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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _________
Commission file number 333-3774
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CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS CAPITAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 43-1728405
43-1740264
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (314) 965-0555
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
None
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 Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated into this Report by reference: _____
Total Pages: _____
Exhibit Index: Page ___
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CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS CAPITAL CORPORATION
1996 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
PART I
Item 1. Business ......................................................................................... 3
Item 2. Properties ....................................................................................... 17
Item 3. Legal Proceedings ................................................................................ 18
Item 4. Submission of Matters to a Vote of Security Holders .............................................. 18
Part II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters ............................ 19
Item 6. Selected Financial Data ......................................................................... 19
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ............ 20
Item 8. Financial Statements and Supplementary Data ...................................................... 27
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............. 27
Part III
Item 10. Directors and Executive Officers of the Registrant .............................................. 28
Item 11. Executive Compensation .......................................................................... 28
Item 12. Security Ownership of Certain Beneficial Owners and Management .................................. 29
Item 13. Certain Relationships and Related Transactions .................................................. 30
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ................................ 33
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
Charter Communications Southeast Holdings, L.P. ("Charter Holdings") was formed
as a Delaware limited partnership in 1995 and is a holding company for other
limited partnerships and corporations that own and operate cable television
systems in the southeastern region of the United States (collectively referred
to as the "Partnership").
Charter Communications Southeast Holdings Capital Corporation ("Holdings
Capital") was formed in 1996 as a Delaware corporation to be a wholly-owned
subsidiary of Charter Holdings and for the exclusive purpose of serving as a
co-issuer with Charter Holdings for the Senior Secured Discount Debentures due
2007 that were issued in March 1996 (see "--Major Transactions in 1996").
Charter Holdings and Holdings Capital, referred to together herein as the
"Registrants", maintain their principal executive offices at 12444 Powerscourt
Drive, Suite 400, St. Louis, Missouri 63131 and their telephone number is (314)
965-0555.
The Partnership receives management services and administrative support for its
operations from Charter Communications, Inc. ("Charter") pursuant to the terms
of a Management Agreement. See "Item 13. Certain Relationships and Related
Transactions.". Charter is a privately-held multi-system operator and manager
of cable television systems serving in excess of one million subscribers.
Charter has an indirect equity interest in Charter Holdings. See "Item 12.
Security Ownership of Certain Beneficial Owners and Management".
The Partnership acquired its cable televisions systems (the "Systems") in a
series of transactions commencing in April 1994. At December 31, 1996, the
Systems served an aggregate of approximately 331,000 basic subscribers, of
which 85% were located within five clusters: the
Greenville-Spartanburg/Asheville Cluster in western North Carolina and South
Carolina; the Atlanta cluster in the suburban corridor south of Atlanta,
Georgia; the northern Alabama Cluster near Huntsville and Birmingham; the New
Orleans Cluster in the suburban areas north of New Orleans, Louisiana; and the
Nashville Cluster in the suburban areas northwest of Nashville, Tennessee. The
remaining 15% of the Partnership's basic subscribers do not reside within the
aforementioned clusters.
ORGANIZATIONAL STRUCTURE
The general partner of Charter Holdings is Charter Communications Holdings
Properties, Inc. ("Holdings Properties"). Charter Holdings has direct and
indirect ownership of 100% of the outstanding equity interests in Charter
Communications Southeast, L.P. ("Charter Southeast"), which, in turn, serves as
a holding company for certain subsidiary entities that own cable television
systems. The operating subsidiary entities are Charter Communications, L.P.
("CC-I") and Charter Communications II, L.P. ("CC-II," which for purposes of
this report, shall be deemed to include its subsidiaries, Charter
Communications III, L.P. and Peachtree Cable TV, Inc.). Charter Holdings and
its general partner, in turn, are directly and/or indirectly owned by another
holding company, CharterComm Holdings, L.P. (See "Item 12. Security Ownership
of Certain Beneficial Owners and Management").
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A summary of the organizational structure of the Registrants is set forth
below.
