
customer's local market. Both Congress and the U. S. Copyright Office
are currently reviewing proposals to allow such transmission and it is
possible that in the near future, DBS systems will be retransmitting
local television broadcast signals back into local television markets.
Additional DBS disadvantages presently include a limited ability to
tailor the programming package to the interests of different geographic
markets; signal reception being subject to line of sight angles; and
technology which requires a customer to rent or own one set-top box
(which is significantly more expensive than a cable converter) for each
television on which they want to view DBS programming.
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, if DBS develps the technology and gains the legal right to
rebroadcast local broadcast signals, it could increase the growth in DBS
customers.
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 Cable Television
Consumer Protection and Competition Act of 1992 ("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.
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." Also, during 1997 there has been a
significant increase in the number of cities that have constructed their
own cable television systems in a manner similar to city-provided utility
services. These systems typically will compete directly with the
existing cable operator without the burdens of franchise fees or other
local regulation. Although the total number of municipal overbuild cable
systems remains small, 1997 would indicate an increasing trend in cities
authorizing such direct municipal competition with cable operators. 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.
Subsequently, BIMS was granted a franchise in August 1997 by the City of
Duluth, Georgia. At this time, BIMS has activated approximately 30
residential housing subdivisions, primarily in Gwinnett County, with
hardwire cable. These activated subdivisions encompass approximately 900
occupied passings, of which approximately 650 are customers of the
Company and 140 are BIMS customers.
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, Duluth 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.
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 BIMS
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. Published plans call for BIMS
to activate a digital MMDS operation in mid-1998 which will affect
portions of Roswell and Gwinnett County, Georgia. 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 per
month. This compares to 25 channels, including Disney, and six off-air
signals offered by the MMDS operator for $19.00 per month along with
Showtime and The Movie Channel for $6.95 each per month. Another MMDS
operator has been operational for over four years near Bridgeport,
Michigan. Currently, this MMDS operator has programmed 23 channels,
including Disney, and four off-air channels for $23.85 per month,
compared to the Company's Bridgeport system's 48 basic channels for
$28.30. This MMDS operator offers Showtime for $6.95 per month. 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 near
Manchester, Tennessee near the Company's Manchester, Tullahoma,
McMinnville and Lawrenceburg systems. Depending on the headend serving
each community, these systems offer between 33 and 60 basic channels for
between $26.64 and $30.90 per month. Wireless One, Inc. currently offers
a basic service package consisting of 21 channels, including five local
broadcast channels and 16 cable satellite channels, for $22.95 per month
and one premium channel, HBO, at $9.95 per month. Due to the hilly and
wooded topography in the area, the Manchester, Tullahoma, McMinnville and
Lawrenceburg systems are minimally affected by the signal pattern of the
MMDS operation near 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, 1997, the Systems had 314 full-time employees and 7 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 54 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 customers, 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. However, certain members of
Congress and FCC officials have called for the delay of this regulatory
sunset and further have urged more rigorous rate regulation (including
limits on programming cost pass-thourghs to cable customers) until a
greater degree of competition to incumbent cable operators has developed.
The 1996 Telecom Act 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.
In July 1997, the Eighth Circuit Court of Appeals vacated certain aspects
of the FCC's initial interconnection order and that decision is now
pending before the Supreme Court. However, the underlying statutory
obligation of local telephone companies to interconnect with competitors
remains in place.
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. The FCC is currently conducting a reconsideration of
its national customer ownership rules, and it is possible the Commission
will revise both the national customer cable operator ownership
limitation and the manner in which it attributes ownership to a cable
operator.
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. The
burden associated with must-carry obligations could dramatically increase
if television broadcast stations proceed with planned conversions to
digital transmissions and if the FCC determines that cable systems must
carry all analog and digital signals transmitted by the television
stations. Additionally, cable systems are required to obtain
retransmission consent for all "distant" commercial television stations
(except for satellite-delivered independent "superstations" such as WGN).
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.
In February of 1997, the FCC released revised rules which mandated a
modest rate reduction which has made commercial leased access a more
attractive option for third party programmers, particularly for part-time
leased access carriage. Further, a group of commercial leased access
users has challenged the FCC's February 1997 Order as failing to reduce
commercial leased access rates by an appropriate amount. If this pending
court challenge is successful, the FCC will be forced to undertake a
further rulemaking which could result in significantly reduced commercial
leased access rates thereby encouraging a much more significant increase
in the use of commercial leased access channels.
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. Recently, both Congress and the FCC have considered proposals
that would expand the program access rights of cable's competitors,
including the possibility of subjecting video programmers who are not
affiliated with cable operators to all program access requirements.
Inside Wiring. In a 1997 Order, the FCC established rules that require
an incumbent cable operator upon expiration or termination of a multiple
dwelling unit ("MDU") service contract to sell, abandon, or remove "home
run" wiring that was installed by the cable operator in an MDU building.
These inside wiring rules will encourage and facilitate building owners
in their attempts to replace existing cable operators with new video
programming providers who are willing to pay the building owner a higher
fee. Additionally, the FCC has proposed abrogating all exclusive MDU
contracts held by cable operators, but at the same time allowing
competitors to cable to enter into exclusive MDU service contracts.
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. FCC requirements imposed in 1997
for Emergency Alert Systems and for providing hearing impaired Closed
Captioning on programming will result in new and potentially significant
costs for the Company. 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.
The FCC currently 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.
Internet Service Regulation. The Company began offering high-speed
internet service to customers in 1997. At this time, there is no
significant federal or local regulation of cable system delivery of
internet services.
However, as the cable industry's delivery of internet services develops,
it is possible that greater federal and/or local regulation could be
imposed.
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 the American Society of Composers, Authors and
Publishers ("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 System. The table below sets forth certain information with
respect to the Georgia System.
Year Ended December 31,
1997 1996 1995 1994 1993
Homes Passed 77,272 71,152 66,307 60,898 55,489
Basic Customers 57,173 53,386 48,925 44,290 39,451
Basic Penetration 74.0% 75.0% 73.8% 72.7% 71.1%
Average Monthly Revenue
per Customer $39.56 $37.35 $35.44 $33.61 $33.01
The Georgia System has been managed by Rifkin & Associates since 1985.
On a combined basis, this system consisted of approximately 1,630 miles
of distribution plant.
The Georgia System serves unincorporated areas in northeast Gwinnett
County and certain incorporated communities therein, including the cities
of Lawrenceville, Duluth, Suwanee, Buford, Sugar Hill, Dacula and
Resthaven, as well as the Cities of Roswell and Mountain Park in Fulton
County. All of the communities served by the Georgia System are suburbs
of Atlanta.
Tennessee Systems. The table below sets forth certain information with
respect to the Tennessee Systems.
Year Ended December 31,
1997 1996 1995 1994 1993
Homes Passed 138,913 120,285 115,057 110,441 108,217
Basic Customers 107,558 96,768 93,765 89,205 85,586
Basic Penetration 77.4% 80.4% 81.5% 80.8% 79.1%
Average Monthly Revenue
per Customer $35.36(1) $32.38 $30.05 $28.73 $28.45
(1) Refer to Footnote (d) on Page 20.
A number of the Tennessee Systems have been managed by Rifkin &
Associates since 1984 and a number since 1986. Additionally, the Company
purchased the Manchester and Shelbyville systems on April 1, 1997. 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, Fayetteville, Shelbyville and Manchester. 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,
1997 1996 1995 1994 1993
Homes Passed 35,924 35,739 35,469 35,320 35,209
Basic Customers 23,542 23,887 24,269 23,987 23,091
Basic Penetration 65.5% 66.8% 68.4% 67.9% 65.6%
Average Monthly Revenue
per Customer $35.49 $32.70 $30.63 $29.57 $29.62
The Illinois Systems have been managed by Rifkin & Associates since
December 1985. On a combined basis, these systems consisted of
approximately 600 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,
1997 1996 1995 1994 1993
Homes Passed 14,356 14,141 13,989 13,805 13,562
Basic Customers 11,182 11,147 10,949 10,469 9,955
Basic Penetration 77.9% 78.8% 78.3% 75.8% 73.4%
Average Monthly Revenue
per Customer $33.69 $31.86 $30.18 $28.87 $28.46
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. The Michigan Systems were sold to another cable
operator effective January 31, 1998.
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.
<PAGE>
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, 1997 and 1996, for the four months ended
December 31, 1995 and the eight months ended August 31, 1995 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 year ended December 31, 1994 and
1993 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 and 1997
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>
<CAPTION>
The Company RAP L.P.
Combined
Year Year Year Four Eight
Ended Ended Ended Months Months Year Ended
Dec. 31, Dec. 31, Dec. 31, Ended Ended December 31,
1997 1996 1995(a) 12/31/95 8/31/95 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue $ 84,325 $71,285 $50,208 $17,301 $32,907 $44,889 $41,470
Costs and Expenses:
Operating expense 14,147 10,363 7,311 2,634 4,677 7,146 6,154
Programming expense 18,427 14,729 10,163 3,496 6,667 8,530 7,563
Selling, general and
administrative expense 9,947 10,733 7,054 2,486 4,568 6,090 5,665
Depreciation and
amortization 38,631 35,298 15,825 8,200 7,625 13,154 13,795
Management fees 2,951 2,475 2,251 606 1,645 2,244 2,073
Costs associated with
transfer of net assets - - 441 - 441 - -
Loss on disposal
of assets 7,835 1,357 506 275 231 128 760
Total costs and expenses 91,938 74,955 43,551 17,697 25,854 37,292 36,010
Operating income (loss) (7,613) (3,670) 6,657 (396) 7,053 7,597 5,460
Interest expense 23,765 21,607 18,871 4,252 14,619 18,008 18,283
Loss before income taxes,
extraordinary item and
cumulative effect of
accounting change (31,378) (25,277) (12,214) (4,648) (7,566) (10,411) (12,823)
Income tax expense (benefit) (5,335) (3,646) (3,232) (1,674) (1,558) 1,558 -
Loss before extraordinary
item and cumulative
effect of accounting change (26,043) (21,631) (8,982) (2,974) (6,008) (11,969) (12,823)
Extraordinary item- Loss on
early retirement of debt - - 1,699 - 1,699 - -
Cumulative effect of
accounting change for
income taxes - - - - - - 3,500
Net loss $(26,043) $(21,631) $(10,681) $(2,974) $(7,707) $(11,969) $(16,323)
Other Financial Data:
Capital expenditures
(excluding acquisitions) $ 28,009 $ 16,897 $ 7,479 $ 3,360 $ 4,119 $ 6,280 $ 6,278
Adjusted EBITDA(b) 39,712 33,085 23,429 8,079 15,350 20,879 20,015
Operating Data:
Homes passed 266,465 241,317 174,054 - - 165,740 158,723
Basic customers 199,455 185,188 132,271 - - 124,059 115,793
Basic penetration 74.9% 76.7% 76.0% - - 74.9% 73.0%
Premium service units 108,729 108,118 80,385 - - 74,913 67,192
Premium penetration 54.5% 58.4% 60.8% - - 60.4% 58.0%
Average monthly revenue
per basic customer(c) $36.54 $34.13 $32.65 - - $31.19 $30.75
Balance Sheet Data
(at end of period):
Total assets $302,040 $299,833 - $238,045 - $ 95,210 $101,724
Total debt 229,500 198,500 - 137,500 - 166,833 163,766
Redeemable partners'
interests and detachable
warrants 7,387 4,862 - 3,600 - 2,739 2,739
Total partners' capital
(deficit) 32,436 61,005 - 68,898 - (85,057) (73,087)
<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) 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 certain Tennessee systems had occurred on
December 31, 1995.
<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.
1997 compared to 1996
Revenue increased 18.2%, or $13.0 million, to $84.3 million for the year
ended December 31, 1997 from $71.3 million for the year ended December
31, 1996. 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 $2.3 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"),
(c) approximately $1.1 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"), and (d) approximately
$3.3 million in total revenue as a result of the April 1, 1997
acquisition of cable systems serving Manchester and Shelbyville,
Tennessee (the "ACT V Acquisition"). Basic customers increased 7.7% to
approximately 199,500 at December 31, 1997 from approximately 185,200 at
December 31, 1996. This increase was attributable to the approximate
11,600 customers acquired in the ACT V Acquisition, as well as continued
growth in Georgia (4,100 or 7.8%) offset by losses in Tennessee (800 or
.8%) systems. Average monthly revenue per customer increased 7.1% from
$34.13 for the year ended December 31, 1996 to $36.54 for 1997. Premium
service units increased .6% to approximately 108,700 as of December 31,
1997, from approximately 108,100 as of December 31, 1996, as a result of
the ACT V Acquisition ( 7,400) offset by decreases in all markets due to
moving the Disney Channel from premium to tier. The Company's premium
penetration decreased to 54.5% from 58.4% between 1997 and 1996 due to
moving the Disney Channel from premium to tier in nearly all systems.
Operating expense, which includes costs related to technical personnel,
franchise fees and repairs and maintenance, increased 36.5%, or
approximately $3.8 million to approximately $14.1 million for the year
ended December 31, 1997 from approximately $10.4 million in 1996, and
increased as a percentage of revenue to 16.8% from 14.5%. Approximately
$500,000, $200,000 and $600,000 of the increase relates to the operating
expense of the acquired systems in the Mid-Tennessee Acquisition, RCT
Acquisition, and ACT V Acquisition, respectively. Approximately $900,000
of the increase relates to higher salaries and benefits as a result of
added technical personnel and annual wage increases and approximately
$400,000 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 25.1%, or approximately $3.7 million, to
approximately $18.4 million for the year ended December 31, 1997 from
approximately $14.7 million for the year ended December 31, 1996, and
increased as a percentage of revenue to 21.9% from 20.7%. Approximately
$500,000, $300,000 and $800,000 of the increase relates to the
programming expenses of the acquired systems in the Mid-Tennessee
Acquisition, RCT Acquisition, and ACT V 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, decreased 7.3%, or approximately
$800,000 to approximately $9.9 million for the year ended December 31,
1997 from $10.7 million for the same period in 1996. As a percentage of
revenue, selling, general and administrative expense decreased to 11.8%
for the year ended December 31, 1997 from 15.1% in 1996. The expense
decrease was due to an approximate $1.9 million increase in programmer
cooperative and marketing launch cost reimbursements, partially offset
by an approximate $200,000 increase resulting from the increase in the
provision for the management incentive plan which became effective
January 1, 1996, an approximate $100,000 increase from increases in
personnel and related benefits costs, an approximate $100,000 increase
from higher customer billing costs, and approximately $300,000, $200,000
and $400,000 related to the selling, general and administrative expense
of the acquired systems in the Mid-Tennessee Acquisition, RCT Acquisition
and ACT V Acquisition, respectively.
Depreciation and amortization expense of approximately $38.6 million for
the year ended December 31, 1997 increased approximately $3.3 million
from the year ended December 31, 1996 . The increases in depreciation
resulted primarily from increases of approximately $16.9 million in 1996
and approximately $28.0 million in 1997 in property, plant and equipment.
The increases in amortization expense resulted primarily from the
amortization of franchise cost related to the Mid-Tennessee Acquisition,
RCT Acquisition and ACT V Acquisition, respectively. As a percentage of
revenue, depreciation and amortization expenses decreased to 45.8% in
1997 from 49.5% in 1996.
Management fees, equal to 3.5% of gross revenue, of approximately $2.9
million in 1997 increased approximately $500,000 from the year ended
December 31, 1996 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, RCT Acquisition and ACT V Acquisition.
The loss on disposal of assets, primarily the write-off of replaced house
drops and rebuilt trunk and distribution equipment, increased to
approximately $7.8 million in 1997 from approximately $1.4 million in
1996.
Interest expense during 1997 increased approximately $2.2 million from
the year ended December 31, 1996 and decreased as a percentage of
revenue from 30.3% to 28.2%. Interest expense was based on an average
debt balance of $220.5 million with an average interest rate of 10.8% and
an average debt balance of $202.9 million with an average interest rate
of 10.6% for 1997 and 1996, respectively. This increase was primarily a
result of the increased borrowings related to the ACT V Acquisition.
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 $5.3 million was recorded in 1997 compared to an income
tax benefit of approximately $3.7 million from the year ended December
31, 1996. The income tax benefit 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 20.4%, or
approximately $4.4 million in 1997 compared with 1996.
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 20%,
or approximately $6.6 million to $39.7 million in 1997 from $33.1 million
for 1996. As a percent of revenue, Adjusted EBITDA increased to 47.1%
in 1997 from 46.4% for 1996. 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.
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 9.1%)
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 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.
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, 1997 and 1996, net cash provided
by operations (including changes in working capital) of the Company was
approximately $16.5 and $20.8 million, respectively.
From December 31, 1996 to December 31, 1997, the Company's available cash
increased from approximately $1.4 million to approximately $1.9 million.
For the same comparable period, accounts payable and accrued liabilities
increased by approximately $1.8 million to approximately $11.7 million,
due primarily to the liabilities and accruals related to the systems
acquired in the Mid-Tennessee, RCT and ACT V Acquisitions. Customer
deposits and prepayments increased approximately $200,000 to
approximately $1.5 million for the same comparable period due primarily
to the increased customer levels related to the Mid-Tennessee, RCT and
ACT V Acquisitions. Interest payable increased approximately $600,000 to
approximately $7.4 million for the same comparable periods due primarily
to the increased debt level as well as the effect of the timing of
payments. Also, for the same comparable periods, deferred taxes payable
decreased approximately $5.3 million to approximately $12.1 million as
a result of differences in book and tax depreciation and amortization
lives and methods. Notes payable increased by $31 million from December
31, 1996 to December 31, 1997 due primarily to the borrowings related to
the ACT V Acquisition.
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. 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 in 1996.
The Company has increased its total consolidated debt to $229.5 million
as of December 31, 1997 from $198.5 million at December 31, 1996. The
Company has unused commitments under the Amended and Restated Credit
Agreement of $36 million, all of which is available for general corporate
and/or acquisition purposes. Access to the remaining commitments 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 5.75x. As of December 31, 1997,
the Company's Total Funded Debt Ratio was 4.94x. 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 was subject to permanent annual commitment reductions
which commenced in 1997 with a remaining commitment as of December 31,
1997 of $72.5 million. 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.
Year 2000
As the year 2000 approaches, the Company recognizes the need to ensure
its operations will not he adversely impacted by year 2000 software
failures. The Company is addressing this issue to ensure the
availability and integrity of its financial systems and the reliability
of its operational systems. The Company has processes for evaluating and
managing the risks and costs associated with this issue. The Company,
if necessary, will make investments in its software systems and
applications to ensure that they are year 2000 compliant. The financial
impact to the Company is not expected to be material.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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, 1997 and 1996, and the
results of their operations and their cash flows for the years ended
December 31, 1997 and 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 ("RAP
L.P.") 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 RAP L.P.
Price Waterhouse LLP
Denver, Colorado
February 23, 1998
<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 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 audit. We conducted our audit
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 audit provides 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>
<TABLE>
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED BALANCE SHEET
<CAPTION>
12/31/97 12/31/96
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,902,555 $ 1,387,232
Customer accounts receivable, net of
allowance for doubtful accounts of
$425,843 in 1997 and $381,197 in 1996 1,371,050 1,184,074
Other receivables 4,615,089 2,622,375
Prepaid expenses and other 1,753,257 1,776,272
Property, plant and equipment at cost:
Cable television transmission and
distribution systems and related
equipment 131,806,310 110,600,391
Land, buildings, vehicles and
furniture and fixtures 7,123,429 5,726,169
138,929,739 116,326,560
Less accumulated depreciation (26,591,458) (14,264,937)
Net property, plant
and equipment 112,338,281 102,061,623
Franchise costs and other
intangible assets, net of
accumulated amortization of
$53,449,637 in 1997
and $28,849,916 in 1996 180,059,655 190,801,885
Total assets $ 302,039,887 $ 299,833,461
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and
accrued liabilities $ 11,690,894 $ 9,937,238
Customer deposits and prepayments 1,503,449 1,272,279
Interest payable 7,384,509 6,784,261
Deferred tax liability, net 12,138,000 17,473,000
Notes payable 229,500,000 198,500,000
Total liabilities 262,216,852 233,966,778
Commitments and contingencies
(Notes 7 and 13)
Redeemable partners' interests 7,387,360 4,861,840
Partners' capital (deficit):
General partner (1,885,480) (1,309,354)
Limited partners 34,044,912 61,881,692
Preferred equity interest 276,243 432,505
Total partners' capital 32,435,675 61,004,843
Total liabilities and partners' capital $ 302,039,887 $ 299,833,461
</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 Year Ended 4 Months Ended 8 Months Ended
12/31/97 12/31/96 12/31/95 8/31/95
<S>
Revenue: <C> <C> <C> <C>
Service $ 78,588,503 $ 66,433,321 $16,316,638 $30,954,441
Installation and other 5,736,412 4,852,124 983,924 1,952,807
Total revenue 84,324,915 71,285,445 17,300,562 32,907,248
Costs and Expenses:
Operating expense 14,147,031 10,362,671 2,633,625 4,676,542
Programming expense 18,427,070 14,728,925 3,496,262 6,667,194
Selling, general and
administrative expense 9,947,083 10,733,472 2,486,389 4,568,081
Depreciation and
amortization 38,630,800 35,297,703 8,199,945 7,624,784
Management fees 2,951,372 2,475,381 605,503 1,645,191
Costs associated with the
transfer of net assets - - - 441,216
Loss on disposal of assets 7,834,968 1,357,180 275,311 231,051
Total costs and expenses 91,938,324 74,955,332 17,697,035 25,854,059
Operating income (loss) (7,613,409) (3,669,887) (396,473) 7,053,189
Interest expense 23,765,239 21,607,174 4,251,616 14,618,957
Loss before income taxes
and extraordinary item (31,378,648) (25,277,061) (4,648,089) (7,565,768)
Income tax benefit (5,335,000) ( 3,645,719) (1,674,000) (1,558,000)
Loss before extraordinary
item (26,043,648) (21,631,342) (2,974,089) (6,007,768)
Extraordinary item -
Loss on early
retirement of debt - - - 1,699,322
Net loss $(26,043,648) $(21,631,342) $ (2,974,089) $ (7,707,090)
</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 Year Ended 4 Months Ended 8 Months Ended
12/31/97 12/31/96 12/31/95 8/31/95
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(26,043,648) $(21,631,342) $(2,974,089) $ (7,707,090)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 38,630,800 35,297,703 8,199,945 7,624,784
Amortization of deferred
loan costs 989,760 970,753 111,037 312,243
Amortization of original debt discount
and accretion of interest - - - 1,105,269
Loss on disposal of fixed assets 7,834,968 1,357,180 275,311 231,051
Deferred tax benefit (5,335,000) (3,654,000) (1,674,000) (1,558,000)
(Increase) decrease in customer
accounts receivables (186,976) (117,278) (133,267) 149,258
Increase in other receivables (1,992,714) (994,681) (152,759) (30,206)
(Increase) decrease in prepaid
expenses and other 23,015 (494,252) 213,483 (69,650)
Increase in accounts payable and
accrued liabilities 1,753,656 3,245,736 1,164,367 469,787
Increase (decrease) in customer
deposits and prepayments 231,170 164,824 (242,011) 170,457
Increase in interest payable 600,248 6,692,988 91,273 9,239,139
Net cash provided by operating
activities 16,505,279 20,837,631 4,879,290 9,937,042
Cash flows from investing activities:
Initial cash acquisition cost, net (Note 1) - - (173,447,115) -
Acquisition of cable systems, net (19,359,755) (71,797,038) - -
Additions to property, plant and
equipment (28,009,253) (16,896,582) (3,360,037) (4,119,335)
Additions to cable television franchises,
net of retirements and changes in other
intangible assets 72,162 (1,182,311) (326,335) 29,087
Net proceeds from the sale of assets 306,890 197,523 19,777 32,521
Management fee escrow - - (1,000,000) -
Net cash used in investing activities (46,989,956) (89,678,408) (178,113,710) (4,057,727)
Cash flows from financing activities:
Proceeds from isssuance of senior
subordinated notes - 125,000,000 - -
Proceeds from debt 38,000,000 18,000,000 138,500,000 4,000,000
Deferred loan costs - (6,090,011) (3,147,989) -
Payments of debt (7,000,000) (82,000,000) (4,000,000) (6,250,000)
Partners' capital contributions - 15,000,000 42,200,429 -
Net cash provided by (used in)
financing activities 31,000,000 69,909,989 173,552,440 (2,250,000)
Net increase in cash 515,323 1,069,212 318,020 3,629,315
Cash and cash equivalents
at beginning of period 1,387,232 318,020 - 1,196,651
Cash and cash equivalents
at end of period $1,902,555 $1,387,232 $318,020 $4,825,966
Supplemental Cash Flow Information:
Interest paid $22,098,732 $13,866,995 $4,024,306 $5,624,247
</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, 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 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
Accretion of redeemable partners' interest - (315,690) (2,209,830) (2,525,520)
Net loss (156,262) (260,436) (25,626,950) (26,043,648)
Partners' capital (deficit) at December 31, 1997 $ 276,243 $ (1,885,480) $ 34,044,912 $ 32,435,675
<FN>
The Partners' capital accounts for financial reporting purposes vary from the tax capital
accounts.
</TABLE>
<PAGE>
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,
changing its name to 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 Interests"). The Carryover Interests had
negative bases 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 recapitalization $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 basis had occurred on the first
day of the period presented:
Year Ended
12/31/95
(Dollars in Thousands)
Total Revenue $ 50,208
Net Loss $(11,649)
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
1997 Acquisitions
On April 1, 1997, the Company acquired the cable operating assets of two
cable systems serving the Tennessee communities of Shelbyville and
Manchester (the "Manchester Systems"), for an aggregate purchase price
of approximately $19.7 million of which $495,000 was paid as escrow in
1996. The acquisition was funded by proceeds from the Company's reducing
revolving loan with a financial institution.
1996 Acquisitions
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 combined purchase price was allocated
based on estimated fair values from an independent appraisal to property,
plant and equipment and franchise cost as follows (dollars in thousands):
Cash paid, net of acquired cash $71,582
Acquisition costs (appraisal, transfer fees, and
direct costs) 215
Total acquisition cost $71,797
Allocation:
Current assets $ 624
Current liabilities (969)
Property, plant and equipment 24,033
Franchise cost and other intangible assets 48,109
Total cost allocated $71,797
2. Acquisition of Cable Properties--(continued)
The following combined 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
1996, 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):
Year Ended
12/31/96
Total revenues $74,346
Net loss (22,558)
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, 1996.
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, Inc. (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
Customer fees are recorded as revenue in the period the service is provided.
The cost to acquire the rights to the programming generally is recorded when
the product is initially available to be viewed by the customer.
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, 1997.
Other Intangible Assets
Certain loan costs have been deferred and are amortized to interest
expense utilizing the straight-line method over the remaining term of
the related debt. Use of the straight-line method approximates the results
of the application of the interest method. The net amounts remaining at
December 31, 1997 and 1996 were $7,166,450 and $8,156,210, 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
and former members of management of Rifkin & Associates, Inc. that requests
to sell their 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.
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. These subsidiaries are required to pay taxes on their taxable
income, if any.
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:
4. Income Taxes--(continued)
<TABLE>
<CAPTION>
Company RAP L.P.
4 Months 8 Months
Year Ended Year Ended Ended Ended
12/31/97 12/31/96 12/31/95 8/31/95
<S> <C> <C> <C> <C>
Pre-tax loss as reported $(31,378,648) $(25,277,061) $(4,648,089) $(7,565,768)
(Increase)decrease due to:
Separately taxed book results
of corporate subsidiaries 15,512,000 9,716,000 3,163,000 2,915,600
Effect of different depreciation
and amortization methods for
tax and book purposes (2,973,000) (3,833,000) 5,249,000 (75,400)
Other (45,052) (22,539) 86,489 (161,332)
Tax income (loss) attributed to the
partners $(18,884,700) $(19,416,600) $ 3,850,400 $(4,886,900)
</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 $5,335,000 and $3,654,000 was recognized for the years ended
December 31, 1997 and 1996, respectively, and $1,674,000 for the four months
ended December, 31, 1995, reducing the liability to $12,138,000.
Deferred tax assets (liabilities) were comprised of the following at
December 31, 1997 and 1996:
Company
12/31/97 12/31/96
Deferred tax assets resulting
from loss carryforwards $ 9,499,000 $ 8,264,000
Deferred tax liabilities resulting
from depreciation and amortization (21,637,000) (25,737,000)
Net deferred tax liability $(12,138,000) $(17,473,000)
As of December 31, 1997 and 1996, the subsidiaries have net operating loss
carryforwards ("NOLs") for income tax purposes of $25,264,000 and
$21,815,000, respectively, substantially all of which are limited.
The NOLs will expire at various times between the years 2000 and 2012.
As a result, the Company had no current tax for 1997 and a current tax
expense of $8,281 for 1996.
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 published 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 subsidiaries 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 their 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:
<TABLE>
<CAPTION>
Company RAP L.P.
Year ended Year ended 4 Months ended 8 Months ended
12/31/97 12/31/96 12/31/95 8/31/95
<S> <C> <C> <C> <C>
Tax benefit computed
at statutory rate $ (10,982,527) $ (8,846,971) $ (1,626,831) $ (2,648,019)
Increase (decrease) due to:
Tax benefit for non-corporate loss 5,900,546 5,446,721 519,781 1,627,602
Increase/(decrease) in valuation
allowance due to NOL carryforwards - - - (493,000)
Permanent differences between
financial statement income and
taxable income 84,500 48,270 - 80,300
State income tax,
net of federal benefit (377,500) (252,590) (120,850) (196,710)
Other 39,981 (41,149) (446,100) 71,827
Income Tax Benefit $ (5,335,000) $ (3,645,719) $ (1,674,000) $ (1,558,000)
</TABLE>
5. Notes Payable
Debt consisted of the following:
December 31, December 31,
1997 1996
Senior Subordinated Notes $ 125,000,000 $ 125,000,000
Reducing Revolving Loan 36,500,000 5,500,000
Tranche A Term Loan 25,000,000 25,000,000
Tranche B Term Loan 40,000,000 40,000,000
Senior Subordinated Debt 3,000,000 3,000,000
$ 229,500,000 $ 198,500,000
The Notes and loans are secured by substantially all of the assets of the
Company.
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, 1997
and 1996, all of the Notes were outstanding (see Note 11).
5. Notes Payable--(continued)
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. 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, 1997 and 1996 were 8.24% and 8.09%, respectively.
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. For
the additional financing, the amounts available at December 31, 1997 and
1996 were $52,500,000 and $60,000,000, respectively. At December 31, 1997,
the full $20,000,000 available had been borrowed, and $16,500,000 had been
drawn against the $52,500,000 commitment. 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 four
years following December 31, 1997 as follows: 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
rates at December 31, 1997 and 1996 was 8.29% and 8.03%, respectively. 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 in 1996 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. Based
on the 1997 calculation, no such mandatory prepayments were required.
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, 1997, 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, 1997, the minimum aggregate
maturities for the five years following 1997 are none in 1998 and 1999, and
$8,000,000 in 2000, $22,000,000 in 2001 and $24,000,000 in 2002.
6. Related Party Transactions
RAP L.P. was operated under a management agreement (the "old agreement")
with Rifkin & Associates, Inc. (Rifkin). The old 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.
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, 1997 are: $353,927 in 1998; $286,058 in 1999; $225,706 in 2000; $199,760
in 2001; $197,322 in 2002; and $404,070 thereafter, totaling $1,666,843.
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, 1997 $1,577,743 $1,061,722
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
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 years ended December 31, 1997 and 1996 relating
to this plan were $859,992 and $660,000, respectively.
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 1997 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 years ended December 31, 1997 and 1996 were $72,707
and $42,636, respectively.
9. Fair Value of Financial Instruments
The Company has a number of financial instruments, none of which are held
for trading purposes. The following method and assumptions were used by
the Company to estimate the fair values of financial instruments as
disclosed herein:
Cash, Customer Accounts Receivable, Other Receivables, Accounts Payable and
Accrued Liabilities and Customer 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 requirements. 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 $239,987,500 and is carried
on the balance sheet at $229,500,000.
10. Cable Reregulation
Congress enacted the Cable Television Consumer Protection and Competition
Act of 1992 (the Cable Act) and has amended it at various times since.
The total effects of the present law are, at this time, still unknown.
However, one provision of the present law further redefines a small cable
system, and exempts these systems from rate regulation on the upper tiers
of cable service. The Partnership is awaiting an FCC rulemaking
implementing the present law to determine whether its systems qualify
as small cable systems.
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, 1997 and 1996 and for
the years ended December 31, 1997 and 1996, the four months ended December
31, 1995 and the eight months ended August 31, 1995. 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.
<TABLE>
<CAPTION
Balance Sheet 12/31/97 12/31/96
<S> <C> <C>
Cash $ 780,368 $ 824,144
Accounts and other receivables, net 3,012,571 1,796,495
Prepaid expenses 970,154 971,279
Property, plant and equipment net 66,509,120 60,563,044
Franchise costs and other intangible
assets, net 103,293,631 116,725,497
Accounts payable and accrued
liabilities 18,040,588 9,643,646
Other liabilities 1,122,404 962,492
Deferred taxes payable 12,138,000 17,473,000
Notes payable 167,200,500 147,147,500
Equity (deficit) (23,935,648) 5,653,821
</TABLE>
<TABLE>
<CAPTION>
Statements of Operations Year ended Year ended 4 Months ended 8 Months ended
12/31/97 12/31/96 12/31/95 8/31/95
<S> <C> <C> <C> <C>
Total revenue $ 47,523,592 $ 42,845,044 $ 12,956,900 $ 24,500,604
Total costs and expenses (53,049,962) (43,578,178) (13,278,953) (19,576,065)
Interest expense (17,868,497) (16,238,221) (3,804,440) (12,921,627)
Income tax benefit 5,335,000 3,645,719 1,674,000 1,558,000
Net loss $ (18,059,867) $ (13,325,636) $ (2,452,493) $ (6,439,088)
</TABLE>
12. Quarterly Information (Unaudited)
The following interim financial information of the Company presents the
1997 and 1996 consolidated results of operations on a quarterly basis
(in thousands):
Quarters Ended 1997
March 31 June 30 Sept 30 Dec. 31
Revenue $19,337 $21,331 $21,458 $22,199
Operating loss (1,220) (2,818) (2,777) (798)
Net loss (5,998) (6,890) (8,127) (5,029)
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)
13. Litigation
The Company could possibly be named as defendant in various actions and
proceedings arising from the normal course of business. In all such
cases, the Company will vigorously defend itself against the litigation
and, where appropriate, will file counterclaims. Although the eventual
outcome of potential lawsuits cannot be predicted, it is management's
opinion that any such lawsuit will not result in liabilities that would
have a material affect on the Company's financial position or results of
operations.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholder of
Rifkin Acquisition Capital Corp.
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of Rifkin Acquisition Capital
Corp. ("RACC") at December 31, 1997 and 1996 in conformity with generally
accepted accounting principles. This balance sheet is the responsibility
of RACC's management; our responsibility is to express an opinion on this
balance sheet based on our audit. We conducted our audit of this balance
sheet in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the balance sheet, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall balance sheet presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Denver, Colorado
February 23, 1998
<PAGE>
RIFKIN ACQUISITION CAPITAL CORP.
BALANCE SHEET
12/31/97 12/31/96
Assets
Cash $1,000 $1,000
Total assets $1,000 $1,000
Stockholder's Equity
Stockholder's Equity
Common Stock; $1.00 par value;
10,000 shares authorized, 1000
shares issued and outstanding $1,000 $1,000
Total stockholder's equity $1,000 $1,000
The accompanying notes are an integral part of the balance sheet.
<PAGE>
1. Organization and Summary of Significant Accounting Policies
Organization
Rifkin Acquisition Capital Corp. ("RACC"), a Colorado Corporation,
was formed on January 24, 1996, as a wholly-owned subsidiary of
Rifkin Acquisition Partners, L.L.L.P. (the "Partnership") for the
purpose of co-issuing, with the Partnership, $125.0 million in
Senior Subordinated Notes (the "Notes") which were used to repay
advances under the Partnership's term debt and to fund the
Partnership's acquisitions of certain cable television systems.
Upon closing of the Notes issuance on January 26, 1996, none of the
Notes were issued by RACC; accordingly, no debt is reflected on its
balance sheet. In addition, RACC does not, and is not expected to
have, any other operations; as such, no statements of operations,
stockholder's equity or cash flows are presented.
<PAGE>
ITEM 9 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes and there were no disagreements with the
Accountants.
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,
Christine K. Vanden Beukel, 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 67 Director, Chairman and Chief
Executive Officer
Jeffrey D. Bennis 39 President and Chief Operating Officer
Kevin B. Allen 36 President, R & A Enterprises
Stephen E. Hattrup 45 Senior Vice President -Operations
Dale D. Wagner 48 Senior Vice President -Finance
and Administration
Paul A. Bambei 43 Vice President -Operations
Lee A. Clayton 40 Vice President - Marketing
Suzanne M. Cyman 38 Vice President - Programming/
Strategic Planning
Bruce A. Rifkin 40 Vice President -Operations
and Advertising Sales
Davida M. Shear 43 Vice President - Operations
Peter N. Smith 48 Vice President -Engineering/
New Business
Jeffrey P. Kramp 40 President and Chief Executive Officer,
InterComm Holdings, L.L.C.
RACC
Name Age Position
Monroe M. Rifkin 67 Director, President and Treasurer
Jeffrey D. Bennis 39 Vice President
Stephen E. Hattrup 45 Vice President
Dale D. Wagner 48 Vice President, Secretary, and
Assistant Treasurer
Advisory Committee
Name Age
S. Gerard Benford 59
Alfred C. Eckert III 50
David H. Morse 36
Dhananjay Pai 35
Monroe M. Rifkin 67
Christine K. Vanden Beukel 27
Jeffrey T. Stevenson 37
John S. Suhler 52
Executive Officers
Monroe M. Rifkin is a cable television industry executive with over
thirty years of experience. He founded Rifkin & Associates ("R & A") in
1982 and has served as its Chairman and Chief Executive Officer since
that time. He made his mark on the cable industry with American
Television and Communications Corporation ( ATC ) serving 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. He holds a B.A. in Finance from New York University.
Jeffrey D. Bennis has been President and Chief Operating Officer of R &
A since April 1994. He is responsible for overall management of R&A s
operating cable television systems and is involved in the development of
policy and strategic direction. Mr. Bennis served as Vice President -
Marketing/Programming of R & A 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. Mr. Bennis executed complex
competitive marketing plans 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. He holds an undergraduate degree from the Pennsylvania State
University and an M.B.A. from the University of Connecticut.
Kevin B. Allen has been President of R&A Enterprises, the development arm
of R & A, since August 1996 when he was charged with the duty of
acquiring new systems for R&A and its affiliated companies. Previously,
Mr. Allen served as Vice President of BT Securities Corporation since
1992 where he was responsible for developing and maintaining a range of
corporate finance relationships with clients around the world. He holds
a B.S. in Aerospace Engineering from the University of Colorado, a
Master s degree in Mechanical Engineering from the Massachusetts
Institute of Technology and an M.B.A. from the Wharton School of Business
at the University of Pennsylvania.
Stephen E. Hattrup has been the Senior Vice President - Operations for
R & A since April 1994. He is
responsible for overseeing all operations of R&A systems. Additionally,
he is responsible for evaluating the integrity of potential system
acquisitions. Mr. Hattrup served as Vice President - Operations from
September 1988 to March 1994. Previously, he served as Vice President
and Treasurer of ATC. Mr. Hattrup holds an undergraduate degree from
Wichita State University and a M.S. in Finance from the University of
Kansas.
Dale D. Wagner, Senior Vice President - Finance and Administration of R
& A since April 1994, has over twenty-five years of experience in
arranging and maintaining financing for cable systems. He is responsible
for R&A s overall financial and accounting activities. Mr. Wagner served
as Vice President - Finance from January 1986 to March 1994. Prior to
joining R & A, Mr. Wagner was employed at 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 holds a degree in Accounting from Wichita State University.
Paul A. Bambei has served as Vice President - Operations of R & A since
January 1987. He is responsible for system operations for all R&A
properties in Georgia, Tennessee, Michigan, Illinois, Indiana, Missouri
and New Mexico. He also has served as Vice President - Marketing of R
& A from March 1984 until December 1986. Prior to joining R & A, Mr.
Bambei was employed by ATC from 1974 to 1984 in various capacities in
marketing and operations. He holds a degree in communications from
Southeast Missouri State University.
Lee A. Clayton has served as Vice President of Marketing since October
1997. Her responsibilities include evaluating product offerings and
prices, as well as overseeing acquisition, retention and communication
efforts. Ms. Clayton was most recently a partner at Bortz & Company,
where she was employed from mid-1988 and where she founded Competitive
Strategies Group which designed competitive plans for major cable MSO's.
Ms. Clayton holds a degree in Economics from Trinity College.
Suzanne M. Cyman has served as R&A s Vice President of
Programming/Strategic Development since July 1997. She is responsible
for negotiating all programming contracts for R&A systems, as well as
serving on special assignments as needed in domestic and international
cable systems. She served as the Vice President of Marketing from July
1994 to July 1997. Previously, she was Vice President at Vista
Communications and Fanch Communications beginning in 1988. She holds an
undergraduate degree in Public Affairs Management with an emphasis in
Economics from Michigan State University.
Bruce A. Rifkin is Vice President-Operations and Advertising Sales, a
position he has held since January 1994. Mr. Rifkin joined R & A in 1988
as Director-Advertising Sales. Prior to joining R & A, Mr. Rifkin was
employed in commercial real estate management and development. Bruce A.
Rifkin is a son of Monroe M. Rifkin.
Davida M. Shear has served as Vice President - Operations since May 1997
where she oversees R&A s Miami Beach system. Previously, she was
employed by Net Channel as a consultant from November 1996 to May 1997,
Popcorn Channel as Vice President - Eastern Region Affiliate Relations
from April 1996 to November 1996, Sports Channel New York as Director of
Affiliate Relations and Marketing from April 1994 to April 1996 and Villa
Bellago as owner and Manager from March 1992 to March 1994. She holds
an M.B.A. from the Harvard Business School.
Peter N. Smith has served as Vice President - Engineering/New Business
Development of R & A since March 1984. Mr. Smith is responsible for the
construction of several of the largest cable television systems in the
United States. Mr. Smith was employed by ATC from 1973 to 1984 in
various engineering capacities including Vice President - Engineering of
the National Division. He holds a degree in Electrical Engineering from
Franklin University.
Jeffrey P. Kramp has served as Managing Director of R & A International
Division since May 1995 and as President and Chief Executive Officer of
InterComm Holdings, L.L.C., an R & A international affiliate, since
October 1995. Prior to joining R & A 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.
Christine K. Vanden Beukel has served as an Associate of Greenwich Street
Capital Partners, Inc. since early 1994. Ms. Vanden Beukel worked at
Smith Barney in the Investment Banking Division from June 1992 to early
1994.
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 R & A are provided to the Company, and the Company
pays R & A a fee pursuant to the Management Agreement for such services.
The executive officers and other employees of R & A and/or RACC who
provide services to the Company are compensated solely in their capacity
as executive officers of R & A and therefore receive no compensation from
the Company except as provided by the Equity Incentive Plan described
below. R & A 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
R & A 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 R & A."
Equity Incentive Plan. In 1996, the Company implemented an Equity
Incentive Plan (the "Plan") in which certain R & A 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 R & A 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 years ended December 31, 1997
and 1996 was $859,992 and $660,000, respectively.
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 1997 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
years ended December 31, 1997 and 1996 were $72,707 and $42,636,
respectively.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Partnership
The following table sets forth certain information, as of December 31,
1997, concerning the beneficial ownership of partnership interests in the
Partnership owned by each person known by the Company to own beneficially
more than a five percent interest and by the executive officers of R &
A as a group.
Name and Addressof 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 R & A 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 R & A
R & A 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 R & A, as manager. R &
A 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 R & A 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 R & A 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 R & A for the years
ended December 31, 1997, 1996 and 1995 were $3.0 million, $2.5 million,
and $1.8 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 R & A in 24 equal monthly installments.
These installments commenced on October 1, 1995 and were paid in full on
September 30, 1997. Neither R & A 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 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 terminated 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 R & A takes action which causes
substantial detriment to the cable systems), then the Company is
obligated to make a severance payment of $500,000 to R & A.
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 1997.
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 R & A. 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 1997 and 1996 were $336,104
and $176,000, respectively. 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.
Certain Relationships with Legal Counsel
Baker & Hostetler LLP, 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 $66,000 in 1997 to Baker &
Hostetler in connection with general matters and $550,000 to Baker &
Hostetler in 1996 in connection with the public offering of the Notes.
<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
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)
Exhibit
Number Description
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 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 4.4
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 R & A, 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
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. (2)
10.8 Asset Purchase Agreement by and between Bresnan Communications
Company and Rifkin Acquisition Partners, L.L.L.P. dated as of
October 16, 1997.
21.1 Subsidiaries of the Registrants. (1)
(1) Incorporated by reference from Registration Statement on
Form S-1, as amended, Registration No. 333-3084.
(2) Incorporated by reference from Form 10-K, dated December 31,
1996, 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 report to be signed
on its behalf by the undersigned, thereunto duly authorized.
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, 1998
Monroe M. Rifkin
President, Treasurer & Director of RT
Investments Corp. (Principal Executive
Officer)
By: /s/Dale D. Wagner March 31, 1998
Dale D. Wagner
Vice President & Assistant Treasurer of
RT Investments Corp. (Principal Financial
Officer)
By: /s/Jeffrey D. Bennis March 31, 1998
Jeffrey D. Bennis
Vice President & Director of RT
Investments Corp.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
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, 1998
Monroe M. Rifkin
Its: President/Treasurer and Director
(Principal Executive Officer)
By: /s/Dale D. Wagner March 31, 1998
Dale D. Wagner
Its: Vice President, Secretary &
Assistant Treasurer (Principal
Financial Officer)
<PAGE>
ASSET PURCHASE AGREEMENT
between
BRESNAN COMMUNICATIONS COMPANY
and
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
dated as of
October 16, 1997
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and
entered into as of October 16, 1997, by and between Bresnan
Communications Company, a Michigan limited partnership
("Bresnan"), and Rifkin Acquisition Partners, L.L.L.P., a
Colorado limited liability limited partnership ("Rifkin").
WHEREAS, Rifkin owns and operates cable television
systems which are franchised or hold other operating authority
and operate in and around Bridgeport, Reese, Bad Axe, Harbor
Beach, and Gagetown, Michigan (individually, a "System" and
collectively, the "Systems");
WHEREAS, Bresnan wishes to purchase from Rifkin, and
Rifkin wishes to sell to Bresnan, the Systems, on the terms and
conditions hereinafter set forth; and
NOW, THEREFORE, in consideration of the foregoing and
of the mutual covenants and agreements set forth herein, the
parties agree as follows:
1. CERTAIN DEFINITIONS
As used in this Agreement:
1.1. "Agreement" has the meaning given in the Recitals.
1.2. "Agreement Not to Compete" has the meaning given in
Section 3.4.
1.3. "Assets" has the meaning given in Section 2.1.1.
1.4. "Assumed Obligations" has the meaning given in Section
2.4.
1.5. "Bresnan" has the meaning given in the Recitals.
1.6. "CERCLA" has the meaning given in Section 4.5.5(e).
1.7. "Closing" has the meaning given in Section 8.1.
1.8. "Closing Time" means 11:59 P.M., eastern local time, on
the date of Closing.
1.9. "Code" has the meaning given in Section 4.18(d).
1.10. "Communications Act" means the Communications Act
of 1934, as amended, and rules and regulations promulgated
thereunder.
1.11. "Contract" means any written contract, mortgage,
deed of trust, bond, indenture, lease, license, note, franchise,
certificate, option, warrant, right, or other instrument,
document, obligation, or agreement, and any oral obligation,
right, or agreement.
1.12. "Current Items Amount" has the meaning given in
Section 2.5.
1.13. "Deposit Escrow Agent" has the meaning given in
Section 2.2.
1.14. "Deposit Escrow Agreement" has the meaning given
in Section 2.2.
1.15. "Eligible Accounts Receivable" shall have the
meaning given in Section 2.5.1.
1.16. "Employee Benefits" has the meaning given in
Section 4.18(a).
1.17. "Environmental Claim" has the meaning given in
Section 4.5.5(b).
1.18. "Environmental Law" has the meaning given in
Section 4.5.5.
1.19. "ERISA" means the Employee Retirement Income
Security Act, as amended.
1.20. "Excluded Assets" has the meaning given in Section
2.1.2.
1.21. "FCC" means the Federal Communications Commission.