ORGANIZATIONAL STRUCTURE OF
CHARTER HOLDINGS AND HOLDINGS CAPITAL
[STRUCTURE CHART]
MAJOR TRANSACTIONS IN 1996
In March 1996, Charter Holdings and Holdings Capital co-issued $146,820,000
principal amount at maturity of Senior Discount Debentures due 2007
(representing a yield from the date of issuance to maturity of 14%) (the
"Debentures"). Concurrent with the issuance of the Debentures, Charter
Southeast, a subsidiary of Charter Holdings, and Charter Communications
Southeast Capital Corporation, a wholly-owned subsidiary of Charter Southeast,
co-issued $125.0 million principal amount of 11-1/4% Senior Notes due 2006 (the
"Senior Notes"). These two concurrent offerings of Debentures and Senior Notes
are referred to as the "Offerings." Net proceeds of approximately $72.4
million from the Debentures offering, combined with net proceeds of
approximately $121.3 million from the Senior Notes offering, were applied as
follows: (a) $15.0 million to repay bridge notes to Charterhouse Equity
Partners II, L.P.; (b) $1.1 million to repay a short-term intercompany note to
CC-I; (c) $61.5 million as a capital contribution to CC-I, which used the funds
to repay outstanding borrowings of $18.1, redeem $43.2 million of outstanding
special limited partnership interests and pay $.2 million of transaction costs;
(d) $114.9 million as a capital contribution to CC-II, which used the funds to
consummate the acquisition of systems from Cencom Cable Income Partners, L.P.
("CCIP") and pay related transaction costs; and (e) pay $1.2 million of
transaction costs. See "Item 13. Certain Relationships and Related
Transactions."
In connection with the issuance of the Debentures and the Senior Notes, the
Partnership's operating subsidiaries amended and restated their credit
facilities (see "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations") and Charter Holdings entered into a
Management Agreement with Charter that effectively provides services for all of
the Partnership's operations and replaced various management agreements then in
effect between certain subsidiaries and Charter. See "Item 13. Certain
Relationships and Related Transactions."
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In January 1996, CC-II acquired a cable television system serving certain
communities in South Carolina with an aggregate of approximately 4,500 basic
subscribers for an aggregate purchase price of $8.7 million, after closing
adjustments.
On March 29, 1996, CC-II acquired cable television systems serving
approximately 53,900 subscribers located in and around Fort Gordon, Georgia,
Camp Lejeune, North Carolina, Clarksville, Tennessee, Hopkinsville, Kentucky
and Tryon, North Carolina. These systems were acquired from CCIP, the general
partner of which is an affiliate of Charter, for an aggregate purchase price of
$112.1 million, after closing adjustments (the "CCIP Acquisition"). See "Item
3. Legal Proceedings" and "Item 13. Certain Relationships and Related
Transactions."
On November 29, 1996, CC-I acquired cable television systems serving certain
communities in Alabama and Tennessee with an aggregate of approximately 13,600
subscribers on that date, for an aggregate purchase price of $21.9 million,
after closing adjustments.
PROPOSED ACQUISITIONS
On May 30, 1996, CC-II entered into an Asset Purchase Agreement with Cencom
Cable Income Partners II, L.P. ("CCIP-II") to acquire the cable televisions
systems located in Anderson County, South Carolina, for a purchase price of
$36.7 million. The Anderson County systems served approximately 20,800
subscribers at December 31, 1996.
On April 26, 1996 (and amended and restated on January 16, 1997), CC-II
entered into an Asset Purchase Agreement with Cencom Partners, L.P. ("CPLP") to
acquire the assets of a cable television system located in Abbeville, South
Carolina for purchase prices of $4.2 million. The Abbeville system served
approximately 2,500 subscribers at December 31, 1996.
On May 30, 1996 (and amended and restated on January 16, 1997), CC-II entered
into an Asset Purchase Agreement with Cencom Partners, L.P. ("CPLP") to acquire
the assets of a cable television system located in Lincolnton, North Carolina
for purchase prices of $27.5 million. The Lincolnton system served
approximately 14,800 subscribers at December 31, 1996.
On May 30, 1996 (and amended and restated on January 16, 1997), CC-I entered
into an Asset Purchase Agreement with CPLP to acquire the assets of a cable
television system located in Sanford, North Carolina serving 12,600 subscribers
at December 31, 1996, for a purchase price of $20.8 million.
The general partner of each of CPLP and CCIP-II is an affiliate of Charter.
Furthermore, each of CPLP and CCIP-II is currently in the process of
dissolution. Each of the above acquisitions (collectively referred to as the
"CCIP-II/CPLP Acquisition") is subject to the prior approval of the holders of
a majority of the outstanding limited partnership interests of CCIP-II, which
approval is currently being sought by written consent. Subject to the
satisfaction of certain terms and conditions, including the favorable votes of
the limited partners of CCIP-II, it is currently expected that these
acquisitions will be consummated in the second quarter of 1997, although there
can be no assurance that these acquisitions will be consummated. See "Item 13.