1.22. "Final Adjustment Certificate" has the meaning
given in Section 2.6.
1.23. "Governmental Authority" means the United States
of America, any state, commonwealth, territory, or possession
thereof and any political subdivision or quasi-governmental
authority of any of the same, including but not limited to
courts, tribunals, departments, commissions, boards, bureaus,
agencies, counties, municipalities, provinces, parishes, and
other instrumentalities.
1.24. "HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
1.25. "Indemnitee" has the meaning given in Section
10.3.
1.26. "Indemnitor" has the meaning given in Section
10.3.
1.27. "Indemnity Escrow Agent" has the meaning given in
Section 2.3(b).
1.28. "Indemnity Escrow Agreement" has the meaning given
in Section 2.3(b).
1.29. "Indemnity Escrow Amount" has the meaning given in
Section 2.3(b).
1.30. "Individual Subscriber" means any subscriber of a
System at that System's regular monthly subscriber rate for basic
cable television service, as that rate is shown on Exhibit 4.9,
who is not pending disconnection for any reason and who is not,
as of the Closing Time, sixty days or more in arrears in payment
for service, as measured from the first day of the month for
which service was provided, or who is more than sixty days but
not more than five dollars in arrears in payment for service.
1.31. "Initial Adjustment Certificate" has the meaning
given in Section 2.6.
1.32. "Initial Claim Date" has the meaning given in
Section 10.4.
1.33. "Initial Deposit" has the meaning given in Section
2.2.
1.34. "Judgment" means any judgment, writ, order,
injunction, award, or decree of any court, judge, justice, or
magistrate, including any bankruptcy court or judge, and any
order of or by any Governmental Authority.
1.35. "Legal Requirements" means applicable common law
and any statute, ordinance, code or other law, rule, regulation,
order, technical or other written standard, requirement, or
procedure enacted, adopted, promulgated, applied, or followed by
any Governmental Authority, including Judgments.
1.36. "Lien" means any security agreement, financing
statement filed with any Governmental Authority, conditional sale
or other title retention agreement, any lease, consignment or
bailment given for purposes of security, any lien, mortgage,
indenture, pledge, option, encumbrance, adverse interest,
constructive trust or other trust, claim, attachment, exception
to or defect in title or other ownership interest (including but
not limited to reservations, rights of entry, possibilities of
reverter, encroachments, easement, rights-of-way, restrictive
covenants leases, and licenses) of any kind, which otherwise
constitutes an interest in or claim against property, whether
arising pursuant to any Legal Requirement, Contract, or
otherwise.
1.37. "Litigation" means any claim, action, suit,
proceeding, arbitration, investigation, hearing, or other
activity or procedure that could result in a Judgment, and any
notice of any of the foregoing.
1.38. "Losses" means any claims, losses, liabilities,
damages, Liens, penalties, costs, and expenses, including but not
limited to interest which may be imposed in connection therewith,
expenses of investigation, reasonable fees and disbursements of
counsel and other experts, and the cost to any Person making a
claim or seeking indemnification under this Agreement with
respect to funds expended by such Person by reason of the
occurrence of any event with respect to which indemnification is
sought.
1.39. "Outside Closing Date" has the meaning given in
Section 8.1.
1.40. "Owned Property" has the meaning given in Section
2.1.1(b).
1.41. "PCBs" has the meaning given in Section 4.5.5(e).
1.42. "Permitted Liens" means (a) liens for Taxes,
assessments and governmental charges not yet due and payable, (b)
zoning laws and ordinances and similar governmental regulations,
(c) rights reserved to any municipality, government or statutory
or public authority to regulate the affected property, and (d) as
to real property, any liens, encumbrances, easements, rights-of-
way, servitudes, permits, leases, conditions, covenants,
restrictions and minor imperfections or irregularities in title
which are reflected in the public records and which do not
individually or in the aggregate interfere with the right or
ability to own, use, enjoy or operate the real property or to
convey good, marketable and indefeasible title to the same;
provided that "Permitted Liens" will not include any Lien that
could prevent or inhibit in any way the conduct of the business
of the affected System, and provided further that classification
of any Lien as a "Permitted Lien" will not affect any liability
which Rifkin may have for any such Lien, including pursuant to
any indemnity obligation under this Agreement.
1.43. "Person" means any natural person, Governmental
Authority, corporation, general or limited partnership, joint
venture, trust, association, or unincorporated entity of any
kind.
1.44. "Purchase Price" has the meaning given in Section
2.3.
1.45. "Real Property Interests" has the meaning given in
Section 2.1.1(b).
1.46. "Required Consents" means any and all consents,
authorizations and approvals required under (a) the Rifkin
Systems Franchises and Rifkin Systems Licenses, and (b) the Real
Property Interests and Rifkin Systems Contracts identified and
marked with an asterisk on Exhibit 4.3.
1.47. "Rifkin" has the meaning given in the Recitals.
1.48. "Rifkin Systems Contracts" has the meaning given
in Section 2.1.1(e).
1.49. "Rifkin Systems Franchises" has the meaning given
in Section 2.1.1(c).
1.50. "Rifkin Systems Licenses" has the meaning given in
Section 2.1.1(d).
1.51. "Signals" has the meaning given in Section 4.9.
1.52. "Subscriber Equivalent" means an equivalent to an
Individual Subscriber. The aggregate number of Subscriber
Equivalents served by a System shall equal, as of any date, the
quotient of (i) the aggregate revenues earned by that System for
basic and tier cable television service provided by that System,
during the last full month ending on or prior to such date, from
billings to residential multiple dwelling units, commercial
establishments, other subscribers that are billed for such
service on a bulk basis and single family households which pay
less than the System's regular basic monthly subscriber rate,
divided by (ii) that System's regular monthly subscriber rate for
basic and tier cable television services. For purposes of the
foregoing there shall be excluded all revenues earned from
billings to any bulk account or discounted family household (a)
that is sixty days or more in arrears in payment for services, as
measured from the first day of the month to which the applicable
billing period relates, unless the amount in arrears is not more
than $10.00 or (b) that is pending disconnection for any reason.
1.53. "System[s]" has the meaning given in the Recitals.
1.54. "Tangible Personal Property" has the meaning given
in Section 2.1.1(a).
1.55. "Taxes" means all levies and assessments of any
kind or nature imposed by any Governmental Authority, including
but not limited to all income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding,
payroll, employment, excise, or property taxes, together with any
interest thereon and any penalties, additions to tax, or
additional amounts applicable thereto.
1.56. "Threshold Amount" has the meaning given in
Section 10.4.
1.57. "Transaction Documents" means the instruments and
documents described in Sections 8.2 and 8.3 that are being
executed and delivered by Rifkin or Bresnan, as the case may be,
or any officer, director, or affiliate of either of them in
connection with this Agreement or the transactions contemplated
hereby.
1.58. "Transfer Taxes" has the meaning given in Section
3.3.
1.59. "WARN" has the meaning given in Section 3.1.
2. PURCHASE AND SALE OF THE ASSETS
2.1. Agreement to Purchase and Sell
Subject to the terms and conditions of this Agreement,
at the Closing Rifkin shall sell, convey, assign, transfer and
deliver to Bresnan, and Bresnan shall purchase from Rifkin, the
Assets for the Purchase Price.
2.1.1. Assets
"Assets" means all of the assets and properties, real
and personal, tangible and intangible, used by or useful to
Rifkin in its operation of, or otherwise relating to, the Systems
as of the Closing Time that are not Excluded Assets, including
but not limited to the following:
(a) All tangible personal property, including but not
limited to towers, tower equipment, aboveground and underground
cable, distribution systems, headend amplifiers, line amplifiers,
microwave equipment, converters, testing equipment, motor
vehicles, office equipment, furniture, fixtures, supplies,
inventory, and other physical assets, the material items of which
are described on Exhibit 2.1.1(a) (the "Tangible Personal
Property").
(b) The fee interests in the real property described
as Owned Property on Exhibit 2.1.1(b) and all improvements
thereon (the "Owned Property"), and the leases, easements, rights
of access and other interests in real property described as Real
Property Interests on Exhibit 2.1.1(b) (the "Real Property
Interests").
(c) The franchises and other authorizations or permits
described on Exhibit 2.1.1(c) (the "Rifkin Systems Franchises").
(d) The intangible channel distribution rights, cable
television relay service (CARS), business radio and other
licenses, copyright notices, and other licenses, authorizations,
consents, or permits issued by the FCC or any other Governmental
Authority described on Exhibit 2.1.1(d) (the "Rifkin Systems
Licenses").
(e) The pole line and joint line agreements,
underground conduit agreements, crossing agreements,
retransmission consent agreements, bulk or commercial service
agreements, and other Contracts described on Exhibit 2.1.1(e)
(the "Rifkin Systems Contracts").
(f) All subscriber, trade, and other accounts
receivable.
(g) All engineering records, files, data, drawings,
blueprints, schematics, reports, lists, plans and processes, and
all files of correspondence, lists, records, and reports
concerning subscribers and prospective subscribers of the
Systems, signal and program carriage, and dealings with
Governmental Authorities that are in possession of Rifkin,
including but not limited to all reports filed by or on behalf of
Rifkin with the FCC and statements of account filed by or on
behalf of Rifkin with the U.S. Copyright Office.
2.1.2. Excluded Assets
"Excluded Assets" means all: (a) cash and cash
equivalents; (b) insurance policies and rights and claims
thereunder; (c) bonds, letters of credit, surety instruments, and
other similar items; (d) Rifkin's trademarks, trade names,
service marks, service names, logos, and similar proprietary
rights; (e) programming Contracts; (f) billing services
agreements and (g) rights, assets, and properties described on
Exhibit 2.1.2.
2.2. Deposit
Upon execution and delivery of this Agreement, Bresnan
shall cause to be delivered to Colorado National Bank (the
"Deposit Escrow Agent") the amount of Five Hundred Thousand
Dollars ($500,000) (the "Initial Deposit") to be held and
disbursed in accordance with the terms of the Deposit Escrow
Agreement of even date herewith, among Rifkin, Bresnan and the
Deposit Escrow Agent (the "Deposit Escrow Agreement").
2.3. Purchase Price
Subject to the terms and conditions of this Agreement,
at the Closing, Bresnan shall deliver to Rifkin the amount of
Seventeen Million Dollars ($17,000,000) as adjusted in accordance
with Sections 2.5 and 2.6 (the "Purchase Price"), payable as
follows:
(a) Bresnan shall cause the Initial Escrow Agent to
deliver the Initial Deposit, and all interest accrued thereon, to
Rifkin;
(b) Bresnan shall deposit the amount of Five Hundred
Thousand Dollars ($500,000) (the "Indemnity Escrow Amount") with
Colorado National Bank, as escrow agent (the "Indemnity Escrow
Agent"), to be held and disbursed in accordance with the
provisions of the Indemnity Escrow Agreement in substantially the
form attached hereto as Exhibit 2.3(b) (the "Indemnity Escrow
Agreement"); and
(c) Bresnan shall deliver the balance of the Purchase
Price by wire transfer of immediately available funds to an
account or accounts designated by Rifkin.
2.4. Bresnan Assumed Obligations
Bresnan shall assume and timely pay, perform and
discharge, the following (the "Assumed Obligations"): (a) those
obligations and liabilities attributable to acts, omissions or
events occurring after the Closing Time under or with respect to
the Assets assigned and transferred to Bresnan at Closing; (b)
other obligations and liabilities of Rifkin only to the extent
that there shall be an adjustment in favor of Bresnan with
respect thereto pursuant to Section 2.5; and (c) all other
obligations and liabilities attributable to acts, omissions or
events occurring after the Closing Time and arising out of
Bresnan's ownership of the Assets or operation of the Systems
after Closing, except to the extent that such obligations or
liabilities relate to any Rifkin Excluded Asset. All obligations
and liabilities arising out of or relating to the Assets or the
Systems other than the Assumed Obligations shall remain and be
the obligations and liabilities solely of Rifkin.
2.5. Current Items Amount
Rifkin or Bresnan, as appropriate, shall pay to the
other the net amount in favor of the other of the adjustments and
prorations described in Sections 2.5.1, 2.5.2, 2.5.3 and 2.5.4
(the "Current Items Amount").
2.5.1. Eligible Accounts Receivable
Rifkin shall be entitled to an amount equal to 100% of
the face amount of all Eligible Accounts Receivable of the
Systems that are less than thirty-one days past due as of the
Closing Time, plus an amount equal to 80% of the face amount of
all Eligible Accounts Receivable of the Systems that are thirty-
one or more days past due, but less than sixty days past due.
"Eligible Accounts Receivable" shall mean accounts receivable
resulting from the Systems' provision of cable television service
to their subscribers that are active subscribers as of the
Closing Time and that relate to periods of time prior to the
Closing Time. For purposes of making "past due" calculations
under this paragraph, the billing statements of a System shall be
deemed to be due and payable on the first day of the period
during which the service to which such billing statements relate
is provided.
2.5.2. Advance Payments and Deposits
Bresnan shall be entitled to an amount equal to the
aggregate of (a) all outstanding deposits of subscribers of the
Systems for converters, decoders, and similar items, and (b) all
payments received by Rifkin prior to the Closing Time for
services to be rendered or equipment to be provided to
subscribers of the Systems after the Closing Time.
2.5.3. Revenues and Expenses
As of the Closing Time, all revenues received by the
Systems shall be prorated, in accordance with generally accepted
accounting principles, so that all revenues relating to periods
prior to the Closing Time shall be for the account of Rifkin, and
all revenues relating to the periods after the Closing Time shall
be for the account of Bresnan. As of the Closing Time, the
following expenses shall be prorated, in accordance with
generally accepted accounting principles, so that all expenses
for periods prior to the Closing Time shall be for the account of
Rifkin, and all expenses for periods after the Closing Time shall
be for the account of Bresnan:
(a) All payments and charges under or with respect to
the Systems Franchises, Rifkin Systems Licenses, Rifkin Systems
Contracts, Real Property Interests and Owned Property;
(b) General property taxes, special assessments, and
ad valorem taxes levied or assessed against any Assets;
(c) Sales and use taxes, if any, payable with respect
to cable television service and related sales to Systems
subscribers;
(d) Charges for utilities and other goods or services
furnished to the Systems;
(e) Copyright fees based on signal carriage by the
Systems; and
(f) All other items of expense relating to the
Systems;
provided, however, that Bresnan and Rifkin shall not prorate any
items of expense that relate to any Rifkin Excluded Assets, all
of which shall remain and be solely for the account of Rifkin.
2.5.4. Subscriber Adjustment
Bresnan shall be entitled to an amount equal to the
greater of (a) $1,545.45 for each Subscriber Equivalent in the
Systems as a whole less than 11,000 as of the Closing, or (b)
$1,545.45 for each Subscriber Equivalent in the Bridgeport System
less than 7,400 as of the Closing.
2.6. Current Items Amount Calculated
The adjustments and prorations included in the Current
Items Amount shall be estimated in good faith by Rifkin and set
forth, together with a detailed statement of the calculation
thereof, in a certificate (the "Initial Adjustment Certificate")
executed by a representative of Rifkin and delivered to Bresnan
at least five days prior to Closing. Each of Rifkin and Bresnan
shall cause their representatives to diligently attempt to
jointly determine prior to Closing, on the basis of the Initial
Adjustment Certificate and such other information as they deem
relevant, their best estimate of the Current Items Amount. At
Closing, the party against whose favor the estimated Current
Items Amount is so determined shall pay to the other the
estimated Current Items Amount. Bresnan shall, within ninety
days following the Closing, deliver to Rifkin a certificate (the
"Final Adjustment Certificate") executed by a representative of
Bresnan setting forth the final calculation of the Current Items
Amount. Rifkin and Bresnan shall endeavor in good faith to agree
upon the actual Current Items Amount within thirty days after
delivery of the Final Adjustment Certificate. In the event that
Rifkin and Bresnan cannot agree on the Current Items Amount
within such period, determination of such amount shall be made by
an independent accounting firm of national stature selected by
Rifkin and Bresnan. Rifkin and Bresnan shall cooperate with such
accounting firm in such determination and shall promptly provide
all information requested by such accounting firm in connection
therewith. Rifkin and Bresnan shall each pay one-half of the
fees and expenses of such accounting firm in connection with such
determination. Not later than fifteen days after determination
of the Current Items Amount, Rifkin or Bresnan, as appropriate,
shall pay to the other an amount equal to the amount by which the
Current Items Amount as finally determined differs from the
Current Items Amount as estimated in the Initial Adjustment
Certificate.
2.7. Allocation
The Purchase Price shall be allocated among the Assets
and the Agreement Not to Compete as agreed by Rifkin and Bresnan
in accordance with an appraisal to be commissioned by Bresnan, at
Bresnan's expense, between the date hereof and the Closing Date.
Bresnan and Rifkin shall, in any state, federal or local income
or other tax or information return filed by it, which includes an
evaluation of the Assets, report such value in accordance with
such allocation.
3. RELATED MATTERS
3.1. Employees
Rifkin shall remain solely responsible for, and shall
indemnify and hold harmless Bresnan from and against all Losses
arising from or with respect to, all salaries and all severance,
vacation, medical, sick, holiday, continuation coverage, and
other compensation or benefits to which its employees may be
entitled, as a result of their employment by it, the termination
of their employment, the consummation of the transactions
contemplated hereby, or pursuant to any applicable law (including
without limitation, the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. ' 2101, et seq. ("WARN")), or
otherwise, whether or not such employees may be hired by Bresnan.
Bresnan shall have no obligation to hire any of Rifkin's
employees that render services in connection with the operation
of the Systems, whether or not such employees' employment shall
have been terminated by Rifkin. Nothwithstanding the foregoing,
Bresnan shall, not less than 30 days prior to the Closing Date,
provide Rifkin with a list of employees that Bresnan plans to
hire.
3.2. Use of Names and Logos
For a period of thirty days after Closing, Bresnan
shall be entitled to use the trademarks, trade names, service
marks, service names, logos, and similar proprietary rights of
Rifkin to the extent incorporated in or on the Assets transferred
to it at Closing, provided that it shall exercise efforts to
remove all such names, marks, logos, and similar proprietary
rights of Rifkin from the Assets as soon as reasonably
practicable following Closing.
3.3. Transfer Taxes
All sales, use, transfer, and similar taxes or
assessments, including but not limited to transfer fees and
similar assessments for Licenses and Contracts ("Transfer
Taxes"), arising from or payable by reason of the conveyance of
the Assets shall be paid one-half by Rifkin and one-half by
Bresnan, except that Bresnan shall bear all expenses in
connection with the transfer of title to any motor vehicles
included among the Assets.
3.4. Agreement Not to Compete
At the Closing, Rifkin shall enter in the Agreement Not
to Compete in substantially the form set forth as Exhibit 3.4
(the "Agreement Not to Compete").
3.5. Further Assurances
At or after Closing, each of Rifkin and Bresnan, at the
request of the other, shall promptly execute and deliver, or
cause to be executed and delivered, to the other all such
documents and instruments, in addition to those otherwise
required by this Agreement, in form and substance reasonably
satisfactory to the other, as the other may reasonably request in
order to carry out or evidence the terms of this Agreement, or to
collect any accounts receivables or other claims included in the
Assets.
4. RIFKIN'S REPRESENTATIONS AND WARRANTIES
Rifkin represents and warrants to Bresnan as follows:
4.1. Organization
Rifkin is a limited liability 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 and lease the Assets and to conduct its
activities as such activities are currently conducted. Rifkin is
duly qualified to conduct business and is in good standing in all
jurisdictions in which the ownership or leasing of the Assets or
the nature of its activities in connection with the Systems makes
such qualification necessary.
4.2. Authority
Rifkin has all requisite partnership power and
authority to execute, deliver, and perform this Agreement and
consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement and the consummation
of the transactions contemplated hereby by Rifkin have been duly
and validly authorized by all necessary action on the part of
Rifkin. This Agreement has been duly and validly executed and
delivered by Rifkin, and is the valid and binding obligation of
Rifkin, enforceable against Rifkin in accordance with its terms.
4.3. No Conflict; Required Consents
Except as described on Exhibit 4.3, the execution,
delivery, and performance by Rifkin of this Agreement do not and
will not: (a) conflict with or violate any provision of the
Certificate of Limited Partnership or Agreement of Limited
Partnership of Rifkin; (b) violate any provision of any Legal
Requirements; or (c) conflict with, violate, result in a breach
of, constitute a default under (without regard to requirements of
notice, lapse of time, or elections of other Persons, or any
combination thereof) or accelerate or permit the acceleration of
the performance required by, any Contract to which Rifkin is a
party or by which Rifkin or the assets or properties owned or
leased by it are bound or affected; (d) result in the creation or
imposition of any Lien against or upon any of the Assets; or (e)
require any consent, approval, or authorization of, or filing of
any certificate, notice, application, report, or other document
with, any Governmental Authority or other Person.
4.4. Title, Condition, and Sufficiency of Assets
Rifkin has, and at the Closing will transfer to
Bresnan, good and marketable title to the Assets, free and clear
of all Liens, except Permitted Liens and Liens described on
Exhibit 4.4 which will be terminated or released at Closing. In
the case of Assets leased by Rifkin, Rifkin has valid leasehold
interests in such Assets. All material items of Tangible
Personal Property are in good condition and repair, ordinary wear
and tear excepted. The Assets constitute all of the assets
necessary to permit Bresnan to operate the Systems substantially
as they are being operated on the date of this Agreement and in
compliance in all material respects with all applicable Legal
Requirements and contractual requirements and to perform all of
the Assumed Obligations.
4.5. Real Property
4.5.1. Description
Exhibit 2.1.1(b) contains a complete and accurate
description of each parcel of real property owned, leased or
utilized by Rifkin in connection with the Systems, together with
a description of the use to which such parcel is put in
connection with the operation of the Systems.
4.5.2. Zoning and Restrictive Covenants
The use and occupancy of the Owned Property and the
Real Property Interests conforms in all material respects to (a)
all zoning requirements without reliance upon a variance issued
by a local government or a classification of the parcel in
question as a nonconforming use; and (b) all restrictive
covenants or other encumbrances affecting such property.
4.5.3. Access and Utilities
The Owned Property and the Real Property Interests have
direct and unobstructed access for purposes of ingress and egress
to public roads or streets. All such Owned Property and Real
Property Interests are served by utilities and services necessary
for the continuation of the business now conducted on such
property.
4.5.4. Easements
All easements or rights-of-way material to the
construction, operation, maintenance, repair or replacement of
any cables, lines, towers, equipment or other facilities which
are necessary or convenient to the operation of the Systems are
included among the Real Property Interests.
4.5.5. Environmental Matters
(a) With respect to the Owned Property and the Real
Property Interests, Rifkin is in compliance in all material
respects with all federal, state and local health and safety and
Environmental Laws, rules and regulations ("Environmental Laws").
All activities undertaken on or affecting the Owned Property or
the Real Property Interests by Rifkin have been in compliance in
all material respects with all health and safety laws and
Environmental Laws. During Rifkin's occupation of the Owned
Property and the Real Property Interests there have been no
abatement, removal, remedial or other response actions for
hazardous substances at the Real Property.
(b) Rifkin is aware of no instances, prior to Rifkin's
operations on the Owned Property or the Real Property Interests,
of noncompliance by any person or any activities thereon with any
health and safety laws or Environmental Laws. Rifkin is aware of
no aspects of the Owned Property or the Real Property Interests
or any operations thereon which might give rise to any civil,
criminal, administrative or other proceeding or notice thereof
under any Environmental Law (an "Environmental Claim").
(c) No Environmental Claim has been asserted in the
past, currently exists or, to the best of Rifkin's knowledge, is
threatened or contemplated against Rifkin, or, to Rifkin's
knowledge, against any other person or entity, which relates to
the Owned Property or the Real Property Interests or any
operations thereon.
(d) To the knowledge of Rifkin, neither the Owned
Property or any of the Real Property Interests have been or are
now, subject to any investigation, assessment, or study by any
person or government agency related to potential or actual
enforcement of any health and safety laws or Environmental Law.
(e) No hazardous substances (which includes without
limitation: (i) any "hazardous substance" or "pollutant or
contaminant" as defined in Sections 101(14) and (33) of
Comprehensive Environment Response Compensation Liability Act, 42
U.S.C. '' 9601 et seq. ("CERCLA"); (ii) any "hazardous material"
as defined in Section 1802 (2) of the Hazardous Materials
Transportation Act, 49 U.S.C. '' 1801, et seq.; (iii) any "oil"
or "hazardous substance" as defined in Sections 311 (a) (1) and
(14) of the Federal Clean Water Act, 33 U.S.C. '' 1321 et seq.;
(iv) any "pesticide" as defined in the Federal Insecticide,
Fungicide, and Rodenticide Act, at 7 U.S.C. ' 136(u); (v) any
"byproduct," "source" or special nuclear" material as defined in
the Atomic Energy Act of 1954, 42 U.S.C. '' 2014(e), (z) and
(aa); (vi) any chemical, compound, material, mixture or substance
defined, listed, or classified under any environmental law as
dangerous, hazardous, extremely hazardous, infectious, or toxic;
(vii) any substance regulated under any environmental law due to
its polluting or dangerous properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, or
reproductive effects; and (viii) petroleum and petroleum
products, asbestos and asbestos-containing materials, and
polychlorinated byphenyls ("PCBs")) have been or are being
released to, from, or under the Owned Property or the Real
Property Interests by Rifkin or, to the best of Rifkin's
knowledge, by any other person or entity. No hazardous
substances have been or are stored, treated, handled, disposed
of, created or otherwise located on, in, or under the Owned
Property or the Real Property Interests by Rifkin or, to the best
of Rifkin's knowledge, by any other person or entity.
(f) No underground storage tanks, surface
impoundments, solid waste management units, tank systems, waste
piles, land treatment areas, landfills or incinerators are
located or, to the best of Rifkin's knowledge, have been located
on the Owned Property or the Real Property Interests. None of
the Owned Property or the Real Property Interests has been used
by Rifkin (or to the knowledge of Rifkin, by any other Person) at
any time as a gasoline service station or any other station or
facility for storing, pumping, dispensing, or producing gasoline
or any other petroleum product, by-product or waste.
(g) To the best of Rifkin's knowledge, there are no
"PCB Items," as that term is defined in 40 C.F.R. ' 761.3,
located on the Owned Property or the Real Property Interests.
(h) Any and all permits, licenses, and other
authorizations or approvals required under health and safety laws
and Environmental Laws for Rifkin's operations on the Owned
Property or the Real Property Interests have been secured by
Rifkin. To the best of Rifkin's knowledge, no building or other
structure on the Owned Property or the Real Property Interests
contains asbestos.
4.6. Rifkin System Franchises
Exhibit 2.1.1(c) and Exhibit 2.1.1(d) list all
authorizations, licenses or permits of any Governmental Authority
required in connection with the construction, operation or
maintenance of the Systems. Rifkin is the valid holder of each
of the Rifkin System Franchises. Each Rifkin System Franchise is
for the period specified in Exhibit 2.1.1(c). All of the Rifkin
System Franchises were validly transferred to and accepted by
Rifkin, in accordance with and as required by the terms thereof
and by applicable law. To the best of Rifkin's knowledge, except
as set forth on Exhibit 4.6, no other person or entity currently
holds any franchise, license, permit, consent, certificate,
authority, agreement, arrangement or operating right entitling
such person or entity to construct, operate or maintain a cable
television system in the respective areas covered by the Rifkin
System Franchises.
4.7. Rifkin System Licenses
The Rifkin System Licenses include all necessary
licenses or permits from the FCC for business radio, satellite
earth receiving facilities and CARS microwave facilities, that
are necessary or appropriate to carry on the business of the
Systems as conducted on the date hereof. Each of the Rifkin
System Licenses is in full force and effect and has not been
revoked, cancelled, encumbered or adversely affected in any
manner, and Rifkin is in compliance in all material respects with
the terms of each of the Rifkin System Licenses.
4.8. System Installation
Each of the Systems has been constructed, installed and
maintained properly and in a good and workmanlike manner in all
material respects, and satisfies the requirements of the Rifkin
System Franchises, applicable technical standards and federal,
state and local laws, rules, regulations and orders in all
material respects. None of the Tangible Personal Property
requires or may require, because of incorrect, improper or
unlawful construction, installation or location, or due to the
requirements of any authorizations pursuant to which it has been
installed, or otherwise due to directives of or claims by the
person or entity giving such authorization or any other person,
any rearrangement, relocation, rehabilitation, reinstallation or
removal in any material respect or any material expenditure for
any additional or different equipment or facilities, or
facilities or labor in connection therewith. No material
restoration, repair or other work is required with respect to (a)
the Assets or the Systems except as required in the usual and
ordinary course of business, or (b) any structure, street,
sidewalk, easement, right-of-way or other property, including
without limitation adjacent or abutting property, due to the
construction, operation or maintenance of the Systems, or is
required by any federal, state or local laws, rules, regulations,
ordinances, codes or orders or by any of the Rifkin System
Franchises, Rifkin System Licenses, Rifkin System Contracts or
other contracts, agreements, commitments or arrangements to which
Rifkin is a party or by which Rifkin or the Assets may be bound
or affected.
4.9. Carriage of Signals
Rifkin has the legal right and authority, including
without limitation all necessary authority from the FCC and the
requisite compulsory copyright license under Section 111 of the
Copyright Act, to carry and use in the conduct of the business of
the Systems all of the stations, frequencies or programming
(whether broadcast television, satellite, radio or otherwise)
carried by the Systems (the "Signals"). No oral or written
notices have been received from the FCC, the United States
Copyright Office, any local or other television station or system
or from any other person or entity, station or governmental
authority claiming to have a right of objection challenging or
questioning the right of Rifkin or the Systems to carry or
furnish, or not to carry or furnish, any of the Signals or any
other station or service to any Subscriber.
4.10. Physical Plant
To the knowledge of Rifkin, the Systems comprise
approximately 367 fully completed and operational strand and
conduit miles of cable system and lines properly installed,
placed, located and connected, of which approximately 297 miles
are aerial and approximately 70 miles are installed underground.
For purposes of this Agreement, a "strand" or "conduit" mile is
considered to be one mile measured along any continuous single
line of aerial or underground cable installation, irrespective of
the total number of cables on or in such installation.
4.11. Channel Capacity
The Systems have the capacity of carrying 39 6 MHz
downstream channels over 100% of the Systems (excluding, for such
purpose, individual house drops), and the capacity of carrying 54
6 MHz downstream channels over not less than 70% of the Systems
(excluding, for such purpose, individual house drops). The
Systems provide reception on all such channels in compliance in
all material respects with the requirements of the Rifkin System
Franchises, and with the rules, regulations and technical
standards of all applicable Governmental Authorities.
4.12. FCC and Copyright
4.12.1. Communications Act
(a) Rifkin has timely and properly made all material
filings, applications, reports and other submissions (including
without limitation registration statements, Aeronautical
notifications and annual employment reports (FCC Form 395-A)
required under the Communications Act and the rules and
regulations of the FCC, in each case relevant to the conduct and
operation of its business and the System. The Systems are in all
material respects in compliance with the Communications Act and
the rules and regulations of the FCC.
(b) Rifkin has filed with the appropriate Governmental
Authorities all appropriate requests for renewal under the
Communications Act within thirty to thirty-six months prior to
the expiration of each Rifkin System Franchise.
(c) Rifkin has not received from the FCC, any other
Governmental Authority or any other Person any written request,
notice or demand, challenging or questioning the legal rights of
Rifkin to operate any of the Systems or carry any broadcast
television signal or requesting signal carriage pursuant to the
FCC's "must-carry" rules, other than any such request, notice or
demand that has since been resolved. All of the local broadcast
television signals carried by the Systems are carried either
pursuant to the must-carry requirements or pursuant to executed
retransmission consent agreements. Rifkin has not received with
respect to any of the Systems any notification of any petition or
submission that is currently pending before the FCC to modify any
television market or for a waiver of any rules or regulations of
the FCC as they apply to such System.
(d) Rifkin has made available to Bresnan true and
complete copies of all reports and filings for the past three
years made or filed by Rifkin with the FCC pursuant to the
Communications Act with respect to the business of the Systems.
(e) Rifkin has made available to Bresnan true and
complete copies of (i) the final versions of all FCC Forms 393,
1200, 1205, 1210, 1220, and 1225 that have been prepared with
respect to each of the Systems and filed with any governmental
authority and the most recent draft of any such Form that has
been prepared with respect to such System in which no version of
such Form was filed with any governmental authority (ii) all
material correspondence with any governmental body relating to
rate regulation under the Communications Act, (iii) any
complaints on FCC Form 329 filed with the FCC with respect to any
rates charged to Subscribers of the Systems and any
correspondence from Rifkin to any Subscriber with respect to any
such complaint. Exhibit 4.12.1(e) sets forth a list of (i) all
rate complaints of FCC Form 329 filed pursuant to the
Communications Act and received by Rifkin that have not been
deemed invalid, (ii) those franchising authorities that have been
certified upon filing FCC Form 328 or have filed FCC Form 328
with the FCC for certification under the Communications Act to
regulate any of the Systems' rates and (iii) a list of all
letters of inquiry from the FCC received by Rifkin since
September 1, 1993 with regard to rate regulation.
4.12.2. Copyright Act
(a) Rifkin has, in a timely manner, recorded or
deposited with the United States Copyright Office and the
Register of Copyrights all material statements of account,
supplemental 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 Systems and as required for Rifkin to obtain,
hold and maintain the compulsory copyright license for cable
television systems prescribed in Section 111 of the Copyright
Act.
(b) The Systems are in compliance in all material
respects with the Copyright Act. The Systems 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,
cancelled, encumbered or adversely affected in any manner except
as to matters impacting the cable television industry generally.
(c) Rifkin is not liable to any person or entity for,
and the Assets and the Systems are not subject to or encumbered
by, any copyright infringement under the Copyright Act or
otherwise or the infringement of the proprietary right of any
other person or entity as a result of the business and operations
of the Systems, and there are no violations of the rights of any
legal or beneficial copyright owner for or by reason of any
secondary or other transmission by or through any of the Assets
or the Systems or any other act which is an infringement under or
pursuant to any of the provisions of any applicable copyright
laws, including without limitation the Copyright Act.
4.13. Litigation
Except as set forth in Exhibit 4.13, (a) there is no
Litigation pending or, to Rifkin's knowledge, threatened, by or
before any Governmental Authority or private arbitration
tribunal, against Rifkin, the Systems or the Assets that could
adversely affect the financial condition or operations of the
Systems, the Assets, or the ability of Rifkin to perform its
obligations under this Agreement, or that seeks or could result
in the modification, revocation, termination, suspension, or
other limitation of any of the Rifkin Systems Franchises, Rifkin
Systems Licenses, Rifkin Systems Contracts or Real Property
Interests; and (b) there is not in existence any Judgment
requiring Rifkin to take any action of any kind with respect to
the Assets or the operation of the Systems, or to which Rifkin
(with respect to the Systems), the Systems, or the Assets are
subject or by which they are bound or affected.
4.14. Financial and Operational Information
Rifkin has delivered to Bresnan a balance sheet of the
Systems as of June 30, 1997 and unaudited statements of
operations of the Systems for the month then ended, and other
operational information relating to the Systems. The trial
balance sheet and operational information are prepared in the
ordinary course of business. The statements of profit and loss
are prepared in accordance with generally accepted accounting
principles, and, except for year-end adjustments which shall not,
in the aggregate be material, present fairly the results of
operations of the Systems for the periods indicated.
4.15. No Material Adverse Change
Since June 30, 1997, except for changes which affect
the cable television industry (nationally or regionally)
generally, there has been no material adverse change in the
Assets or the financial condition or operations of the Systems,
and the Assets and the financial condition and operations of the
Systems have not been materially and adversely affected as a
result of any fire, explosion, accident, casualty, labor trouble,
flood, drought, riot, storm, condemnation, or act of God or
public force or otherwise.
4.16. Tax Returns; Other Reports
Rifkin has filed in true and correct form all material
federal, state, local, and foreign tax returns and other reports
required to be filed, and has timely paid all Taxes that have
become due and payable, whether or not so shown on any such
return or report, the failure to file or pay which could affect
or result in the imposition of a Lien upon the Assets. Rifkin has
received no notice of, nor does Rifkin have any knowledge of, any
deficiency or assessment or proposed deficiency or assessment
from any taxing Governmental Authority that could affect or
result in the imposition of a Lien upon the Assets.
4.17. Employees
Rifkin has provided to Bresnan a true and complete list
of all individuals employed by the Systems, the date of hire of
each such individual, the wage rates or salary and other
compensation paid or payable to each of such individuals, the
number of days of accrued vacation and accrued sick leave, the
date of last wage increase and the amount of such increase.
Rifkin is not a party to any written employment contract,
agreement, commitment or arrangement with any individual
identified in such list. Rifkin is not a party to or subject to
any labor, union or collective bargaining agreement or
arrangement and has not recognized, nor is it required to
recognize nor has it received any demand for recognition by, any
collective bargaining representative with respect to employees of
the Systems. There have been no labor disputes and Rifkin has no
knowledge, after due investigation, of any union organization
activity involving the Systems.
4.18. Employee Benefits
Except as described in Exhibit 4.18:
(a) Rifkin does not have or contribute to any Employee
Benefit Plan (as defined in Section 3(3) of ERISA) or any other
pension, profit sharing or incentive plan and does not have any
obligation to, or arrangement with, employees or former employees
for bonuses, incentive compensation, severance pay, retiree
benefits, insurance or other benefits (collectively "Employee
Benefits");
(b) If any Employee Benefit Plan of Seller were to be
terminated on the date prior to the Closing Date, (i) no
liability under Title IV of ERISA would be incurred by Seller, or
Buyer and (ii) all benefits accrued to the date prior to the
closing date (whether or not vested) would be fully funded to the
extent required by and in accordance with regulations of the
Pension Benefit Guaranty Corporation governing the funding of
terminated Employee Benefit Plans;
(c) Except for future premiums, future contributions
and benefit payments to be made in due course to participants and
beneficiaries, all liabilities (for contributions or otherwise)
of Seller as of the Closing Date under each Employee Benefit Plan
and with respect to Employee Benefits have been paid, and no
payment to any Employee Benefit Plan or of any Employee Benefit
since December 31, 1996 has been disproportionately large
compared to prior payments thereof;
(d) There has been no violation of the reporting and
disclosure requirements imposed under either ERISA or the
Internal Revenue Code of 1986, as amended (the "Code"), for which
a penalty has been, or which Rifkin has reason to believe may be,
imposed with respect to any Employee Benefit Plan;
(e) No Employee Benefit Plan or related trust has any
liability of any nature, accrued or contingent, including,
foreign taxes, other than future premium payments and
contributions and payments to be made in due course to
participants and beneficiaries;
(f) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or
investigation pending, threatened or in prospect (or any basis
therefor known to the best of Rifkin's knowledge after due
investigation) with respect to any Employee Benefit Plan or
related trust, or with respect to any fiduciary, administrator or
sponsor (in its capacity as such) of any Employee Benefit Plan;
(g) No Employee Benefit Plan or related trust of any
Employee Benefit Plan is in violation of, or in default with
respect to, any law, rule, regulation, order, judgement or
decree, nor is any action necessary to avoid violation or
default. No event has occurred or, to the best of Rifkin's
knowledge after due investigation, is threatened or about to
occur which would constitute a prohibited transaction or
reportable event under Section 406 of ERISA;
(h) Each Pension Plan (as defined in Section 3(2) of
ERISA) maintained for the employees of the Systems has been
qualified from its inception and will be qualified as of the
Closing Date under Section 401(a) of the Code, and any related
trust has been an exempt trust for that period under Section 501
of the Code. Each Pension Plan has been operated in accordance
with its terms;
(i) No investigation or review by the Internal Revenue
Service is currently pending or, to the best of Rifkin's
knowledge after due investigation, is contemplated in which the
Internal Revenue Service has asserted, or may assert, that any
Pension Plan is not qualified under Section 401(a) of the Code or
that any related trust is not exempt under Section 501 of the
Code. No assessment of any federal income taxes has been made
or, to the best of Rifkin's knowledge after due investigation, is
contemplated against Rifkin or any related trust of any Pension
Plan on the basis of a failure of qualification or exemption.
Forms 5500 and related schedules have been timely filed with
respect to all Pension Plans. No notice of termination has been
filed by the plan administrator pursuant to Section 4041 of ERISA
or issued by the Pension Benefit Guaranty Corporation pursuant to
Section 4042 of ERISA with respect to any Pension Plan;
(j) Rifkin does not contribute to any multiemployer
Pension Plan within the meaning of Section 3(37) of ERISA;
(k) Rifkin is not a party to, or obligated to provide
benefits under, any future benefit program, including without
limitation any plan, program or arrangement which provides
medical, dental, vision care, life insurance or disability
benefits to any former employee of Rifkin who has terminated
employment and is in retirement status;
(l) Rifkin has complied with all requirements under
the Consolidated Omnibus Budget Reconciliation Act of 1986
relating to the continuation of health care coverage for any
current or prior employee of Seller or any qualified beneficiary
of such employee on or prior to the Closing Date;
(m) All benefits provided under Seller's Employee
Benefits Plans, including without limitation Pension Plans,
medical and dental plans, disability plans, and life insurance
arrangements, comply with the provisions of the Age
Discrimination in Employment Act with respect to Seller's current
and prior employees; and
(n) As of the Closing Date no statutory employee
benefit plan (as defined in Section 89(i)(1) of the Code) of
Seller will be a discriminatory employee benefit plan (as defined
in Section 89(c) of the Code).
5. BRESNAN'S REPRESENTATIONS AND WARRANTIES
Bresnan represents and warrants to Rifkin as follows:
5.1. Organization
Bresnan is a limited partnership duly organized,
validly existing, and in good standing under the laws of the
State of Michigan, and has all requisite corporate power and
authority to conduct its activities as such activities are
currently conducted. Bresnan is duly qualified to do business as
a foreign corporation and is in good standing in all
jurisdictions in which the nature of its activities makes such
qualification necessary.
5.2. Authority
Bresnan has all requisite partnership power and
authority to execute, deliver, and perform this Agreement and
consummate the transactions contemplated hereby. The execution,
delivery, and performance of this Agreement and the consummation
of the transactions contemplated hereby by Bresnan have been duly
and validly authorized by all necessary action on the part of
Bresnan. This Agreement has been duly and validly executed and
delivered by Bresnan, and is the valid and binding obligation of
Bresnan, enforceable against Bresnan in accordance with its
terms.
5.3. No Conflict; Required Consents
Except as set forth on Exhibit 5.3, the execution,
delivery, and performance by Bresnan of this Agreement do not and
will not: (a) conflict with or violate any provision of the
Certificate of Limited Partnership or Limited Partnership
Agreement of Bresnan; (b) violate any provision of any Legal
Requirements; or (c) conflict with, violate, result in a breach
of, constitute a default under (without regard to requirements of
notice, lapse of time, or elections of other Persons, or any
combination thereof) or accelerate or permit the acceleration of
the performance required by, any Contract to which Bresnan is a
party or by which Bresnan or the assets or properties owned or
leased by it are bound or affected; or (d) require any consent,
approval, or authorization of, or filing of any certificate,
notice, application, report, or other document with, any
Governmental Authority or other Person.
5.4. Brokers
Except for HPC Puckett, Bresnan has not engaged any
broker, finder or agent in connection with this transaction and
has not incurred any unpaid liability to any broker, finder or
agent for any brokerage fees, finders fees or commissions with
respect to the transactions contemplated by this Agreement.
Bresnan agrees to indemnify Rifkin for any fees payable to HPC
Puckett.
6. COVENANTS
6.1. Certain Affirmative Covenants
Except as the other party may otherwise consent in
writing, between the date of this Agreement and Closing:
6.1.1. Operation by Rifkin
Rifkin shall operate the Systems only in the usual,
regular, and ordinary course and in accordance with past
practices (including but not limited to completing line
extensions, placing conduit or cable in new developments,
fulfilling installation requests, and continuing work on existing
construction projects) and, to the extent consistent with such
operation, use its reasonable efforts to (a) preserve the current
business organization of the Systems intact, including preserving
existing relationships with franchising authorities, suppliers,
customers, and others having business dealings with the Systems,
unless the other party requests otherwise, (b) keep available the
services of its employees providing services in connection with
the Systems, and (c) continue normal marketing, advertising, and
promotional expenditures with respect to the Systems.
6.1.2. Maintenance of Assets
Rifkin shall maintain all material items of Tangible
Personal Property in good condition and repair, ordinary wear
excepted, and Rifkin shall maintain in full force and effect
policies of insurance with respect to the Assets and the
operation of the Systems, in such amounts and with respect to
such risks as are customarily maintained by operators of cable
television systems of the size and in the geographic location of
the Systems.
6.1.3. Rifkin Books and Records
Rifkin shall maintain its books, records, and accounts
with respect to the Assets and the operation of the Systems in
the usual, regular, and ordinary manner on a basis consistent
with past practices.
6.1.4. Access
Rifkin shall give to Bresnan, and its counsel,
accountants, and other representatives, full access during normal
business hours to its System or Systems, all of its Assets, its
books and records, and its Systems' personnel; and shall furnish
all such additional documents, financial information, and other
information as the other from time to time reasonably may
request; provided that no investigation conducted by Bresnan
shall affect or limit the scope of any of the representations and
warranties herein or in any Transaction Document or limit
liability for any breach of such representations and warranties.
Bresnan shall use its reasonable efforts to inform Rifkin of any
breach of a representation or warranty of Rifkin hereunder of
which Bresnan becomes aware; provided that failure or delay in
providing such information shall not affect Rifkin's obligations
hereunder, and shall not create any liability on the part of
Bresnan under this Agreement or otherwise.
6.1.5. Consents
Rifkin shall use its commercially-reasonable efforts to
obtain in writing as promptly as possible the Required Consents
and any other consent, authorization, or approval required to be
obtained by Rifkin in connection with the transactions
contemplated hereunder. Bresnan shall cooperate with Rifkin in
obtaining such consents, including, without limitation, attending
such meetings and making such filings as may be reasonably
requested in connection therewith. Rifkin shall deliver to
Bresnan copies, reasonably satisfactory in form and substance to
Bresnan, of the Required Consents and such other consents,
authorizations, or approvals. Neither Rifkin nor Bresnan shall
accept or agree or accede to any modifications or amendments to,
or any conditions to the transfer of, any of the Rifkin Systems
Franchises, Rifkin Systems Licenses, Rifkin Systems Contracts or
Real Property Interests that are not reasonably acceptable to the
other.
6.1.6. Financial and Operating Statements; Reports
Rifkin shall promptly deliver to Bresnan, upon
reasonable request, true and complete copies of all monthly
financial statements and operating reports and any reports with
respect to the operation of the Systems prepared by or for Rifkin
at any time from the date hereof until Closing, and any other
similar materials which Bresnan may reasonably request.
6.1.7. Notification
Each party shall promptly notify the other of (a) any
circumstance, event, or action by it or otherwise which, if known
at the date of this Agreement, would have been required to be
disclosed in or pursuant to this Agreement, and (b) the
existence, occurrence, or taking of circumstance, event or action
which would result in any of its representations and warranties
in this Agreement or in any Transaction Document not being true
and correct in all material respects when made or at Closing.
6.2. Certain Negative Covenants
Except as the other party may consent in writing, or as
otherwise contemplated by this Agreement, between the date of
this Agreement and Closing:
6.2.1. Rifkin System Contracts, Franchises, Real
Property Interests and Licenses
Rifkin shall not modify in any material respect,
terminate, suspend, or abrogate any Rifkin Systems Contract,
Rifkin Systems Franchise, Real Property Interest or Rifkin
Systems License. Rifkin shall not renew any Rifkin Systems
Franchise other than in the ordinary course of business.
6.2.2. Disposition of Assets
Rifkin shall not sell or otherwise dispose of any
Assets other than in the ordinary course of business.
6.2.3. Contrary Actions
Rifkin shall not enter into any transaction or take any
action that would result in any of its representations and
warranties in this Agreement or in any Transaction Document not
being true and correct in all material respects when made or at
Closing.
6.2.4. Practices Other than in the Ordinary Course
Rifkin shall not engage in any marketing, subscriber
installation, or collection practices that are inconsistent with
its past practices.