Certain Relationships and Related Transactions."
RECENT DEVELOPMENTS
On February 7, 1997, CC-II acquired a cable television system serving Hickory,
North Carolina serving approximately 35,400 subscribers, for a purchase price
of approximately $68.1 million, after closing adjustments.
On February 28, 1997, Charter Holdings received $30 million of additional
limited partnership contributions as well as the contribution of the assets and
related liabilities of a certain cable television system serving areas in and
around Stockbridge, Georgia. The Stockbridge system, which had an appraised
value of approximately $3.67 million, was contributed to Charter Southeast
which, in turn, contributed such system to CC-II. The additional capital was
contributed to Charter Southeast which, in turn, contributed $5.0 million of
such capital to CC-I and $25.0 million of such capital to CC-II, to be
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ultimately used toward the proposed CCIP-II/CPLP Acquisition. Pending
consummation of the CCIP-II/CPLP Acquisition, the equity contribution was used
to pay down outstanding indebtedness under the credit facilities of CC-I and
CC-II. See "Item 13. Certain Relationships and Related Transactions."
THE CABLE TELEVISION INDUSTRY
Most cable television systems offer a variety of channels and programming and,
in recent years, more sophisticated systems with greater channel capacity have
increased the potential number of programming offerings available to
subscribers and, consequently, the potential revenue available per subscriber.
Present day state-of-the-art cable television systems are capable of providing
36 to 108 channels of programming. See "--Marketing, Programming and Rates."
A cable television system consists of two principal operating components: one
or more signal origination points called "headends" and a signal distribution
system. It may also include program origination facilities. Each headend
includes a tower, antennae or other receiving equipment at a location favorable
for receiving broadcast signals and one or more earth stations that receive
signals transmitted by satellite. The headend facility also houses the
electronic equipment which amplifies, modifies and modulates the signals,
preparing them for passage over the system's network of cables.
The signal distribution system consists of amplifiers and trunk lines which
originate at the headend and carry the signal to various parts of the system,
smaller distribution cable and distribution amplifiers which carry the signal
to the immediate vicinity of the subscriber and drop lines which carry the
signal into the subscriber's home. In the past several years, many cable
operators have utilized fiber optic technology (in place of, or in combination
with, coaxial cable) to transmit signals through the primary trunk lines.
SUBSCRIBER DATA OF THE PARTNERSHIP SYSTEMS
The following table sets forth a summary of subscriber data (rounded to the
nearest hundred) of the Systems as of the dates indicated:
<TABLE>
<CAPTION>
As of December 31,
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1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Basic Subscribers:
Greenville-Spartanburg/Asheville Cluster 78,100 71,100 0
Atlanta Cluster 62,400 57,700 33,700
Northern Alabama Cluster 62,400 47,800 17,600
New Orleans Cluster 35,600 35,400 34,400
Nashville Cluster 42,400 0 0
Non-Cluster Systems 49,700 37,100 13,300
------- ------- ------
330,600 249,100 99,000
======= ======= ======
Premium Subscriptions:
Greenville-Spartanburg/Asheville Cluster 30,400 26,400 0
Atlanta Cluster 23,700 22,400 12,500
Northern Alabama Cluster 27,000 50,400 9,000
New Orleans Cluster 16,800 19,100 19,800
Nashville Cluster 22,800 0 0
Non-Cluster Systems 30,500 23,900 7,900
------- ------- ------
151,200 142,200 49,200
======= ======= ======
</TABLE>
See "Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of subscriber data.
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MARKETING, PROGRAMMING AND RATES
The Systems' marketing program is based upon offering various packages of cable
services designed to appeal to different market segments. Charter, in its
capacity as manager of the Systems, performs and utilizes market research on
selected Systems, compares the data to national research and tailors a
marketing program for each individual market. The Partnership utilizes a
coordinated array of marketing techniques to attract and retain subscribers,
including door-to-door solicitation, telemarketing, media advertising and
direct mail solicitations, gain new subscribers and increase basic and premium
penetration in the communities served by the Systems.