6.3. Confidentiality
Any non-public information that either party may obtain
from the other in connection with this Agreement, including the
terms of this Agreement, with respect to the other's Systems
shall be confidential and, unless and until Closing shall occur,
such party shall not disclose any such information to any other
Person (other than its directors, officers and employees, and
representatives of its advisers and lenders whose knowledge
thereof is necessary in order to facilitate the consummation of
the transactions contemplated hereby) or use such information to
the detriment of the other; provided that (a) such party may use
and disclose any such information once it has been publicly
disclosed (other than by such party in breach of its obligations
under this Section) or which rightfully has come into the
possession of such party (other than from the other party), and
(b) to the extent that such party may, in the reasonable judgment
of its counsel, be compelled by Legal Requirements to disclose
any of such information, such party may disclose such information
if it shall have used all reasonable efforts, and shall have
afforded the other the opportunity, to obtain an appropriate
protective order, or other satisfactory assurance of confidential
treatment, for the information compelled to be disclosed. In the
event of termination of this Agreement, each party shall use all
reasonable efforts to cause to be delivered to the other, and
retain no copies of, any documents, work papers and other
materials obtained by such party or on its behalf from the other,
whether so obtained before or after the execution hereof.
6.4. Publicity
Bresnan and Rifkin each shall consult and cooperate
with the other with respect to the content and timing of all
press releases and other public announcements, and any oral or
written statements to Rifkin's employees concerning this
Agreement and the transactions contemplated hereby. Except as
required by applicable Legal Requirements, neither Bresnan nor
Rifkin shall make any such release, announcement, or statements
without the prior written consent and approval of the other.
6.5. HSR Act Compliance
As soon as reasonably practicable, and in any event
within thirty days after the date of this Agreement, Bresnan and
Rifkin shall take any and all actions necessary to comply with
the HSR Act. The fees payable to Governmental Authorities
required for such filings relating to the transfer of the Systems
shall be shared equally by Rifkin and Bresnan. If any
Governmental Authority shall challenge the transactions
contemplated hereby, or request any additional filings or
information, neither Bresnan nor Rifkin shall have any obligation
to contest such challenge or make or provide any such filing or
information, and in any such event each shall be entitled, at its
option, to withdraw its filing and terminate this Agreement.
6.6. Consents
Subsequent to Closing, each of Bresnan with respect to
its System and Assets and Rifkin with respect to its Systems and
Assets shall cooperate with the other party in such party's
efforts to obtain all consents, authorizations, or approvals
required to be obtained in connection with the transactions
contemplated hereunder which was not obtained on or before
Closing.
7. CONDITIONS PRECEDENT
7.1. Conditions to Rifkin's Obligations
The obligations of Rifkin to consummate the
transactions contemplated by this Agreement shall be subject to
the following conditions, which may be waived by Rifkin:
7.1.1. Accuracy of Representations and Warranties
The representations and warranties of Bresnan in this
Agreement and in any Transaction Document shall be true and
accurate in all material respects at and as of Closing with the
same effect as if made at and as of Closing.
7.1.2. Performance of Agreements
Bresnan shall have performed in all material respects
all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any
Transaction Document to be performed and complied with by it at
or before Closing.
7.1.3. Deliveries
Rifkin shall have received all items specified in
Section 8.2.
7.1.4. Legal Proceedings
There shall be no Legal Requirement, and no Judgment
shall have been entered and not vacated by any Governmental
Authority of competent jurisdiction in any Litigation or arising
therefrom, that (a) enjoins, restrains, makes illegal, or
prohibits consummation of the transactions contemplated by this
Agreement or by any Transaction Document.
7.1.5. HSR Act Compliance
All waiting periods under the HSR Act applicable to
this Agreement or the transactions contemplated hereby shall have
expired or been terminated.
7.2. Conditions to Bresnan's Obligations
The obligations of Bresnan to consummate the
transactions contemplated by this Agreement shall be subject to
the following conditions, which may be waived by Bresnan:
7.2.1. Accuracy of Representations and Warranties
The representations and warranties of Rifkin in this
Agreement and in any Transaction Document to which Rifkin is a
party shall be true and accurate in all material respects at and
as of Closing with the same effect as if made at and as of
Closing.
7.2.2. Performance of Agreements
Rifkin shall have performed in all material respects
all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any
Transaction Document to be performed and complied with by it at
or before Closing.
7.2.3. Deliveries
Bresnan shall have received each of the items specified
in Section 8.3.
7.2.4. Legal Proceedings
There shall be no Legal Requirement, and no Judgment
shall have been entered and not vacated by any Governmental
Authority of competent jurisdiction in any Litigation or arising
therefrom, that (a) enjoins, restrains, makes illegal, or
prohibits consummation of the transactions contemplated hereby or
by any Transaction Document; or (b) requires separation or
divestiture by Bresnan of all or any significant portion of the
Assets after Closing, and there shall be no Litigation pending or
threatened seeking, or that if successful would have the effect
of, any of the foregoing.
7.2.5. HSR Act Compliance
All waiting periods under the HSR Act applicable to
this Agreement or the transactions contemplated hereby shall have
expired or been terminated.
7.2.6. Consents
Bresnan shall have received evidence, in form and
substance reasonably satisfactory to it, that the Required
Consents have been obtained.
7.2.7. No Material Adverse Change
There shall not have been any material adverse change,
other than changes affecting the cable television industry
(nationally or regionally) generally, in the Assets or the
financial condition or operations of the Systems since the date
of this Agreement.
7.2.8 Documents and Records
Rifkin shall have delivered to Bresnan (a) all existing
blueprints, schematics, working drawings, plans, specifications,
projections, statistics, engineering records, System construction
and as-built maps relating to the Systems that are in its
possession, and (b) all customer lists, files and records used by
Rifkin in connection with the operation of the Systems, including
a list of all pending subscriber hook-ups, disconnect and repair
orders, supply orders, and any other lists reasonably necessary
to the operation of the Systems. Delivery of the foregoing shall
be deemed made to the extent such lists, files and records are
then located at any of the offices included in the Owned Property
or Real Property Interests.
8. CLOSING
8.1. Closing
The closing of the transactions contemplated by this
Agreement ("Closing") shall take place, contemporaneously with
the Closing under the Exchange Agreement, at a time and location
mutually determined by Bresnan and Rifkin; provided, however,
that either party may, at its option, upon five days' notice to
the other, adjourn Closing to the last day of the month, but not
later than the Outside Closing Date, to allow for satisfaction of
the conditions set forth in Sections 7.1 and 7.2. The parties
shall, without expanding or modifying their obligations
hereunder, exercise all commercially reasonable efforts to cause
Closing to occur on or before December 31, 1997 (the "Outside
Closing Date").
8.2. Bresnan's Obligations
At Closing, Bresnan shall deliver or cause to be
delivered to Rifkin, the following:
8.2.1. Purchase Price
The Purchase Price, in the manner specified in Section
2.3.
8.2.2. Indemnity Escrow Agreement
The Indemnity Escrow Agreement, duly executed on behalf
of Bresnan.
8.2.3. Current Items Amount
The agreed estimated Current Items Amount, if it favors
Rifkin.
8.2.4. Evidence of Necessary Actions
Evidence reasonably satisfactory to Rifkin that Bresnan
has taken all action necessary to authorize the execution of this
Agreement and all other Transaction Documents and the
consummation of the transactions contemplated hereby.
8.2.5. Officer's Certificate
A certificate, signed by an officer of Bresnan, dated
as of the Closing, certifying that the conditions set forth in
Section 7.1.1 and Section 7.1.2 have been satisfied.
8.2.6. Bresnan Counsel Opinion
An opinion of Cole, Raywid & Braverman, L.L.P., counsel
for Bresnan, in substantially the form attached hereto as Exhibit
8.2.6.
8.2.7 FIRPTA Certificate
FIRPTA Non-Foreign Seller Certificate certifying that
Bresnan is not a foreign person within the meaning of Section
1445 of the Code of 1986.
8.2.8 Other
Such other documents and instruments as shall be
necessary to effect the intent of this Agreement and consummate
the transactions contemplated hereby.
8.3. Rifkin's Obligations
At Closing, except as otherwise provided below, Rifkin
shall deliver or cause to be delivered to Bresnan the following:
8.3.1. Current Items Amount
The agreed estimated Current Items Amount, if it favors
Bresnan.
8.3.2. Indemnity Escrow Agreement
The Indemnity Escrow Agreement, duly executed on behalf
of Rifkin.
8.3.3. Bill of Sale and Assignment
The executed Rifkin Bill of Sale and Assignment and
Assumption Agreement in the form of Exhibit 8.3.3.
8.3.4. Vehicle Titles
Title certificates to all vehicles included among the
Assets, endorsed for transfer of title to Bresnan, and separate
bills of sale therefor, if required by the laws of the States in
which such vehicles are titled.
8.3.5. Evidence of Necessary Actions
Evidence reasonably satisfactory to Bresnan that Rifkin
has taken all action necessary to authorize the execution of this
Agreement and all other Transaction Documents and the
consummation of the transactions contemplated hereby.
8.3.6. Deeds
Special warranty deeds conveying to Bresnan each parcel
of the Owned Property.
8.3.7. Officer's Certificate
A certificate, executed by an officer of Rifkin,
certifying that the conditions described in Section 7.2.1 and
Section 7.2.2 have been satisfied.
8.3.8. Rifkin Counsel Opinion
An opinion of Baker & Hostetler, counsel for Rifkin, in
substantially the form set forth as Exhibit 8.3.8.
8.3.9. FCC Opinion
An opinion of Cole, Raywid & Braverman, L.L.P., in
substantially the form set forth as Exhibit 8.3.9.
8.3.10 Lien Releases
Evidence satisfactory to Bresnan that all Liens (other
than Permitted Liens) affecting or encumbering the Assets have
been terminated, released, or waived, as appropriate, or
original, executed instruments in form satisfactory to Bresnan
effecting such terminations, releases, or waivers.
8.3.11 FIRPTA Certificate
FIRPTA Non-Foreign Seller Certificate certifying that
Rifkin is not a foreign person within the meaning of Section 1445
of the Code.
8.3.12 Other
Such other documents and instruments as shall be
necessary to effect the intent of this Agreement and consummate
the transactions contemplated hereby.
9. TERMINATION AND DEFAULT
9.1. Termination Events
This Agreement may be terminated and the transactions
contemplated hereby may be abandoned:
9.1.1. Mutual Agreement
At any time, by the mutual agreement of Rifkin and
Bresnan.
9.1.2. Default
By either Rifkin or Bresnan, if it is not then in
material breach or default, at any time that the other is in
material breach or default of its respective covenants,
agreements, or other obligations herein or in any Transaction
Document, or if any of its representations herein or in any
Transaction Document are not true and accurate in all material
respects when made or when otherwise required by this Agreement
or any Transaction Document to be true and accurate.
9.1.3. Failure to Meet Conditions Prior to Outside
Closing Date
By either Rifkin or Bresnan, upon written notice to the
other, if any of the conditions to its obligations set forth in
Sections 7.1 and 7.2, respectively, shall not have been satisfied
on or before the Outside Closing Date, for any reason other than
a material breach or default by such party of its respective
covenants, agreements, or other obligations hereunder, or any of
its representations herein not being true and accurate in all
material respects when made or when otherwise required by this
Agreement to be true and accurate in all material respects.
9.2. Effect of Termination
If this Agreement shall be terminated pursuant to
Section 9.1, all obligations of the parties hereunder shall
terminate, except for the obligations set forth in Sections 6.3,
11.1, 11.2 and 11.13. Termination of this Agreement pursuant to
Sections 9.1.1 or 9.1.2 shall not limit or impair any remedies
that either Bresnan or Rifkin may have with respect to a breach
or default by the other of its covenants, agreements or
obligations hereunder.
10. INDEMNIFICATION
10.1. Indemnification by Bresnan
From and after Closing, Bresnan shall indemnify and
hold harmless Rifkin, its affiliates, partners, officers,
employees, agents, and representatives, and any Person claiming
by or through any of them, as the case may be, from and against
any and all Losses arising out of or resulting from: (a) any
representations and warranties made by Bresnan in this Agreement
or in any Transaction Document not being true and accurate in all
material respects, when made or at Closing; (b) any failure by
Bresnan to perform in all material respects any of its covenants,
agreements, or obligations in this Agreement or in any
Transaction Document; and (c) the Assumed Obligations. If, by
reason of the claim of any third party relating to any of the
matters subject to such indemnification, a Lien is placed or made
upon any of the properties or assets owned or leased by Rifkin or
any other Indemnitee under this Section, in addition to any
indemnity obligation of Bresnan under this Section, Bresnan shall
furnish a bond sufficient to obtain the prompt release thereof
within ten days after receipt from Rifkin of notice thereof.
10.2. Indemnification by Rifkin
From and after Closing, Rifkin shall indemnify and hold
harmless Bresnan, its affiliates, officers and directors,
employees, agents, and representatives, and any Person claiming
by or through any of them, as the case may be, from and against
any and all Losses arising out of or resulting from: (a) any
representations and warranties made by Rifkin in this Agreement
or in any Transaction Document not being true and accurate in all
material respects when made or at Closing; (b) any failure by
Rifkin to perform in all material respects any of its covenants,
agreements, or obligations in this Agreement or in any
Transaction Document; (c) the operation and ownership of the
Systems prior to the Closing Time; and (d) all liabilities of
Rifkin or relating to the Systems that are not Assumed
Obligations.
10.3. Procedure for Indemnified Third Party Claim
Promptly after receipt by a party entitled to
indemnification hereunder (the "Indemnitee") of written notice of
the assertion or the commencement of any Litigation with respect
to any matter referred to in Sections 10.1 or 10.2, the
Indemnitee shall give written notice thereof to the party from
whom indemnification is sought pursuant hereto (the "Indemnitor")
and thereafter shall keep the Indemnitor reasonably informed with
respect thereto if the Indemnitor does not assume the defense of
such claim; provided, however, that failure of the Indemnitee to
give the Indemnitor notice as provided herein shall not relieve
the Indemnitor of its obligations hereunder, except to the extent
that such failure to give notice shall prejudice any defense or
claim available to the Indemnitor. In case any Litigation shall
be brought against any Indemnitee, the Indemnitor shall be
entitled to assume the defense thereof with counsel reasonably
satisfactory to the Indemnitee, at the Indemnitor's sole expense;
provided, however, that if the Litigation relates to a claim for
which Bresnan is entitled to indemnification pursuant to Section
10.2, Bresnan may, at its option, require Rifkin to assume the
defense thereof with counsel reasonably satisfactory to Bresnan,
at Rifkin's sole expense. If the Indemnitor shall assume the
defense of any Litigation, it shall not settle the Litigation
unless the settlement shall include as an unconditional term
thereof the giving by the claimant or the plaintiff of a release
of the Indemnitee, satisfactory to the Indemnitee, from all
liability with respect to such Litigation. If the Indemnitor does
not assume the defense of any Litigation, the Indemnitor shall
nevertheless provide reasonable cooperation to the Indemnitee in
the defense of such Litigation, and any settlement of such
Litigation shall be on terms reasonable satisfactory to the
Indemnitor.
10.4. Time and Manner of Certain Claims
The indemnification obligations and remedies set forth
in this Article 10 are intended to be the sole and exclusive
remedy of the parties with respect to the matters for which
indemnification may be sought pursuant to Sections 10.1 or 10.2
or elsewhere in this Agreement. No claim or action seeking
indemnification pursuant to this Section 10 shall be commenced
until the date (the "Initial Claim Date") on which the aggregate
amount claimed by the party seeking indemnification exceeds
$25,000 (the "Threshold Amount"). Following the Initial Claim
Date, claims or actions seeking indemnification may be commenced
at any time prior to the date (the "Final Claim Date") which is
one year following the Closing Date. Rifkin shall have not
obligation or liability under this Section 10 to the extent that
such obligation or liability, in the aggregate, exceeds
$2,000,000 (the "Indemnification Limitation"). Matters relating
to federal, state or local taxes, copyright laws and regulations
and Environmental Laws, and claims with respect to title to the
Assets, may be made at any time following the Initial Claim Date
and prior to thirty days following the expiration of the
applicable statute of limitations with respect thereto (without
regard to the Final Claim Date), and shall not be subject to the
Indemnification Limitation. The Threshold Amount shall not be
deductible from any amount payable in accordance with the
provisions of this Article 10.
10.5. Escrow Upon Fundamental Changes
If Rifkin (a) sells all or substantially all of its
assets, (b) merges with or into any other entity, (c) dissolves
or liquidates, or (d) takes any other action in connection with
or in preparation for winding up its business, Rifkin shall place
the sum of $2,000,000, less any amount previously paid to Bresnan
pursuant to this Section 10, in escrow with an escrow agent
reasonably acceptable to Bresnan. Such amount, less the sum of
any amount for which an unresolved claim has been made pursuant
to this Article 10, shall be released to Rifkin on the date which
is ten business days following the Final Claim Date. Any amount
held following the Final Claim Date shall be disbursed upon, and
in accordance with, the resolution of the related claim.
11. MISCELLANEOUS PROVISIONS
11.1. Expenses
Except as otherwise provided in Section 11.13 or
elsewhere in this Agreement, each of the parties shall pay its
own expenses and the fees and expenses of its counsel,
accountants, and other experts in connection with this Agreement.
11.2. Brokers
Bresnan shall indemnify and hold Rifkin harmless from
and against any and all Losses arising from any employment by it
of, or services rendered to it by, any finder, broker, agency, or
other intermediary, in connection with the transactions
contemplated hereby, or any allegation of any such employment or
services. Rifkin shall indemnify and hold Bresnan harmless from
and against any and all Losses arising from any employment by it
of, or services rendered to it by, any finder, broker, agency, or
other intermediary, in connection with the transactions
contemplated hereby, or any allegation of any such employment or
services.
11.3. Waivers
No action taken pursuant to this Agreement, including
any investigation by or on behalf of any party hereto, shall be
deemed to constitute a waiver by the party taking the action of
compliance with any representation, warranty, covenant or
agreement contained herein or in any Transaction Document. The
waiver by any party hereto of any condition or of a breach of
another provision of this Agreement or any Transaction Document
shall be in writing and shall not operate or be construed as a
waiver of any other condition or subsequent breach. The waiver by
any party of any of the conditions precedent to its obligations
under this Agreement shall not preclude it from seeking redress
for breach of this Agreement other than with respect to the
condition so waived.
11.4. Notices
All notices, requests, demands, applications, services
of process, and other communications which are required to be or
may be given under this Agreement or any Transaction Document
shall be in writing and shall be deemed to have been duly given
if sent by telecopy or facsimile transmission, or delivered by
courier or mailed, certified first class mail, postage prepaid,
return receipt requested, to the parties hereto at the following
addresses:
If to Bresnan:
Bresnan Communications Company
709 Westchester Avenue
White Plains, New York 10604
Attn: Bob Bresnan
Facsimile: 914/993-6601
with a copy (which shall not constitute notice) to:
Cole, Raywid & Braverman, L.L.P.
1919 Pennsylvania Avenue, NW
Suite 200
Washington, DC 20006
Attn: Ann Flowers
Facsimile: 202/452-0067
If to Rifkin:
Rifkin & Associates, Inc.
360 South Monroe
Suite 600
Denver, Colorado 80209
Facsimile: 303/322-3553
with a copy (which shall not constitute notice) to:
Stuart Rifkin
Baker & Hostetler
303 East 17th Avenue
Suite 1100
Denver, Colorado 80203
Facsimile: 303/861-2307
or to such other address as any party shall have furnished to the
other by notice given in accordance with this Section. Such
notice shall be effective, (a) if delivered in person or by
courier, upon actual receipt by the intended recipient, or (b) if
sent by telecopy or facsimile transmission, upon confirmation of
delivery, or (c) if mailed, upon the date of delivery as shown by
the return receipt therefor or upon refusal to accept delivery.
11.5. Entire Agreement; Prior Representations;
Amendments
This Agreement and the Exchange Agreement embody the
entire agreement between the parties hereto with respect to the
subject matter hereof and supersede all prior representations,
agreements and understandings, oral or written, with respect
thereto. Notwithstanding any representations which may have been
made by either party in connection with the transactions
contemplated by this Agreement, each party acknowledges that (a)
it has not relied on any representation by the other party with
respect to such transactions, the Assets or the Systems except
those contained in this Agreement or the Exhibits hereto, and (b)
its execution of this Agreement specifically precludes any
negligent misrepresentation or other claims by it based on any
representation made by the other party which is not contained in
this Agreement or the Exhibits hereto. This Agreement may not be
modified orally, but only by an agreement in writing signed by
the party or parties against whom any waiver, change, amendment,
modification, or discharge may be sought to be enforced.
11.6. Binding Effect; Benefits
This Agreement shall inure to the benefit of and will
be binding upon the parties hereto and their respective heirs,
legal representatives, successors, and permitted assigns. Rifkin
shall not assign this Agreement or delegate any of its duties
hereunder to any other Person without the prior written consent
of Bresnan. Bresnan shall have the right to assign this
Agreement and its rights and duties hereunder, in whole or in
part, to any party without the consent of Rifkin so long as such
assignee assumes and agrees to discharge all (or the relevant
portion) of Bresnan's duties hereunder, and Bresnan agrees to
remain liable for payment of the Purchase Price. For purposes of
this Section, any change in control of Rifkin or Bresnan shall
constitute an assignment by it of this Agreement.
11.7. Headings and Exhibits
The section and other headings contained in this
Agreement are for reference purposes only and will not affect the
meaning or interpretation of this Agreement. Reference to
Exhibits shall, unless otherwise indicated, refer to the Exhibits
attached to this Agreement, which shall be incorporated in and
constitute a part of this Agreement by such reference.
11.8. Governing Law
The validity, performance, and enforcement of this
agreement and all transaction documents, unless expressly
provided to the contrary, shall be governed by the laws of the
State of Michigan, without giving effect to the principles of
conflicts of law of such state.
11.9. Severability
Any term or provision of this Agreement which is
invalid or unenforceable shall 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.
11.10. Third Parties; No Joint Venture
This Agreement constitutes an agreement solely among
the parties hereto, and, except as otherwise provided herein, is
not intended to and will not confer any rights, remedies,
obligations, or liabilities, legal or equitable, including any
right of employment, on any Person other than the parties hereto
and their respective successors, or assigns, or otherwise
constitute any Person a third party beneficiary under or by
reason of this Agreement. Nothing in this Agreement, expressed or
implied, is intended to or shall constitute the parties hereto
partners or participants in a joint venture.
11.11. No Recourse to Partners of Rifkin
No claim under this Agreement shall be made against the
general partner or any limited partner of Rifkin 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.
11.12. Construction
This Agreement has been negotiated by Rifkin and
Bresnan and their respective legal counsel, and legal or
equitable principles that might require the construction of this
Agreement or any provision of this Agreement against the party
drafting this Agreement shall not apply in any construction or
interpretation of this Agreement.
11.13. Attorneys' Fees
If any Litigation between Bresnan and Rifkin with
respect to this Agreement or the transactions contemplated hereby
shall be resolved or adjudicated by a Judgment of any court, the
party prevailing under such Judgment shall be entitled, as part
of such Judgment, to recover from the other party its reasonable
attorneys' fees and costs and expenses of litigation.
11.14. Risk of Loss
The risk of any loss or damage to the Assets resulting
from fire, theft or any other casualty (except reasonable wear
and tear) shall be borne by Rifkin at all times prior to the
Closing Time. In the event that any such loss or damage shall be
sufficiently substantial so as to preclude and prevent resumption
of normal operations of any material portion of a System or the
replacement or restoration of the lost or damaged property within
40 days from the occurrence of the event resulting in such loss
or damage, Rifkin shall immediately notify Bresnan in writing of
the inability to resume normal operations or to replace or
restore the lost or damaged property, and Bresnan, at any time
within ten days after receipt of such notice, may elect by
written notice to Rifkin to either (a) waive such defect and
proceed toward consummation of the transaction in accordance with
terms of this Agreement, or (b) terminate this Agreement. If
Bresnan elects to so terminate this Agreement, both parties shall
stand fully released and discharged of any and all obligations
hereunder. If Bresnan shall elect to consummate the transactions
contemplated by this Agreement notwithstanding such loss or
damage and does so, all insurance proceeds payable as a result of
the occurrence of the event resulting in such loss or damage
shall be delivered by the notifying party to the other, or the
rights thereto shall be assigned by Rifkin to Bresnan if not yet
paid over to Bresnan, and Rifkin shall pay to Bresnan an amount
equal to the difference between the amount of such insurance
costs and the full replacement cost of the damaged or lost
Assets.
11.15. Counterparts
This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be
an original and all of which together will be deemed to be one
and the same instrument.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed on its behalf as of the date first
hereinabove set forth.
BRESNAN COMMUNICATIONS RIFKIN ACQUISITION PARTNERS,
L.L.L.P. COMPANY
By: BCI (USA), L.P., its By: Rifkin Acquisition Management,
managing general partner L.P.,its general partner
By: Bresnan Communications, Inc., By: RT Investments Corp.,
its managing general partner its general partner
By:_____________________ By:_____________________
<PAGE>
1. CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
2. PURCHASE AND SALE OF THE ASSETS . . . . . . . . . . . . . . . . . . 5
2.1. Agreement to Purchase and Sell . . . . . . . . . . . . . . . . 5
2.1.1. Assets. 5
2.1.2. Excluded Assets 6
2.2. Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4. Bresnan Assumed Obligations. . . . . . . . . . . . . . . . . . 7
2.5. Current Items Amount . . . . . . . . . . . . . . . . . . . . . 8
2.5.1.Eligible Accounts Receivable 8
2.5.2.Advance Payments and Deposits 8
2.5.3.Revenues and Expenses 8
2.5.4.Subscriber Adjustment 9
2.6. Current Items Amount Calculated. . . . . . . . . . . . . . . . 9
2.7. Allocation . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3. RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.1. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2. Use of Names and Logos . . . . . . . . . . . . . . . . . . . . 10
3.3. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4. Agreement Not to Compete . . . . . . . . . . . . . . . . . . . 11
3.5. Further Assurances . . . . . . . . . . . . . . . . . . . . . . 11
4. RIFKIN'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . 11
4.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3. No Conflict; Required Consents . . . . . . . . . . . . . . . . 11
4.4. Title, Condition, and Sufficiency of Assets. . . . . . . . . . 12
4.5. Real Property. . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5.1.Description 12
4.5.2.Zoning and Restrictive Covenants 12
4.5.3.Access and Utilities 12
4.5.4.Easements 13
4.5.5.Environmental Matters 13
4.6. Rifkin System Franchises . . . . . . . . . . . . . . . . . . . 14
4.7. Rifkin System Licenses . . . . . . . . . . . . . . . . . . . . 15
4.8. System Installation. . . . . . . . . . . . . . . . . . . . . . 15
4.9. Carriage of Signals. . . . . . . . . . . . . . . . . . . . . . 15
4.10.Physical Plant 16
4.11.Channel Capacity 16
4.12.FCC and Copyright 16
4.12.1. Communications Act . . . . . . . . . . . . . . . . . . 16
4.12.2. Copyright Act. . . . . . . . . . . . . . . . . . . . . 17
4.13.Litigation 18
4.14.Financial and Operational Information 18
4.15.No Material Adverse Change 18
4.16.Tax Returns; Other Reports 18
4.17.Employees 19
4.18.Employee Benefits 19
5. BRESNAN'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 21
5.1. Organization . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.2. Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.3. No Conflict; Required Consents . . . . . . . . . . . . . . . . 21
5.4. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.1. Certain Affirmative Covenants. . . . . . . . . . . . . . . . . 22
6.1.1.Operation by Rifkin 22
6.1.2.Maintenance of Assets 22
6.1.3.Rifkin Books and Records 23
6.1.4.Access. 23
6.1.5.Consents 23
6.1.6.Financial and Operating Statements; Reports 23
6.1.7.Notification 24
6.2. Certain Negative Covenants . . . . . . . . . . . . . . . . . . 24
6.2.1.Rifkin System Contracts, Franchises, Real
Property Interests and Licenses . . . . . . . . . . . . . 24
6.2.2. Disposition of Assets 24
6.2.3. Contrary Actions 24
6.2.4. Practices Other than in the Ordinary Course 24
6.3. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 24
6.4. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.5. HSR Act Compliance . . . . . . . . . . . . . . . . . . . . . . 25
6.6. Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . 26
7.1. Conditions to Rifkin's Obligations . . . . . . . . . . . . . . 26
7.1.1. Accuracy of Representations and Warranties 26
7.1.2. Performance of Agreements 26
7.1.3. Deliveries 26
7.1.4. Legal Proceedings 26
7.1.5. HSR Act Compliance 26
7.2. Conditions to Bresnan's Obligations. . . . . . . . . . . . . . 26
7.2.1. Accuracy of Representations and Warranties 27
7.2.2. Performance of Agreements 27
7.2.3. Deliveries 27
7.2.4. Legal Proceedings 27
7.2.5. HSR Act Compliance 27
7.2.6. Consents 27
7.2.7. No Material Adverse Change 27
7.2.8. Documents and Records 28
8. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.2. Bresnan's Obligations. . . . . . . . . . . . . . . . . . . . . 28
8.2.1. Purchase Price 28
8.2.2. Indemnity Escrow Agreement 28
8.2.3. Current Items Amount 28
8.2.4. Evidence of Necessary Actions 29
8.2.5. Officer's Certificate 29
8.2.6. Bresnan Counsel Opinion 29
8.2.7. FIRPTA Certificate 29
8.2.8. Other . 29
8.3. Rifkin's Obligations . . . . . . . . . . . . . . . . . . . . . 29
8.3.1. Current Items Amount 29
8.3.2. Indemnity Escrow Agreement 29
8.3.3. Bill of Sale and Assignment 29
8.3.4. Vehicle Titles 30
8.3.5. Evidence of Necessary Actions 30
8.3.6. Deeds . 30
8.3.7. Officer's Certificate 30
8.3.8. Rifkin Counsel Opinion 30
8.3.9. FCC Opinion 30
8.3.10. Lien Releases 30
8.3.11 FIRPTA Certificate 30
8.3.12 .Other. 31
9. TERMINATION AND DEFAULT . . . . . . . . . . . . . . . . . . . . . . 31
9.1. Termination Events . . . . . . . . . . . . . . . . . . . . . . 31
9.1.1. Mutual Agreement 31
9.1.2. Default 31
9.1.3. Failure to Meet Conditions Prior to Outside
Closing Date. . . . . . . . . . . . . . . . . . . . . . . 31
9.2. Effect of Termination. . . . . . . . . . . . . . . . . . . . . 31
10. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.1. Indemnification by Bresnan 32
10.2. Indemnification by Rifkin 32
10.3. Procedure for Indemnified Third Party Claim 32
10.4. Time and Manner of Certain Claims 33
10.5. Escrow Upon Fundamental Changes 33
11. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 34
11.1. Expenses 34
11.2. Brokers 34
11.3. Waivers 34
11.4. Notices 34
11.5. Entire Agreement; Prior Representations;
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . 36
11.6. Binding Effect; Benefits 36
11.7. Headings and Exhibits 36
11.8. Governing Law 36
11.9. Severability 37
11.10. Third Parties; No Joint Venture 37
11.11. No Recourse to Partners of Rifkin 37
11.12. Construction 37
11.13. Attorneys' Fees 37
11.14. Risk of Loss 37
11.15. Counterparts 38
Exhibits
Exhibit 2.1.1(a) Tangible Personal Property
Exhibit 2.1.1(b) Real Property
Exhibit 2.1.1(c) Franchises
Exhibit 2.1.1(d) Governmental Licenses
Exhibit 2.1.1(e) Material Contracts
Exhibit 2.1.2 Excluded Assets
Exhibit 2.3(b) Indemnity Escrow Agreement
Exhibit 3.4 Agreement Not to Compete
Exhibit 4.3 Notices and Required Consents
Exhibit 4.4 Liens and Permitted Liens
Exhibit 4.5.2 Zoning and Restrictive Covenants
Exhibit 4.6 Others Holding Franchises
Exhibit 4.9 Rates
Exhibit 4.12.1(e) Rate Proceedings
Exhibit 4.13 Litigation
Exhibit 4.18 Employee Benefits
Exhibit 5.3 Bresnan Conflicts and Consents
Exhibit 8.2.6 Form of Bresnan Counsel Opinion
Exhibit 8.3.3 Form of Bill of Sale and Assignment and
Assumption Agreement
Exhibit 8.3.8 Form of Rifkin Counsel Opinion
Exhibit 8.3.9 Form of Opinion of Cole, Raywid &
Braverman, L.L.P.
<PAGE>
LIST OF EXHIBITS
Page
Exhibit 2.1.1(a) Tangible Personal Property E-1
Exhibit 2.1.1(b) Real Property E-6
Exhibit 2.1.1(c) Franchises E-9
Exhibit 2.1.1(d) Governmental Licenses E-10
Exhibit 2.1.1(e) Material Contracts E-11
Exhibit 2.1.2 Excluded Assets E-17
Exhibit 2.3(b) Form of Indemnity Escrow Agreement E-18
Exhibit 2.7 Allocation of Purchase Price E-19
Exhibit 3.4 Agreement Not to Compete E-20
Exhibit 4.3 Notices and Required Consents E-21
Exhibit 4.4 Permitted Liens and Liens E-22
Exhibit 4.5.2 Zoning and Restrictive Covenants E-23
Exhibit 4.6 Others Holding Franchises, Licenses, Permits,
etc. E-24
Exhibit 4.9 Rate Schedule E-25
Exhibit 4.12.1(e) Rate Complaints and Inquiries E-26
Exhibit 4.13 Litigation Pending E-27
Exhibit 4.18 Employee Benefit Exclusions E-28
Exhibit 5.3 Buyer's Conflicts and Consents E-29
Exhibit 8.2.6 Form of Opinion Letter of Counsel for Buyer E-30
Exhibit 8.3.3 Form of Bill of Sale and Assignment and
Assumption Agreement E-31
Exhibit 8.3.8 Form of Opinion Letter of Counsel for Seller E-32
Exhibit 8.3.9 Form of Opinion Letter of FCC Counsel E-33
<PAGE>
EXHIBIT 2.1.1(a)
Tangible Personal Property
DISTRIBUTION EQUIPMENT BAD AXE BRIDGEPORT
Year Upgraded/Rebuilt: 1989 1988
Homes Passed at 6/30/97: 1967 9762
Miles of Plant:
Aerial 29.7 210.09
Underground 6.26 50.31
Total 35.96 260.40
Density 50 50
Channels:
Channel Capacity 43 55
In Use: 43 55
Bandwidth 330MHz 400MHz
Cable:
Fiber: AL,P1,P3-500, 750 QR, P1,P3-500,750,860
Trunk: AL,P1,P3-412, 500 QR, P1,P3-412,500,540
Feeder:
Drops:
Plant Electronics
Amplifiers Longest Jerrold Texscan
Amplifier Cascade 26 45
Taps: Magnavox, Regal Texscan, Regal
Premium Security:
Addressable None None
Positive/Negative Traps HBO: Negative HBO,Max,
Showtime:Negative
Rest: Positive Rest: Positive
Converters:
Addressable None None
Standard SA 5811 SA 5811
<PAGE>
Exhibit 2.1.1 (a)
Tangible Personal Property, Con't.
DISTRIBUTION EQUIPMENT GAGETOWN HARBOR BEACH REESE
year Upgraded/Rebuilt 1988 1987 1988
Homes passed at 6/30/97 261 1295 988
Miles of Plant;
Aerial 8.2 26.5 22.9
Underground 4.1 2.69 6.32
Total 12.3 29.19 29.22
Density 50 50 50
Channels:
Channel Capacity 42 40 54
In Use: 42 40 47
Bandwidth 330MHz 318MHz 400MHz
Cable:
Fiber: P3-750 P-500, 750 P3-750, QR-860
Trunk: P3-500 AL, P1,P3-412,500 P1, P3-500,QR-540
Feeder:
Drops:
Plant Electronis
Amplifiers Longest Texscan Jerrold Texscan
Amplifier Cascade 12 22 20
Taps: Texscan RMS,Regal Texscan, Regal
Premium Security:
Addressable None None None
Pos/Neg Traps All Positive HBO:Negative HBO, Max: Negative
Rest: Positive Rest: Positive
Converters:
Addressable None None None
Standard SA 8511 SA 8511 SA 8511
<PAGE>
Exhibit 2.1.1 (a)
Tangible Personal Property, Con't.
HEADEND EQUIPMENT BAD AXE BRIDGEPORT
Headend Location; 1370 McKenzie Road 5917 S. Reimer
Bad Axe, MI 48413 Bridgeport, MI 48722
Headend Site -
Owned/Leased Owned leased
Tower Type/Size Guyed, 250 ft. Guyed, 250 ft.
Earth Stations: 5 5
Receivers: DX, Standard DX, Standard
Modulators: ISS, Standard ISS, SA, Standard
Processors: ISS, Triple Crow ISS, SA, Cadco
Stereo Encoders: SA SA
Scrambler/Encoders: Eagle, Pico Eagle, Pico
Descramblers: Videocypher, Digicypher Videocypher, Digicypher
Ad Insertion N/A Ad Command
Equipment:
Backup Power Supply: Gen on Trailer Gen on Trailer
<PAGE>
Exhibit 2.1.1 (a)
Tangible Personal Property, Con't.
HEADEND EQUIPMENT GAGETOWN HARBOR BEACH REESE
Headend Location; 6747 McEldowny Rd. 842 N. Huron Rd. 9754 Dixie Rd.
Gagetown, MI 48735 Harbor Beach, Mi Reese, Mi 48757
48441
Headend Site -
Owned/Leased Leased Owned Leased
Tower Type/Size Self Supt, 75 ft. Guyed, 480 ft. Guyed, 175 ft.
Earth Stations: 5 5 5
Receivers: Drake, Standard DX ISS, SA
Modulators: ISS, Standard ISS, Standard ISS, SA
Stereo Encoders: SA SA SA
Scrambler/Encoders: Eagle, Pico Eagle, Pico Eagle, Pico
Descramblers: Videocypher, Videocypher, Videocypher,
Digicypher Digicypher Digicypher
Ad Insertion
Equipment: N/A N/A N/A
Backup Power Supply Gen on Trailer Gen on Trailer Gen on Trailer
<PAGE>
EXHIBIT 2.1.1(a)
VEHICLES:
Year Make Body Vehicle I.D. # Date
Acquired
1990 Chevrolet Van w/aerial lift 2GCGG35K8L412 4546 01/31/90
1991 Chevrolet Station wagon 1GNCT18Z9M010 8191 03/21/90
1991 GMC Van 1GTGG35K7M750 8212 06/04/91
1992 GMC Safari 1GTDM15Z8NB52 1305 03/27/92
1993 GMC Vandura 1GTEG25K9PF50 7266 04/05/93
1993 GMC Vandura 1GTEG25K6PF50 7029 03/22/93
1994 GMC Vandura 1GTEG25K3RF53 4823 09/06/94
1995 GMC Vandura 1GTEG25K6SF50 4950 11/18/94
1995 Chevrolet Van 1GCEG25K3SF18 9508 05/04/95
1995 Buick Century 1G4AG55M9S650 5247 09/27/95
1995 Chevrolet Van 1GCEG25K8SF24 9220 03/20/96
Total Vehicles: 11
<PAGE>
EXHIBIT 2.1.1(b)
Real Property
1. Owned Property
Warranty Deed dated September 1, 1995 to Rifkin Acquisition
Partners, L.L.L.P. for real property located in the Township
of Colfax, City of Huron, State of Michigan (Bad Axe Headend)
Legal Description: The West 600.0 feet of the Southerly
700.0 feet of the Southeast quarter of the Southwest
quarter of Section 26, Township 16 North, Range 12 East,
Colfax Township, Huron County, Michigan, except easements
and rights of way of record.
Warranty Deed dated September 1, 1995 to Rifkin Acquisition
Partners, L.L.L.P. for real property located in the City of
Harbor Beach, County of Huron, State of Michigan (Harbor Beach
Headend).
Legal Description: Commencing at the Northwest corner of
Government Lot 2, Section 1, Township 16 North, Range 15
East, City of Harbor Beach, Huron County, Michigan;
thence S89 degrees 48'10"E, 160.53 feet; thence South 314.09 feet
to the Point of Beginning; RUNNING THENCE South 100.0
feet; thence East 100.0 feet; thence North 100.0 feet;
thence West 100.0 feet to the Point of Beginning. Being
a part of Government Lot 2, Section 1, Township 16 North,
Range 15 East, City of Harbor Beach, Huron County,
Michigan, as described by Russell L. Brown, R.L.S. Huron
Survey, Inc., October 24, 1979.
2. Real Property Interests
a. Leased Property
Lease dated September 9, 1994 between Westland
Properties, as Lessor, and Cable Equities of Colorado,
Ltd., as Lessee, for the premises at 47 Westland Drive,
Bad Axe, Michigan for a term of three years, ending
October 1, 1997 (Bad Axe Office Space).
Lease Agreement dated April 22, 1994 (and Extension of
Lease effective May 1, 1997) between John G. Hoffmann and
Betty D. Hoffmann, as Lessors, and Cable Equities of
Colorado, Ltd., as Lessee, for the premises located at
4398 Williamson Road, Bridgeport, Michigan for a term of
two years, ending April 30, 1999 (Bridgeport Office
Space).
Lease Agreement dated July 5, 1994 between the City of
Frankenmuth, Michigan, as Lessor, and Cable Equities of
Colorado, Ltd., as Lessee, for the property situated in
the Township of Frankenmuth, County of Saginaw, State of
Michigan for a term commencing on the effective date of
the Cable Television Franchise Ordinance for the City of
Frankenmuth and ending upon its expiration date (July 4,
2009) (Bridgeport Headend).
Lease Agreement dated January 28, 1988 between Roy
Wildman, as Lessor, and Cable Equities of Colorado, Ltd.
(subsequently assigned to Rifkin Acquisition Partners,
L.L.L.P.), as Lessee, for the property situated in
Elmwood Township,
Tuscola County, Michigan for a term of commencing on the
effective date of the Cable Television Franchise
Ordinance for the Towship of Elmwood and ending upon its
expiration date (December 11, 2002) (Gagetown Headend).
Lease Agreement dated April 11, 1994 between the Village
of Reese, Michigan, as Lessor, and Cable Equities of
Colorado, Ltd., as Lessee, for the property situated in
the Village of Reese, County of Tuscola, Michigan for a
term commencing on the effective date of the Cable
Television Franchise Ordinance for the Village of Rese,
Michigan and ending upon its expiration date (April 11,
2009) (Reese Headend).
Lease Agreement dated September 17, 1991 between Cable
Equities of Colorado, Ltd., as Landlord, and Thumb
Cellular, as Tenant, for tower space on the Harbor Beach
headend, for a term of five years with five automatic
five-year renewals (expiration of first five-year renewal
is September 17, 2001).
Lease Agreements (4) dated February 7, 1995 between REMC
#10, as Lessee, and CableVision Cable Company, as Lessor,
for tower space on the Bad Axe, Gagetown, Harbor Beach
and Reese headends, for a term of ten years commencing on
January 1, 1995 and terminating on December 31, 2005.
<PAGE>
EXHIBIT 2.1.1(b)
Real Property
(con't)
b. Easements/Rights of Way
Master License Agreement dated March 27, 1987 between
Huron and Eastern
Railway Company, Inc., as Licensor, and Cable Equities of
Colorado, Ltd., as Licensee (Bad Axe system).
Wireline Crossing Agreement dated April 8, 1991 between
CSX Transportation, Inc., as Licensor, and Cable Equities
of Colorado, Ltd., as Licensee (Bridgeport system).
Agreement for Grant of Easement dated August 20, 1993
between Birch Run
Farms Mobile Park, Inc., as Property Owner, and Cable
Equities of Colorado, Ltd., as Cable Operator, regarding
property located at Church Street in Birch Run, Michigan,
for a term of 15 years or for the period of Cable
Operator's franchise (Bridgeport system).
Agreement for Grant of Easement dated April 13, 1994
between Tom Vance, as Property Owner, and Cable Equities
of Colorado, Ltd., as Cable Operator, regarding property
located at 8425 West Curtis Road for a term of 15 years
or for the period of Cable Operator's franchise
(Bridgeport system).
<PAGE>
EXHIBIT 2.1.1(c)
Franchises
Franchise Name Issue Date Term Expiration Date Franchise Fee
Birch Run, Village of 4/83 15 yrs 4/1998 No Fee
Colfax, Township of 9/68 30 yrs 9/1998 5% Gross
Birch Run, Township of 2/84 15 yrs 2/1999 $500
Blumfield, Township of 6/84 15 yrs 6/1999 No Fee
Taymouth, Township of 5/85 15 yrs 5/2000 $500
Bad Axe, City of 4/86 15 yrs 2/2001 3% Gross
Harbor Beach, City of 3/87 15 yrs 3/2002 No Fee
Gagetown, Township of 11/87 15 yrs 12/2002 No Fee
Owendale, Village of 11/87 15 yrs 11/2002 No Fee
Elmwood, Township of 15 yrs 12/2002 No Fee
Tuscola, Township of 12/87 15 yrs 12/2002 No Fee
Brookfield, Township of 1/88 15 yrs 1/2003 No Fee
Bridgeport, Township of 8/95 10 yrs 8/2005 $500
Verona, Township of 5/91 15 yrs 5/2006 No Fee
Sand Beach, Township of 4/93 15 yrs 4/2008 No Fee
Reese, Village of 4/94 15 yrs 4/2009 No Fee
Frankenmuth, City of 7/94 15 yrs 7/2009 No Fee
Denmark, Township of 1/95 15 yrs 1/2010 No Fee
Frankenmuth, Township of 12/95 15 yrs 12/2010 No Fee
<PAGE>
EXHIBIT 2.1.1(d)
Governmental Licenses
Business Radio Licenses
Headend Call Sign Location Issue/Expire
Date
Bad Axe, MI KNER225 S Bad Axe Rd 8 Mi So 9/25/95 -
10/24/2000
Bad Axe, Huron, MI
596 Port Crescent
Bad Axe, MI
Bridgeport, MI WNUT813 1.5 Mi SE of Bridgeport/ 1/22/96 -
11/23/2000
Dixie Hwy.
Portsmouth, Saginaw, MI
4398 Williamson Rd.
Bridgeport, MI
<PAGE>
EXHIBIT 2.1.1(e)
Material Contracts
Pole Agreements
License Agreement dated March 16, 1983 between Michigan Bell
Telephone Company, as Licensor, and Huron Cable TV, Inc.,
subsequently assigned to Rifkin Acquisition Partners,
L.L.L.P., as Licensee.
Pole, Conduit and Trench Use Agreement dated February 9, 1977
between The Detroit Edison Company and Cable Equities of
Colorado, Ltd., subsequently assigned to Rifkin Acquisition
Partners, L.L.L.P.
Agreement dated October 1, 1980 as amended by Assignment of
Pole License Agreement dated December 1, 1985 between
Consumers Power Company, as Owner, and Cable Equities of
Colorado, Ltd., subsequently assigned to Rifkin Acquisition
Partners, L.L.L.P., as Licensee.
License Agreement dated March 15, 1983 between Michigan Bell
Telephone Company, as Licensor, and Bridgeport-Frankenmuth
Cablevision, subsequently assigned to Rifkin Acquisition
Partners, L.L.L.P., as Licensee.
General Agreement for Joint Use of Wood Poles dated June, 1988
between Thumb Electric Cooperative, as "Electric Company", and
Cable Equities of Colorado, Ltd., as "Cable TV."
Advertising Sales Agreements
Agreement dated May 2, 1996 (effective June 1, 1996), as
amended, between Cable One Corp. (n/k/a CableTime), as Vendor,
and Rifkin Acquisition Partners, L.L.L.P., as Operator, for a
term of three years, expiring May 31, 1999.