Although services vary from system to system because of differences in channel
capacity, viewer interests and community demographics, each of the individual
Systems offers a "basic service tier," consisting of local television channels
(network and independent stations) available over-the-air, local public
channels and governmental and leased access channels. The individual Systems
also offer an expanded basic tier of television stations relayed from distant
cities, specialized programming delivered via satellite and various
alpha-numeric channels providing information on news, time, weather and the
stock market. In addition to these services, the Systems typically provide one
or more premium services purchased from independent suppliers and combined in
different formats to appeal to the various segments of the viewing audience,
such as Home Box Office, Cinemax, Showtime, The Movie Channel and the Disney
Channel. A "premium service unit" is a single premium service for which a
subscriber must pay an additional monthly fee in order to receive the service.
Subscribers may subscribe for one or more premium service units. The Systems
also receive revenues from the sale or monthly use of certain equipment (e.g.,
converters, wireless remote control devices, etc.) and from cable programming
guides, with some Systems offering enhanced audio services. Certain of the
Systems also generate revenues from the sale of advertising spots on one or
more channels, from the distribution and sale of pay-per-view movies and
events, and from commissions resulting from subscribers participating in home
shopping.
Rates to subscribers vary from market to market and in accordance with the type
of service selected and the rates currently charged by the Systems reflect
reductions effected in response to the implementation of the 1992 Cable Act
(as hereafter defined). A one-time installation fee, which may be partially
waived during a promotional period, is charged to new subscribers. The
practices of the Partnership regarding rates are consistent with the current
practices in the industry. See Item 1 - "Regulation of the Cable Television
Industry" for a discussion of rate setting.
FRANCHISES
The Systems operate pursuant to an aggregate of 237 non-exclusive franchises,
permits or similar authorizations issued by governmental authorities.
Franchises or permits are awarded by a governmental authority and generally are
not transferable absent the consent of the authority. Most of the franchises
pursuant to which the Systems operate may be terminated prior to their stated
expiration by the granting authority, after due process, following a breach of
a material provision. Currently, 29 of the Partnership's 237 franchises,
serving approximately 16% of the Partnership's subscribers in the aggregate,
were within a three-year window period for renewal. Under the terms of most of
the franchises, a franchise fee of up to five percent (5%) of the gross
revenues derived by a cable system from the provision of cable television
services (the maximum amount that may be charged by a franchising authority
under the 1992 Cable Act) is payable to the franchising authority.
The Cable Acts, as herein defined, provide for an orderly franchise renewal
process in which franchise renewal may not be unreasonably withheld. If a
renewal is withheld and the franchising authority acquires ownership of the
cable system or effects a transfer of ownership to another party, the franchise
authority must pay the cable operator the "fair market value" for the system
covered by such franchise. The Cable Acts also establish comprehensive renewal
procedures requiring that an incumbent franchisee's renewal application be
assessed on its own merit and not as part of a comparative process with
competing applications. In connection with the franchise renewal process, many
governmental authorities require the cable operator to commit to making certain
technological upgrades to the system, which may require substantial capital
expenditures.
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CERTAIN REGULATORY AND LEGISLATIVE DEVELOPMENTS
The cable television industry is subject to extensive regulation by federal,
local and, in some instances, state government agencies. The Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act")
significantly expanded the scope of cable television regulation on an
industry-wide basis by imposing rate regulation, requirements related to the
carriage of local broadcast station, customer service obligations and other
requirements. Under the FCC's initial rate regulations pursuant to the 1992
Cable Act, regulated cable systems (i.e., those systems not subject to
effective competition) were required to apply a benchmark formula to determine
their maximum permitted rates. Those systems whose rates were above the
benchmark on September 30, 1992, were required to reduce their rates to the
benchmark or by 10%, whichever was less. Under revised rate regulations
adopted in February 1994, regulated cable systems were required to set their
rates so that regulated revenues per subscriber did not exceed September 30,
1992 levels, reduced by 17% (taking into account the previous 10% reduction).
On June 15, 1995, the FCC released new rules to reduce the substantive and
procedural burdens of rate regulation applicable to small cable systems (i.e.,
cable systems servicing 15,000 or fewer subscribers that are owned by a cable
company which served, in the aggregate, 400,000 or fewer subscribers at the
time such rules went into effect). Cable companies falling outside of this
definition may petition the FCC for small company treatment if they can
demonstrate similar circumstances. The FCC's new small cable systems rules
amended the FCC's previous definitions of small cable entities to encompass a
broader range of cable systems that are eligible for special rate and
administrative treatment. Specifically, the new rules create a new
cost-of-service approach for the purpose of determining the rate applicable to
a small cable system using a five-element calculation based on a system's
costs. See "--Regulation and Legislation - Small Cable Systems."
On February 1, 1996, Congress passed the Telecommunications Act of 1996 ( the
"Telecommunications Act" and, together with the 1992 Cable Act, the "Cable
Acts"). The Telecommunications Act was signed into law by the President on
February 8, 1996, and substantially amends the Communications Act of 1934 (the
"Communications Act") (including the re-regulation of subscriber rates under
the 1992 Cable Act). The Telecommunications Act alters federal, state and
local laws and regulations pertaining to cable television, telecommunications
and other services.
Certain provisions of the Telecommunications Act could materially affect the
growth and operation of the cable television industry and the cable services
provided by the Partnership. Although the new legislation is expected to
substantially lessen regulatory burdens, the cable television industry may be
subject to additional competition as a result thereof. There are numerous
rulemakings which have been, and which will be undertaken by the FCC which will
interpret and implement the Telecommunications Act's provisions. In addition,
certain provisions of the Telecommunications Act (such as the deregulation of
cable programming rates) are not immediately effective. Furthermore, the
legality of certain of the Telecommunications Act's provisions have been and
are likely to continue to be, judicially challenged, and the FCC's regulations
implementing the Telecommunications Act may be appealed for reconsideration by
the FCC. The Partnership is unable at this time to predict the outcome of such
rulemaking or litigation or the substantive effect (financial or otherwise) of
the new legislation and the rulemakings on the Partnership.
REGULATION AND LEGISLATION
The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. In addition, recent
legislative and regulatory changes and additional regulatory proposals under
consideration may materially affect the cable television industry. The Cable
Acts, both of which amended the Communications Act, establish a national policy
to guide the development and regulation of cable television systems. The
Communications Act was recently substantially amended by the Telecommunications
Act, which alters federal, state and local laws pertaining to cable television,
telecommunications and other services. Principal responsibility for
implementing the policies of the Cable Acts is allocated between the FCC and
state or local franchising authorities.
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Cable Acts and FCC Regulation
The Cable Acts and the FCC's implementing rules establish, among other things,
(i) rate regulations, (ii) "anti-buy through" provisions, (iii) "must carry"
and "retransmission consent" requirements, (iv) rules for franchise renewals
and transfer, and (v) other regulations covering a variety of operational
areas.
The 1992 Cable Act and the FCC's rules implementing the 1992 Cable Act
generally have increased the administrative and operational expenses of cable
television systems and have resulted in additional regulatory oversight by the
FCC and local franchise authorities. The Partnership is not able to predict
the ultimate effect of the 1992 Cable Act or the ultimate outcome of various
FCC rulemaking proceedings or the litigation challenging various aspects of the
1992 Cable Act and the FCC regulations implementing the 1992 Cable Act.
Rate Regulation. The Cable Acts and FCC regulations have imposed rate
requirements for basic services and equipment. Under the 1992 Cable Act, a
local franchising authority in a community not subject to "effective
competition" (as defined in the 1992 Cable Act) generally is authorized to
regulate basic cable service rates after certifying to the FCC that, among
other things, it will adopt and administer rate regulations consistent with FCC
rules, and in a manner that will provide a reasonable opportunity to consider
the views of interested parties. The Telecommunications Act expands the
definition of "effective competition" to include any franchise area where a
local exchange carrier (or its affiliate) (or any multichannel video
programming distributor using the facilities of such carrier or its affiliate)
provides video programming services to subscribers by any means, other than
through DBS. The local exchange carrier must provide "comparable" programming
services in the franchise area. In regulating the basic service rates,
certified local franchise authorities have the authority to order a rate refund
of previously paid rates determined to be in excess of the maximum permitted
reasonable rates.
For a defined class of "small cable operators," the Telecommunications Act
immediately eliminates regulation of cable programming rates. To qualify as a
"small cable operator," the operator must serve in the aggregate fewer than one
percent of all U.S. subscribers and have affiliate gross revenues not exceeding
$250,000,000 and serve 50,000 or fewer subscribers in any franchise area. Rate
regulation of the basic service tier remains subject to regulation by local
franchising authorities under the Telecommunications Act, except under specific
circumstances for certain small cable operators. Rates for the basic service
tier of small cable operators are deregulated if the system offered only a
single tier of services as of December 31, 1994. See "--Small Cable Systems,"
below.
Under the 1992 Cable Act, rates for cable programming services not carried on
the basic service tier ("non-basic services") could be regulated by the FCC
upon the filing of a complaint by franchise authorities or subscribers that
indicates the cable operator's rates for these services are unreasonable.