<PAGE>
EXHIBIT 2.1.1(e)
Material Contracts
(con't)
Bulk Agreements
Bad Axe
No. of Monthly Contract Expiration
Property Units Revenue* Date Date
Coral Gables 23 $ 76.13 11/01/79 Year-to-Year
Four Season Health Center 63 $208.53 05/08/86 Year-to-Year
Franklin Inn 47 $155.57 11/01/79 Year-to-Year
Franklin Plaza 24 $ 79.44 11/06/95 Year-to-Year
Graystone Manor 6 $ 19.86 02/22/94 Year-to-Year
Huron Memorial Hospital 51 $128.52 12/01/79 Year-to-Year
Maple Lans 17 $ 56.27 02/11/82 Year-to-Year
Medical Care 65 $215.15 12/01/79 Year-to-Year
Ron Osantoski 18 $ 64.26 01/12/89 Year-to-Year
Bridgeport
No. of Monthly Contract Expiration
Property Units Revenue* Date Date
Bavarian Inn 349 $1179.62 02/20/86 Year-to-Year
Bel-Air Motel 35 $121.10 05/11/85 Year-to-Year
Birch Run Holiday Inn 103 $464.53 07/11/96 07/11/1999
Comfort Inn 100 $450.00 05/15/97 05/15/2000
Country Inn 72 $324.00 05/15/97 05/15/2000
Days Inn 124 $367.04 08/09/88 Year-to-Year
Drury Inn 79 $327.85 12/13/96 Year-to-Year
The Exit Motel 152 $449.92 06/01/89 Year-to-Year
Frankenmuth Motel 73 $245.28 12/14/88 Year-to-Year
Hampton Inn 89 $400.50 05/09/97 05/09/2000
Heidelberg Motel 11 $ 38.06 06/15/80 Year-to-Year
Karen's Haus 3 $ 11.13 10/14/94 Year-to-Year
The Lutheran Home 33 $138.93 08/17/80 Year-to-Year
Miller's Motel 16 $ 52.48 07/19/91 Year-to-Year
Pinocchios Motel 3 $ 11.13 01/22/82 Year-to-Year
Roseland Motel 7 $ 25.97 08/14/84 Year-to-Year
Sun Valley Manor 56 $224.00 08/03/95 Year-to-Year
Super 8 Motel 110 $356.40 03/19/92 Year-to-Year
Winters Motel 18 $ 81.72 07/11/96 07/11/1999
Zehnder's Haus 137 $449.36 07/30/91 Year-to-Year
*basic and tier revenue only, exclusive of taxes and fees
EXHIBIT 2.1.1(e)
Material Contracts
(con't)
Gagetown
No. of Monthly Contract Expiration
Property Units Revenue* Date Date
Abbe Acre 4 $ 14.28 08/15/96 Year-to-Year
Sherwood 20 $ 71.40 06/02/92 Year-to-Year
Harbor Beach
No. of Monthly Contract Expiration
Property Units Revenue* Date Date
Harbor Beach Hospital 18 $ 59.58 12/01/79 Year-to-Year
Motel Huron 8 $ 28.56 04/05/91 Year-to-Year
North Park Campground 64 $144.64 10/10/95 Year-to-Year
Randolph Motel 15 $ 49.65 12/01/79 Year-to-Year
Smalley Hotel 11 $ 36.41 12/01/79 Year-to-Year
State Street Inn 3 $ 10.71 07/02/96 Year-to-Year
Wellock Inn 6 $ 21.42 12/06/91 Year-to-Year
* basic and tier revenue only, exclusive of taxes and fees
Retransmission Consent Agreements
Bad Axe System
Retransmission Consent Agreement dated December 24, 1996
between Thunder Bay Broadcasting, as Broadcaster, and
Rifkin Acquisition Partners, L.L.L.P., as Cable Operator
for retransmission of WBKB in Bad Axe and Harbor Beach,
Michigan, expiring December 31, 1999.
Satellite Transmission Service Agreement dated October
31, 1996 between UVTV and Rifkin Acquisition Partners,
L.L.L.P. for retransmission of WDIV and WXYZ in Bad Axe
and Harbor Beach, Michigan, expiring December 31, 1999.
Retransmission Consent Agreement dated September 26, 1996
between Meredith Corp., licensee of television station
WNEM-TV, and Rifkin Acquisition Partners, L.L.L.P. for
retransmission of WNEM in all five Michigan systems,
expiring December 31, 1999.
Fox Broadcast Affiliate Retransmission Consent Agreement
dated February 17, 1994 between Kenko Communications/R
Communications Group, the station also known as WSMH, and
Rifkin & Associates, Inc. for retransmission of WSMH in
all five Michigan systems, expiring December 31, 1999.
Bridgeport System
Fox Broadcast Affiliate Retransmission Consent Agreement
dated February 17, 1994 between Paramount Stations, the
station also known as WKBD, and Rifkin & Associates,
Inc., for retransmission of WKBD in Bridgeport, Harbor
Beach and Reese, Michigan, expiring December 31, 1999.
Retransmission Consent Agreement dated September 26, 1996
between Meredith Corp., licensee of television station
WNEM-TV, and Rifkin Acquisition Partners, L.L.L.P. for
retransmission of WNEM in all five Michigan systems,
expiring December 31, 1999.
Fox Broadcast Affiliate Retransmission Consent Agreement
dated February 17, 1994 between Kenko Communications/R
Communications Group, the station also known as WSMH, and
Rifkin & Associates, Inc. for retransmission of WSMH in
all five Michigan systems, expiring December 31, 1999.
Gagetown System
Retransmission Consent Agreement dated September 26, 1996
between Meredith Corp., licensee of television station
WNEM-TV, and Rifkin Acquisition Partners, L.L.L.P. for
retransmission of WNEM in all five Michigan systems,
expiring December 31, 1999.
Fox Broadcast Affiliate Retransmission Consent Agreement
dated February 17, 1994 between Kenko Communications/R
Communications Group, the station also known as WSMH, and
Rifkin & Associates, Inc. for retransmission of WSMH in
all five Michigan systems, expiring December 31, 1999.
Harbor Beach System
Retransmission Consent Agreement dated December 24, 1996
between Thunder Bay Broadcasting, as Broadcaster, and
Rifkin Acquisition Partners, L.L.L.P., as Cable Operator
for retransmission of WBKB in Bad Axe and Harbor Beach,
Michigan, expiring December 31, 1999.
EXHIBIT 2.1.1(e)
Material Contracts
(con't)
Satellite Transmission Service Agreement dated October
31, 1996 between UVTV and Rifkin Acquisition Partners,
L.L.L.P. for retransmission of WDIV and WXYZ in Bad Axe
and Harbor Beach, Michigan, expiring December 31, 1999.
Fox Broadcast Affiliate Retransmission Consent Agreement
dated February 17, 1994 between Paramount Stations, the
station also known as WKBD, and Rifkin & Associates,
Inc., for retransmission of WKBD in Bridgeport, Harbor
Beach and Reese, Michigan, expiring December 31, 1999.
Retransmission Consent Agreement dated September 26, 1996
between Meredith Corp., licensee of television station
WNEM-TV, and Rifkin Acquisition Partners, L.L.L.P. for
retransmission of WNEM in all five Michigan systems,
expiring
December 31, 1999.
Fox Broadcast Affiliate Retransmission Consent Agreement
dated February 17, 1994 between Kenko Communications/R
Communications Group, the station also known as WSMH, and
Rifkin & Associates, Inc. for retransmission of WSMH in
all five Michigan systems, expiring December 31, 1999.
Reese System
Fox Broadcast Affiliate Retransmission Consent Agreement
dated February 17, 1994 between Paramount Stations, the
station also known as WKBD, and Rifkin & Associates,
Inc., for retransmission of WKBD in Bridgeport, Harbor
Beach and Reese, Michigan, expiring December 31, 1999.
Retransmission Consent Agreement dated September 26, 1996
between Meredith Corp., licensee of television station
WNEM-TV, and Rifkin Acquisition Partners, L.L.L.P. for
retransmission of WNEM in all five Michigan systems,
expiring December 31, 1999.
Fox Broadcast Affiliate Retransmission Consent Agreement
dated February 17, 1994 between Kenko Communications/R
Communications Group, the station also known as WSMH, and
Rifkin & Associates, Inc. for retransmission of WSMH in
all five Michigan systems, expiring December 31, 1999.
Other Agreements
See Exhibit 2.1.1(b)
See Exhibit 2.1.1(c)
See Exhibit 2.1.1(d)
See Exhibit 4.4
<PAGE>
EXHIBIT 2.1.2
Excluded Assets
-- None --
<PAGE>
EXHIBIT 2.3(b)
Form of Indemnity Escrow Agreement
EXHIBIT 2.3(b)
INDEMNITY ESCROW AGREEMENT
THIS INDEMNITY ESCROW AGREEMENT is entered into as of
_____________, 1997 by and among Bresnan Communications Company, a
Michigan limited partnership ("Bresnan"), Rifkin Acquisition
Partners, L.L.L.P., a Colorado limited liability limited
partnership ("Rifkin") and Colorado National Bank, as escrow agent
("Escrow Agent");
WHEREAS, Bresnan and Rifkin have entered into an Asset
Purchase Agreement dated as of October __, 1997 (the "Purchase
Agreement") by which Rifkin has agreed to sell, assign, transfer,
convey and deliver to Bresnan, and Bresnan has agreed to purchase
from Rifkin, the Assets (as defined in the Purchase Agreement), all
in accordance with and subject to the terms and conditions set
forth in the Purchase Agreement; and
WHEREAS, pursuant to the Purchase Agreement, Bresnan is
required to deposit in an escrow account $500,000 in cash, as part
of the purchase price payable thereunder, subject to the terms of
the Purchase Agreement and of this Agreement;
NOW, THEREFORE, for and in consideration of the foregoing
and of the mutual covenants and agreements hereinafter set forth,
the parties agree as follows:
1. Definitions
All terms contained in this Escrow Agreement shall have
the meaning set forth in the Purchase Agreement.
2. Escrow Account
2.1. Deposit
There is hereby established a separate escrow account
with Escrow Agent in which Bresnan, simultaneously with the
execution and delivery of this Agreement, is depositing Five
Hundred Thousand Dollars ($500,000) in cash (the "Indemnity Escrow
Amount"), to be held and disbursed by Escrow Agent as hereinafter
set forth.
2.2. Investment
Escrow Agent shall invest the Escrow Deposit in such
bonds, treasury notes and other evidences of indebtedness of the
United States, and/or certificates of deposit in commercial banks
and savings and loan associations organized under the laws of the
United States or any state thereof as Rifkin shall in writing
direct. Bresnan and Rifkin hereby authorize the Escrow Agent to
enter into transactions with respect to the Escrow Deposit with FBS
Investment Services, Inc. ("ISI"), the broker/dealer affiliate of
Escrow Agent. In such transactions, ISI may act as either
principal or agent. Bresnan and Rifkin recognize that due to
conflict of interest restrictions, the Escrow Agent would not be
able to enter into such transactions with ISI absent the
authorization set forth in this Section 2.2. Bresnan and Rifkin
recognize that ISI will receive a fee or discount on ISI
transactions. Bresnan and Rifkin shall rely primarily upon the
internal ISI customer fair pricing procedures to establish proper
prices for any ISI securities transactions, however Bresnan and
Rifkin acknowledge that the Escrow Agent, as it deems appropriate,
may also utilize bidding procedures and enter into certain
transactions with other, unaffiliated broker/dealers.
2.3. Release to Rifkin
Except as otherwise provided in Section 2.4, on the date
which is ninety-one (91) days following the date of this Agreement
(or if not a business day, the next business day thereafter),
Escrow Agent shall deliver to Rifkin, by wire transfer of
immediately available funds to an account or accounts designated by
Rifkin, the Indemnity Escrow Amount, together with all interest
earned thereon, less (a) any amount previously paid to Bresnan
pursuant hereto and (b) any amount then subject to a Claim (as
defined in Section 2.4) made during the preceding ninety-day
period. If an amount is withheld from distribution as a result of
being subject to a Claim, and such amount is not subsequently
distributed to Bresnan in accordance with Section 2.4, such amount
shall be delivered to Rifkin promptly following written notice from
Rifkin and Bresnan that such Claim has been resolved, or receipt of
an order of a court of competent jurisdiction ordering delivery of
such amount to Rifkin.
2.4. Release to Bresnan
If Bresnan incurs any Losses for which it is claiming
indemnification pursuant to Section 10 of the Purchase Agreement,
Bresnan may, from time to time, provide written notice (a "Claim
Notice") to Escrow Agent and Rifkin that Bresnan is entitled to
receive all or a portion of the Indemnity Escrow Amount. The Claim
Notice shall state the basis for Bresnan's claim and the amount
claimed. Escrow Agent shall deliver the amount so claimed to
Bresnan ten business days after receipt by Escrow Agent of (a) the
Claim Notice and (b) evidence of delivery of the Claim Notice to
Rifkin; provided, that the Escrow Agent shall not disburse such
amount if, within such ten business day period, Escrow Agent
receives notice from Rifkin that Rifkin is contesting such claim.
In such case, Escrow Agent shall continue to hold the disputed
amount until it receives a written certification from Rifkin and
Bresnan that such dispute has been resolved, or an order of a court
of competent jurisdiction resolving such claim, and then Escrow
Agent shall disburse such amount in accordance with such written
certification or order.
3. Concerning the Escrow Agent
3.1. Indemnification
Escrow Agent may rely upon and shall be protected in
acting or refraining from acting upon any written notice,
instructions 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 shall not be liable for any action
taken by it in good faith and without negligence, and believed by
it to be authorized or within the rights or powers conferred upon
it by this Agreement, and may consult with counsel 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. Bresnan
and Rifkin hereby agree to indemnify Escrow Agent for, and to hold
Escrow Agent harmless against, any loss, liability or expense
incurred without negligence or bad faith on the part of Escrow
Agent, arising out of or in connection with Escrow Agent's entering
into this Agreement and carrying out Escrow Agent's duties
hereunder, including costs and expenses of successfully defending
Escrow Agent against any claim of liability with respect thereto.
3.2. Other Matters
Escrow Agent reserves the right to resign as Escrow Agent
at any time, provided thirty (30) days' prior written notice is
given to the other parties hereto. The other parties hereto
reserve the right to remove Escrow Agent at any time, provided
thirty (30) days' prior written notice is given to Escrow Agent.
In the event of litigation or dispute by the parties hereunder
affecting its duties as Escrow Agent, Escrow Agent shall take no
action until agreed to by the parties hereto, or until receipt of
an order of a court having jurisdiction. Escrow Agent neither
approves nor disapproves of this transaction, nor does it recommend
for or against, nor does it have an opinion as to the legality or
validity of this transaction.
4. Termination
This Escrow Agreement shall be terminated upon the
delivery of the entire Indemnity Escrow Amount and all interest
earned thereon made pursuant to Section 2.3 and/or Section 2.4
hereof, and may be terminated by written mutual consent signed by
all parties hereto.
5. Notices
All notices, requests, demands, applications, services of
process, and other communications which are required to be or may
be given under this Agreement shall be in writing and shall be
deemed to have been duly given if sent by telecopy or facsimile
transmission, or delivered by courier or mailed, certified first
class mail, postage prepaid, return receipt requested, to the
parties hereto at the following addresses:
If to Bresnan:
Bresnan Communications Company
709 Westchester Avenue
White Plains, New York 10604
Attn: Bob Bresnan
Facsimile: 914/993-6601
with a copy (which shall not constitute notice) to:
Cole, Raywid & Braverman, L.L.P.
1919 Pennsylvania Avenue, NW
Suite 200
Washington, DC 20006
Attn: Ann Flowers
Facsimile: 202/452-0067
If to Rifkin:
Rifkin & Associates, Inc.
360 South Monroe
Suite 600
Denver, Colorado 80209
Facsimile: 303/322-3553
with a copy (which shall not constitute notice) to:
Stuart Rifkin
Baker & Hostetler
303 East 17th Avenue
Suite 1100
Denver, Colorado 80203
Facsimile: 303/861-2307
If to Escrow Agent:
Colorado National Bank
Tech Center Office
8401 East Belleview
Denver, Colorado 80237
Attn: J. Eric Lindquist
Facsimile: 303/220-1224
or to such other address as any party shall have furnished to the
other by notice given in accordance with this Section. Such notice
shall be effective, (a) if delivered in person or by courier, upon
actual receipt by the intended recipient, or (b) if sent by
telecopy or facsimile transmission, upon confirmation of delivery,
or (c) if mailed, upon the date of delivery as shown by the return
receipt therefor or upon refusal to accept delivery.
6. Benefit and Assignment
This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors
and assigns as permitted hereunder. No person or entity other than
the parties hereto is or shall be entitled to bring any action to
enforce any provision of this Agreement against any of the parties
hereto, and the covenants and agreements set forth in this
Agreement shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto or their respective
successors and assigns as permitted hereunder. No party to this
Agreement may assign this Agreement or any rights hereunder without
the prior written consent of the parties hereto; provided, that
Bresnan may, without the consent of the other parties hereto,
assign this Agreement and Bresnan's rights and obligations
hereunder to any individual or entity to which Bresnan assigns its
rights and obligations under the Purchase Agreement.
7. Entire Agreement; Amendment
This Agreement, together with the Purchase Agreement,
contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written
agreements, commitments or understandings with respect to such
matters. Bresnan and Rifkin shall furnish Escrow Agent with a copy
(without Exhibits) of the Purchase Agreement. This Agreement may
not be changed orally, but only by an instrument in writing signed
by all parties hereto.
8. Headings
The headings of the sections and subsections contained in
this Agreement are inserted for convenience only and do not form a
part or affect the meaning, construction or scope thereof.
9. Signature in Counterparts
This Agreement may be executed in separate counterparts,
none of which need contain the signatures of all parties, each of
which shall be deemed to be an original, and all of which taken
together constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account
for more than the number of counterparts containing the respective
signatures of, or on behalf of, all of the parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Escrow Agreement to be duly executed and delivered in its name
and on its behalf, all as of the date and year first above written.
BRESNAN COMMUNICATIONS RIFKIN ACQUISITION PARTNERS
COMPANY L.L.L.P.
By: BCI (USA), L.P., its managing By: Rifkin Acquisition
Management, general partner L.P.,its
general partner
By: Bresnan Communications, Inc., By: RT Investments
Corp., its
its managing general partner general
partner
By:_____________________
By:_____________________
COLORADO NATIONAL BANK
By:_____________________________
-- See attached --
EXHIBIT 2.7
Allocation of Purchase Price
To be allocated to Assets $
To be allocated to Agreement Not to Compete $
Total Purchase Price $17,000,000.00
EXHIBIT 3.4
Form of Agreement Not to Compete
EXHIBIT 3.4
AGREEMENT NOT TO COMPETE
THIS AGREEMENT NOT TO COMPETE is made as of
_____________, 1997 by and among Bresnan Communications Company,
a Michigan limited partnership ("Bresnan"), and Rifkin
Acquisition Partners, L.L.L.P., a Colorado limited liability
limited partnership ("Rifkin");
WHEREAS, Bresnan and Rifkin have entered into an Asset
Purchase Agreement dated as of October __, 1997 (the "Purchase
Agreement") by which Rifkin has agreed to sell, assign, transfer,
convey and deliver to Bresnan, and Bresnan has agreed to purchase
from Rifkin, the Assets (as defined in the Purchase Agreement),
all in accordance with and subject to the terms and conditions
set forth in the Purchase Agreement; and
WHEREAS, pursuant to the Purchase Agreement and for the
consideration set forth therein, Rifkin has agreed to enter into
the Agreement Not to Compete;
NOW, THEREFORE, in consideration of the foregoing, as
an inducement to Bresnan to purchase the Assets described in the
Purchase Agreement, in satisfaction of a condition precedent to
Bresnan's willingness to consummate the Purchase Agreement, and
for other good and valuable consideration (the receipt and
sufficiency of which is hereby acknowledged), the parties hereto
covenant and agree as follows:
1. Covenant Not to Compete
During a period of five (5) years following the date
hereof, Rifkin shall not at any time compete, directly or
indirectly, with Bresnan in providing any cable television
service, or any other service that competes with cable television
service, at any location within the Counties of Saginaw, Tuscola,
or Huron, Michigan (the "Geographic Area"), including without
limitation (a) participating as a stockholder, member or partner
of, or having any direct or indirect financial interest
(including without limitation the interest of a creditor) in, any
enterprise which engages in such business; or (b) participating
as an employee, agent, representative, or consultant in, or
rendering any services to, any such enterprise. Rifkin
acknowledges that the restrictions contained herein are
reasonable and necessary to protect the business and interest
which Bresnan is acquiring pursuant to the Purchase Agreement,
and that any violation of these restrictions will cause
substantial irreparable injury to Bresnan. Rifkin therefore
agrees that Bresnan is entitled, in addition to any other
remedies, to preliminary and permanent injunctive relief to
prevent a breach or contemplated breach of this Section. The
restrictions set forth herein shall be construed as independent
covenants, and the existence of any claim or cause of action
against Bresnan, whether predicated upon this Agreement or
otherwise, shall not constitute a defense to the enforcement by
Bresnan of the restrictions contained in this Section.
2. Compensation
In consideration of the undertakings contained herein,
simultaneously with the execution of this Agreement, Bresnan is
paying $_________ to Rifkin (which is the amount determined in
accordance with Section 2.7 of the Purchase Agreement).
3. Waiver
No delay or failure in exercising any right, power or
privilege under this Agreement or under any other instrument or
document given in connection with or pursuant to this Agreement
shall impair any such right, power or privilege or be construed
as a waiver of any default or any acquiescence therein. No
single or partial exercise of any such right, power or privilege
shall preclude the further exercise of such right, power or
privilege, or the exercise of any other right, power or
privilege.
4. Benefit and Assignment
This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors
and assigns as permitted hereunder. No person or entity other
than the parties hereto is or shall be entitled to bring any
action to enforce any provision of this Agreement against any of
the parties hereto, and the covenants and agreements set forth in
this Agreement shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto or their respective
successors and assigns as permitted hereunder. Neither this
Agreement nor any rights hereunder shall be assignable by any
party without the prior written consent of the other party;
provided, however, without such consent, Bresnan may assign this
Agreement, including the non-competition covenant contained
herein, to any party to which Bresnan assigns its rights under
the Purchase Agreement.
5. Entire Agreement; Amendment
This Agreement, together with the Purchase Agreement,
constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof, and supersedes all prior
oral and written agreements, commitments or understandings with
respect to the matters provided herein. This Agreement may not
be changed orally, but only by an instrument in writing signed by
the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
6. Severability
If any part or any provision of this Agreement shall be
invalid or unenforceable under applicable law, said part or
provision shall be ineffective to the extent of such invalidity
or unenforceability only, without in any way affecting the
remaining parts of such provisions or the remaining provisions of
this Agreement, which shall be construed as if such invalid parts
or provisions had not been inserted.
7. Headings
The headings of the paragraphs contained in this
Agreement are inserted for convenience only and do not form a
part of or affect the meaning, construction or scope thereof.
8. Counterparts
This Agreement may be executed in separate
counterparts, none of which need contain the signatures of all
parties, each of which is deemed to be an original, and all of
which taken together constitute one and the same instrument. It
shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts
containing the respective signatures of, or on behalf of, all the
parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be duly executed and delivered in its
name on its behalf, all as of the day and year first above
written.
BRESNAN COMMUNICATIONS RIFKIN ACQUISITION PARTNERS
COMPANY L.L.L.P.
By: BCI (USA), L.P., its managing By: Rifkin Acquisition
Management, general partner L.P.,its
general partner
By: Bresnan Communications, Inc., By: RT Investments
Corp., its
its managing general partner general
partner
By:_____________________
By:_____________________
-- See attached --
<PAGE>
EXHIBIT 4.3
Notices and Required Consents
Franchises
* City of Bad Axe
* Township of Birch Run
Village of Birch Run
Township of Blumfield
* Township of Bridgeport
Township of Brookfield
* Township of Colfax
Township of Denmark
Township of Elmwood
* City of Frankenmuth
Township of Frankenmuth
Township of Gagetown
* City of Harbor Beach
Village of Owendale
* Village of Reese
* Township of Sand Beach
* Township of Taymouth
Township of Tuscola
Township of Verona
Pole Agreements
* Ameritech (formerly Michigan Bell)
* Consumers Power Company
* Detroit Edison
* Thumb Electric Cooperative
Advertising Sales Agreement
CableOne (n/k/a CableTime)
<PAGE>
Leases
City of Frankenmuth, Michigan
* John Hoffman and Betty Hoffman
Village of Reese, Michigan
* Westland Properties
* Roy Wildman
Easement Agreements
Birch Run Farms Mobile Park,Inc.
* CSX Transportation
Huron & Eastern Railway Company
Tom Vance
* Required Consent
<PAGE>
EXHIBIT 4.4
Permitted Liens and Liens
1. SENIOR DEBT
Dated: March 1, 1996
Amount: $145,000,000
Agent: First Union National Bank of North Carolina
2. SENIOR SUBORDINATED DEBT
Dated: January 26, 1996
Amount: $125,000,000
Lender: Public Bonds
3. SENIOR SUBORDINATED DEBT
Dated: January 26, 1996
Amount: $3,000,000
Lender: Monroe M. Rifkin
<PAGE>
EXHIBIT 4.5.2
Zoning and Restrictive Covenants
-- None --
EXHIBIT 4.6
Others Holding Franchises, Licenses, Permits, etc.
Cox Communications currently holds a franchise in the Township of
Bridgeport.
C-Tec currently holds a franchise in the Township of Tuscola.
<PAGE>
EXHIBIT 4.9
Rate Schedule
Current Rates*
Headend Basic Tier Date of Last Increase
Bad Axe $12.00 $14.25 2/1/97
Bridgeport $12.00 $16.30 2/1/97
Gagetown $12.00 $14.25 2/1/97
Harbor Beach $12.00 $14.25 2/1/97
Reese $12.00 $16.30 2/1/97
* Rates net of tax and fee pass-throughs
<PAGE>
EXHIBIT 4.12.1(e)
Rate Complaints and Inquiries
1. A complaint was filed by the Township of Bridgeport on
10/12/93 and tier rates were found to be reasonable by the
FCC based upon small system cost of service rules. As a
result, the complaint was dismissed.
2. The Township of Bridgeport certified and opted to regulate
on 10/12/93.
3. There have been no letters of inquiry from the FCC with
regard to rate regulation.
EXHIBIT 4.13
Litigation Pending
James A. Martin v. Rifkin & Associates, Inc. (corporate insured
for Rifkin Acquisition Partners, L.L.L.P.), Worker's Compensation
Bureau, Claim No. 021-085228. On or about February 27, 1995, the
employee slipped and fell on ice while performing his normal
duties and suffered a concussion and back injury. Mr. Martin has
never returned to work and there have been conflicting doctor's
reports in this case. A settlement package of $16,500 has been
rejected by plaintiff, and the matter has been placed on the
trial docket for September 17, 1997.
<PAGE> EXHIBIT 4.18
Employee Benefit Exclusions
Wayne Leese, Manager, has been guaranteed a "bonus" of $58,000
for assisting in the sale of the subject systems.
Rifkin & Associates, Inc. 401(k) Retirement Savings Plan, which
employees may roll into another qualified plan or request a lump
sum payment.
<PAGE>
EXHIBIT 5.3
Buyer's Conflicts and Consents
EXHIBIT 5.3
BRESNAN CONFLICTS AND CONSENTS
Bresnan must receive the consent of the Executive Committee of
Bresnan Communications Company.
To be provided by Buyer
<PAGE>
EXHIBIT 8.2.6
OPINION OF COUNSEL TO BRESNAN
The opinion of counsel to Bresnan shall be in customary
form, including a specification of the scope of investigation
conducted (which may be limited), and shall address the following
matters:
(a) Bresnan is a limited partnership organized,
validly existing and in good standing under the laws of the State
of Michigan, and has the partnership power to execute, deliver
and perform as of the Closing Date the Asset Purchase Agreement
and all other agreements of Bresnan required thereby.
(b) The execution, delivery and performance as of the
Closing Date of the Asset Purchase Agreement, and of each
agreement of Bresnan required thereby have been duly authorized
by all necessary partnership action on the part of Bresnan.
(c) The Asset Purchase Agreement and each agreement of
Bresnan required thereby has been duly executed and delivered on
behalf of Bresnan, and each constitutes a valid and binding
obligation of Bresnan, enforceable in accordance with its
respective terms.
(d) The execution, delivery and performance by Bresnan
as of the Closing Date of the Asset Purchase Agreement, and of
each other agreement of Bresnan required thereby do not violate
the Certificate of Limited Partnership or Limited Partnership
Agreement of Bresnan and, to counsel's knowledge, do not violate
any provision of anyagreement, instrument, license, order,
arbitration award, judgment or decree to which Bresnan is a
party.
(e) To counsel's knowledge, there is no litigation or
other proceeding before any court or administrative agency
pending or threatened against Bresnan which questions the
validity of, or which would prevent consummation of the
transactions contemplated by, the Asset Purchase Agreement, or
such other agreements of Bresnan required thereby.
-- See attached --
<PAGE>
EXHIBIT 8.3.3
BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS BILL OF SALE AND ASSIGNMENT AND ASSUMPTION
AGREEMENT is made as of October 16, 1997 by and among Bresnan
Communications Company, a Michigan limited partnership
("Bresnan"), and Rifkin Acquisition Partners, L.L.L.P., a
Colorado limited liability limited partnership ("Rifkin").
WHEREAS, Bresnan and Rifkin have entered into an Asset
Purchase Agreement dated as of October 16, 1997 (the "Purchase
Agreement") by which Rifkin has agreed to sell, assign, transfer,
convey and deliver to Bresnan, and Bresnan has agreed to purchase
from Rifkin, the Assets (as defined in the Purchase Agreement),
all in accordance with and subject to the terms and conditions
set forth in the Purchase Agreement; and
WHEREAS, pursuant to the Purchase Agreement Bresnan has
agreed to assume certain specified liabilities of Rifkin;
NOW, THEREFORE, in consideration of the foregoing, and
of the mutual covenants and agreements set forth herein, the
parties hereto agree as follows:
1. Definitions
All capitalized terms shall have the meanings set forth
in the Purchase Agreement, unless otherwise defined herein.
2. Assignment
Rifkin hereby sells, assigns, transfers, conveys and
delivers to Bresnan all of Rifkin's right, title and interest in
and to the following:
(a) All tangible personal property, including but not
limited to towers, tower equipment, aboveground and underground
cable, distribution systems, headend amplifiers, line amplifiers,
microwave equipment, converters, testing equipment, motor
vehicles, office equipment, furniture, fixtures, supplies,
inventory, and other physical assets, the material items of which
are described on Attachment 1 hereto.
(b) The franchises and other authorizations or permits
described on Attachment 2 hereto.
(c) The intangible channel distribution rights, cable
television relay service (CARS), business radio and other
licenses, copyright notices, and other licenses, authorizations,
consents, or permits issued by the FCC or any other Governmental
Authority described on Attachment 3 hereto.
(e) The pole line and joint line agreements,
underground conduit agreements, crossing agreements,
retransmission consent agreements, bulk or commercial service
agreements, and other Contracts described on Attachment 4 hereto.
(f) All subscriber, trade, and other accounts
receivable.
(g) All engineering records, files, data, drawings,
blueprints, schematics, reports, lists, plans and processes, and
all files of correspondence, lists, records, and reports
concerning subscribers and prospective subscribers of the
Systems, signal and program carriage, and dealings with
Governmental Authorities that are in possession of Rifkin,
including but not limited to all reports filed by or on behalf of
Rifkin with the FCC and statements of account filed by or on
behalf of Rifkin with the U.S. Copyright Office.
The foregoing shall not include, or be deemed to include (i) cash
and cash equivalents; (ii) insurance policies and rights and
claims thereunder; (iii) bonds, letters of credit, surety
instruments, and other similar items; (iv) Rifkin's trademarks,
trade names, service marks, service names, logos, and similar
proprietary rights; (v) programming Contracts; (vi) billing
services agreements and (vii) rights, assets, and properties
described on Attachment 5 hereto.
3. Assumption
Bresnan hereby assumes and agrees to pay, perform and
discharge the following:
(a) Those obligations and liabilities attributable to
acts, omissions or events occurring after the Closing Time under
or with respect to the assets assigned and transferred to Bresnan
pursuant hereto.
(b) [Other obligations and liabilities of Rifkin only
to the extent that there shall be an adjustment in favor of
Bresnan with respect thereto pursuant to Section 2.5--to be
specified when known.]
(c) All other obligations and liabilities attributable
to acts, omissions or events occurring after the Closing Time and
arising out of Bresnan's ownership of the Assets or operation of
the Systems after the date hereof, except to the extent that such
obligations or liabilities relate to any Rifkin Excluded Asset.
All obligations and liabilities arising out of or relating to the
Assets or the Systems other than as set forth herein shall remain
and be the obligations and liabilities solely of Rifkin.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be duly executed and delivered in its
name on its behalf, all as of the day and year first above
written.
BRESNAN COMMUNICATIONS RIFKIN ACQUISITION PARTNERS
COMPANY L.L.L.P.
By: BCI (USA), L.P., its managing By: Rifkin Acquisition
Management, L.P.,
general partner its general partner
By: Bresnan Communications, Inc., By: RT
Investments Corp., its
its managing general partner general
partner
By:_____________________
By:_____________________
-- See attached --
<PAGE> EXHIBIT 8.3.8
Form of Opinion Letter of Counsel for Seller
861-0600
February ____, 1998
Rifkin Acquisition Partners, L.L.L.P.
360 S. Monroe Street, Suite 600
Denver, Colorado 80209
Re: Asset Purchase Agreement dated as of October 16, 1997
(the Agreement ) between Bresnan Communication Company
(the Buyer ) and Rifkin Acquisition Partners, L.L.L.P.
(the Seller )
Gentlemen and Ladies:
We are furnishing this opinion pursuant to Section 8.3.8 of
the Agreement. Capitalized terms used herein and not defined
shall have the meanings set forth in the Agreement.
EXAMINATION
We have acted as counsel to Seller in connection with the
Agreement and the sale of the assets (collectively, the Assets )
contemplated thereby. For purposes of this opinion we have
examined and relied upon the following:
The executed Agreement and the schedules attached thereto;
A copy of the Certificate of Limited Partnership of Seller,
certified by the Colorado Secretary of State as of a recent date
(the Colorado Certificate );
A copy of the Registration Statement for Registration as a
Registered Limited Liability Limited Partnership for Seller,
certified by the Colorado Secretary of State as of a recent date;
A copy of the Amended and Restated Agreement of Limited
Partnership of Seller, certified by the General Partner of Seller
(the Partnership Agreement );
The franchise(s) and other agreements referred to in the
schedules to the Agreement;
Copies of certain resolutions adopted by the Board of
Directors of the General Partner of Seller authorizing the
execution and delivery of the Agreement and the sale of the
Assets;
Certificates as to the incumbency and signatures of officers
of the General Partner of Seller authorized to execute documents
on behalf of Seller;
A certificate of the Secretary of State of Colorado as to
the existence of Seller; and
A certificate of the Secretary of State of Michigan as to
the [good standing] [existence] of Seller.
ASSUMPTIONS
For purposes of this opinion, we assume the following:
The genuineness of all signatures, the legal capacity of
natural persons, the authenticity of all documents submitted to
us as originals, the conformity with the original documents of
all documents submitted to us as certified, photostatic or
reproduced copies and the authenticity of such;
The authenticity and accuracy of all oral or written
certifications and statements of fact upon which we are relying;
and
The due authorization, execution and delivery of the
Agreement and other agreements of Buyer required thereby by
Buyer, and that all such agreements, including the Agreement, are
the legal, valid and binding obligations of Buyer enforceable
against it in accordance with their respective terms.
OPINION
Based upon and subject to the foregoing and the
qualifications set forth at the end of this opinion, we are of
the opinion that:
Seller is a limited partnership organized, validly existing
and registered as a limited liability limited partnership under
the laws of the State of Colorado.
Seller has all requisite partnership power and authority to
execute, deliver and perform, as of the Closing Date, the Asset
Purchase Agreement and all other agreements of Seller required
thereby.
To our knowledge, the execution, delivery and performance by
Seller, as of the Closing Date, of the Agreement, and of each
other agreement of Seller required thereby, will not violate the
Partnership Agreement and will not violate any provision of any
agreement, instrument, license, order, arbitration award,
judgment or decree to which Seller is a party known to us.
The Agreement and each other agreement of Seller required
thereby have been duly executed and delivered by Seller and each
constitutes a valid and binding obligation of Seller, enforceable
against it in accordance with their respective terms.
To our knowledge, there is no litigation or other proceeding
before any court or administrative agency pending or threatened
against Seller which questions the validity of, or which would
prevent consummation of the transactions contemplated by, the
Agreement or such other agreements of Seller required thereby,
other than proceedings affecting the cable television industry
generally and to which Seller is not specifically a party and
proposed federal and state laws affecting the cable television
industry generally.
QUALIFICATIONS
Our opinion set forth in paragraph 1 above as to the
existence of Seller under the laws of the State of Colorado is
based solely upon the Colorado Certificate.
Our opinion as to the enforceability of the Agreement, as
set forth in paragraph 4 above, is subject to the qualifications
that (1) enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer, and other similar laws, now or hereafter in effect, and
(2) the remedies of specific performance and injunctive relief
and other forms of equitable relief are subject to equitable
defenses and to the discretion of the court before which any
proceeding therefor may be brought.
In all instances, to the extent that any opinion herein is
stated to be to our knowledge or known to us , we have relied,
with your consent, solely on a certificate of one or more
officers of the Seller (the Officers Certificate ) and on the
absence of contrary knowledge by those attorneys presently
practicing with our firm who have given substantive attention to
the transaction contemplated by the Agreement, but we have
otherwise neither investigated nor attempted to verify any of
such matters. A form of the Officers Certificate is attached
hereto as Annex A.
We express no opinion as to Seller s right, title and
interest to any of the Assets.
This opinion is based solely upon existing laws, rules and
regulations.
The opinion is limited to the matters stated herein and no
opinion is implied or may be inferred beyond the matters
expressly stated.
This opinion is being furnished to you for your own use. No
other use or distribution may be made without our prior written
consent.
This opinion is given as of the date hereof, and we
specifically disclaim any duty or obligation to advise you of any
future changes in the foregoing or to otherwise update the
opinions expressed herein.
We express no opinion as to any laws other than the laws of
the United States of America and the laws of the State of
Colorado. Notwithstanding the foregoing, we express no opinion
with respect to matters of federal law relating to the
Communications Act of 1934, as amended, and any rules and
regulations of the Federal Communications Commission thereunder.
We call your attention to the fact that the Agreement
provides that it is to be governed by and construed in accordance
with the laws of the State of Michigan. These opinions have been
rendered as if the Agreement was governed in all respects by the
laws of the State of Colorado, without giving effect to
principles of conflict of laws, and we have assumed that Michigan
law is the same as Colorado law in all relevant aspects.
Very truly yours,
BAKER & HOSTETLER LLP
-- See attached --
<PAGE>
EXHIBIT 8.3.9
OPINION OF COLE, RAYWID & BRAVERMAN, L.L.P.
[Date]
Bresnan Communications Company
709 Westchester Avenue
White Plains, New York 10604
Ladies and Gentlemen:
This opinion letter is provided to you pursuant to
the provisions of Section 8.3.9 of the Asset Purchase Agreement
(the "Agreement") dated as of October 16, 1997 by and between
Bresnan Communications Company ("Bresnan") and Rifkin Acquisition
Partners. L.L.L.P. ("Rifkin"). The opinions expressed herein
relate only to the cable television systems owned and operated by
Rifkin serving the communities listed on Exhibit A attached
hereto (hereinafter individually referred to as a "System" and
collectively as the "Systems"). Unless otherwise defined herein,
capitalized terms used in this opinion shall have the respective
meanings ascribed to them in the Agreement.
We have acted as special communications counsel to
Rifkin in connection with the Agreement. Our role as special
counsel to Rifkin has been limited to matters specifically
arising under the Communications Act of 1934, as amended (the
"Communications Act"), the rules and regulations of the Federal
Communications Commission (the "FCC"), Section 111 of the
Copyright Act of 1976, as amended (the "Copyright Act"), and the
rules and regulations of the United States Copyright office (the
"Copyright Office") pertaining to Section 111 of the Copyright
Act. Our opinion is strictly limited to those areas of
compliance in the Communications Act, FCC regulations and
Copyright Act that are set forth in this opinion. We do not
express opinions herein concerning the laws of any jurisdiction
other than the specific laws of the United States of America
identified above to the extent applicable hereto.
In our capacity as special communications counsel
and in order to provide the opinions rendered herein, we have
examined a copy of the Agreement and the available public records
of the FCC and the Copyright Office specifically relating to the
Systems that we located in the public reference room of each such
federal agency's Washington D.C., office on ____________, 1997.
We have also examined such other documents and papers and have
made such investigations as we have considered necessary or
appropriate as a basis for the opinions hereinafter set forth.
In rendering the opinions herein expressed, we have assumed: (i)
the genuineness of all signatures on documents submitted to us;
(ii) the legal capacity of natural persons; (iii) the
authenticity and completeness of all documents submitted to us as
originals; (iv) the conformity with original documents of all
documents submitted to us as certified, conformed or photostatic
copies or facsimiles; (v) the authority of the person or persons
who executed any such documents on behalf of any person or
entity; (vi) that such person or entity has all the requisite
power and authority and has fulfilled all necessary procedures to
take and adopt the actions, or enter into the agreements, set
forth in such documents executed by him or it or on his or its
behalf and to effect the actions contemplated thereby; and (vii)
that such agreements constitute the legal, valid and binding
obligations of such parties.
As to factual matters relevant to the opinions set
forth herein, we have also assumed, and relied upon without any
independent inquiry or verification by us, the accuracy and
completeness of (i) all records of Rifkin and the Systems made
available to us; (ii) all statements, representations and
warranties set forth in the Agreement; (iii) all certificates
provided and statements made to us by agents and representatives
of Rifkin; (iv) statements of government officials concerning the
Systems and Rifkin, and (v) the publicly available records of the
FCC and the Copyright Office at the time of examination by us,
and the absence of changes since the date of our examination.
As to factual matters relevant to the opinions set
forth herein, whenever a statement herein is indicated to be
based on our knowledge, it is intended to signify that during the
course of our representation of Rifkin in connection with the
Agreement, no information has come to the attention of the
attorneys in our firm involved in the preparation of this opinion
that would give those attorneys actual knowledge of the
inaccuracy of such statement. Other than our review of documents
and papers and the review of the available public records of the
FCC and Copyright Office described above, we have not undertaken
any independent investigation to determine the accuracy of any
such statements and no inference as to our knowledge of the
accuracy of any such statements should be drawn from our serving
as special communications counsel to Rifkin.
The opinions stated herein relate only to the
Systems, as described to us by Rifkin and its agents. The
opinions stated herein are limited strictly to such areas of
compliance as can be demonstrated by the available public records
of the FCC and the Copyright Office described above and do not
purport to cover areas of compliance that can be determined only
through an inspection of the Systems, their work product, records
or operations. We have not searched the docket files of any
court. We express no opinions regarding technical, engineering
or franchising matters, or matters relating to the FCC's
ownership regulations and policies. Our opinions are limited to
the matters stated herein and no opinions may be implied or
inferred beyond the matters expressly stated herein. The
opinions stated herein are as of the date of this letter and we
undertake no obligation to advise you of any changes that may
occur thereafter.
On the basis of the foregoing, and subject to the
assumptions, limitations and exceptions contained herein, it is
our opinion that:
1. (a) Rifkin holds the FCC licenses listed in
Exhibit B attached hereto (collectively, the "FCC Licenses") and
to our knowledge, each such FCC License is currently valid and
has not been revoked by the FCC. To our knowledge, based solely
on the Systems' current operations as described by Rifkin or its
agents, Exhibit B lists all FCC licenses that are required by the
FCC for Rifkin to operate each System as presently operated,
except for those licenses which, if absent, would not have a
material adverse effect on the Systems' operations taken as a
whole. Except as set forth on Exhibit B, the assignment of the
FCC Licenses to the Buyer has been approved by the FCC, to the
extent such approval is required, and, to our knowledge, such
assignment authorizations are currently valid and have not been
revoked.
(b) The execution, delivery and performance by
Rifkin of the Agreement will not result in any violation of the
Communications Act or the rules or regulations of the FCC, and
will not cause any forfeiture or impairment of any of the FCC
Licenses, provided that the Buyer complies with the
Communications Act and the rules and regulations of the FCC,
including, but not limited to, cross-ownership restrictions.
2. Except as noted in Exhibit C attached hereto and
except for filings and reports which, if not submitted to the
FCC, would not have a material adverse effect on the operations
of any System or the operations of the Systems taken as a whole,
to the extent required under the Communications Act and the FCC's
regulations, Rifkin has submitted to the FCC: (i) registration
statements for each of the communities identified in Exhibit A;
(ii) annual signal leakage reports on FCC Form 320 for the 1995
and 1996 reporting periods for each System; (iii) annual reports
on FCC Form 325 (Schedule A) for the 1994 reporting period for
each System; and (iv) based on the representations of Rifkin or
its agents concerning the number of employees in Rifkin's
relevant FCC employment units, annual FCC EEO reports on Form
395A in 1991-1997 covering each of the FCC employment units
relevant to the Systems. Except as noted on Exhibit C attached
hereto, the FCC employment units covering the Systems that have
been required under the FCC's regulations to file annual
employment reports have been certified by the FCC for compliance
with the FCC's EEO requirements for each annual reporting period
from 1991 through 1996. To our knowledge, the FCC has not acted
on the 1997 EEO reports on FCC Form 395-A filed by Rifkin
covering the FCC employment units relevant to the Systems. We
express no opinion regarding the accuracy or completeness of any
such statements, reports or forms.
3. To our knowledge, based on the information
provided to us by Rifkin or its agents concerning the restricted
frequencies used on the Systems and the coverage areas of the
Systems, all frequencies within the restricted aeronautical and
navigational bands (i.e., 108-137 MHz and 225-400 MHz) that are
currently being used on each System have been authorized in all
material respects for such use by the FCC.
4. Except as noted in Exhibit C hereto and except
with respect to general rulemakings and similar matters relating
generally to the cable television industry (in each case on a
national, regional or state basis) and rate or marketing matters
arising under 47 U.S.C. Section 543, to our knowledge: (i) there is no
current adverse FCC judgment, decree or order which has been
issued specifically involving the ongoing operations of any
System or involving Rifkin with respect to the Systems; and (ii)
there is no FCC action, proceeding or investigation pending or,
based solely upon representations of Rifkin, threatened by the
FCC against any System or Rifkin that, if adversely determined,
is reasonably likely to have a material adverse effect on the
operation of any System or on the operations of the Systems taken
as a whole. Except as disclosed in the Agreement and the
Schedules to the Agreement and except as noted in Exhibit C
hereto, based solely upon the representations of Rifkin or its
agents and our review of the unofficial log reports for the FCC
Form 328 and Form 329 prepared by the FCC or its independent
contractor, to our knowledge, as of _____________ no franchising
authority has submitted Form 328 to the FCC requesting FCC
certification to regulate the rates charged by Rifkin for basic
cable service; and (y) there is no pending complaint on FCC Form
329 concerning rates charged by Rifkin for cable programming
service. It is possible that there may be matters pending before
the FCC relating to the Systems or Rifkin of which we do not have
knowledge because such matters have not yet been incorporated
into the available public files of the FCC.
5. All Statements of Account (collectively the
"Copyright Filings") that are required to be filed by Rifkin
under Section 111 of the Copyright Act for the semi-annual
accounting periods beginning with the first accounting period of
1994 through the date hereof in connection with the
retransmission of any broadcast television signals by Rifkin on
each System during such accounting periods have been filed with
the Copyright Office. We have not conducted an audit of the
Copyright Filings and related royalty payments and therefore
express no opinion as to whether the amounts of the royalty
payments or the statements or the representations made in the
Copyright Filings are correct. Based solely upon the
representations of Rifkin or its agents and on our review of the
Copyright Office's available public records described above, to
our knowledge there are no inquiry letters issued by the
Copyright Office to Rifkin concerning any of the Copyright
Filings or related royalty payments made by Rifkin with respect
to the Systems for the semi-annual accounting periods identified
above. It is possible that there may be matters pending before
the Copyright Office relating to the Copyright Filings, the
Systems or Rifkin of which we do not have knowledge because such
matters have not yet been incorporated into the available public
files of the Copyright Office.
This opinion letter is solely for your information
in connection with the transaction described herein and it may
not be quoted in whole or in part or otherwise referred to, nor
may it be filed with or furnished to any governmental agency or
other person, without the prior written consent of this firm,
provided, however, that the Buyer's lending institutions which
are providing financing in connection with the transactions
contemplated by the Agreement may rely upon this opinion letter
as if such letter were addressed to such institutions subject to
the assumptions, limitations and exceptions contained herein.
This letter may not be relied upon by any other person for any
other purposes whatsoever.
Sincerely,
COLE, RAYWID & BRAVERMAN,
L.L.P.
By:_________________________________
A Member of the Firm
EXHIBIT 8.3.9
Form of Opinion Letter of FCC Counsel
-- See attached --
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001011701
<NAME> RIFKIN ACQUISITION CAPITAL CORP
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,903
<SECURITIES> 0
<RECEIVABLES> 1,371
<ALLOWANCES> 426
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 138,930
<DEPRECIATION> 26,592
<TOTAL-ASSETS> 302,040
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 229,500
0
0
<COMMON> 0
<OTHER-SE> 39,823
<TOTAL-LIABILITY-AND-EQUITY> 299,833
<SALES> 0
<TOTAL-REVENUES> 84,325
<CGS> 0
<TOTAL-COSTS> 84,103
<OTHER-EXPENSES> 7,835
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,765
<INCOME-PRETAX> (31,378)
<INCOME-TAX> (5,335)
<INCOME-CONTINUING> (26,043)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,043)
<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>