Three rate complaints have been filed with the FCC with respect to certain of
the Partnership's cable programming service tiers, one of which has been filed
with respect to the Anderson County System. The General Partner does not
believe that these rate complaints, even if decided against the Partnership,
will have a material adverse effect on the Partnership. The Telecommunications
Act eliminates regulation of the cable programming service tier (non-basic
programming) as of March 31, 1999. In the interim, rate regulation of the
cable programming tier can only be triggered by a franchising authority
complaint to the FCC. A franchising authority complaint must be based on more
than one subscriber complaint, which must be filed within 90 days after a rate
increase. If the FCC determines that the Partnership's cable programming
service tier rates are unreasonable, the FCC has the authority to order the
Partnership to reduce cable programming service tier rates and to refund to
customers any overcharges occurring from the filing date of the rate complaint
at the FCC. While management believes that the Partnership has complied in all
material respects with the rate provisions of the 1992 Cable Act, in
jurisdictions that have not yet chosen to certify, refunds covering a one-year
period on basic service may be ordered upon future certification if the
Partnership is unable to justify its rates through a benchmark or
cost-of-service filing or small system cost-of-service filing pursuant to FCC
rules. The General Partner is unable to estimate at this time the amount of
refunds that may be payable by the Partnership in the event any of the
Partnership System's rates are successfully challenged by franchising
authorities or found to be unreasonable by the FCC, although it does not
believe that the amount of any such refunds would have a material adverse
effect on the Partnership. Notwithstanding mandated rate reductions, cable
operators currently may adjust their regulated rates to reflect inflation and
what the FCC has deemed to be external costs (such as increased in franchise
fees).
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In November 1994, the FCC adopted the so-called "going-forward rules" which,
among other things, allow cable operators to raise rates over the next three
years by adding channels to the expanded basic service tier. Under the revised
rules, cable operators were allowed to take a per channel markup of up to 20
cents for each channel added to the expanded basic service tier, with an
aggregate cap of $1.20 per subscriber per month. Accordingly, the Partnership
was permitted to adjust rates on January 1, 1995 for channel additions occurring
after May 14, 1994. In addition to rate adjustments permitted for additional
channels, the "going-forward rules" allowed cable operators to recover an
additional amount of 30 cents in the aggregate per subscriber per month for
license fees associated with adding new channels through 1996. The license fee
cap applied through December 31, 1996. (During the third year, license fees are
subject to the general rate rules.) Thus, through 1996 the allowable rate
increases for channel adjustments and license fees could have totaled up to
$1.50 per subscriber per month. Under the "going-forward rules," in 1997, cable
operators may make an additional flat fee increase of 20 cents per channel per
month for channels added during that year, provided that the rate increases made
by cable operators over the three year period (exclusive of license fees) do not
exceed $1.40 in the aggregate. For channels added after May 14, 1994, operators
electing to take advantage of the 20 cents per channel adjustment may not take a
7.5% markup on programming cost increases that are otherwise currently
permissible under the rate rules. The "going-forward rules" are scheduled to
expire on December 31, 1997.
The "going-forward rules" also allow cable operators to place channels that
were not offered on the cable system prior to October 1, 1994 on a new separate
unregulated service tier as long as the regulated basic and expanded basic
service tiers remain intact. Cable operators may offer the same new channels
simultaneously on both an expanded basic tier and a new unregulated service
tier, and may at any time move them to the new tier. Thus, operators may build
up a following for new channels by putting them in the expanded basic service
tier before moving them to the new unregulated service tier. Channels that
were in the basic service tier or the expanded service tier prior to September
30, 1994, may not be moved to the new tier, nor may such channels be dropped
from the basic or expanded basic service tiers and then added to a new tier
within the two-year period after the date upon which any such channel is
dropped.
In September 1995, the FCC developed an abbreviated cost-of-service form that
permits cable operators to recover the costs of significant upgrades that
provide benefits to subscribers of regulated cable services. Cable operators
seeking to raise rates to cover the cost of an upgrade would submit only the
costs of the upgrade instead of all current costs.
In another action in September 1995, the FCC established a new optional rate
adjustment methodology that encourages operators to limit their rate increases
to once per year to reflect inflation and changes in external costs and in the
number of channels. The rules permit cable operators to "project reasonable"
changes in their costs for the 12 months following the rate change (in an
effort to eliminate delays in recovering costs). The order also allows
operators to recover increases in additional types of franchise requirement
costs. Permitted pass-through increases include increases in the costs of
providing institutional networks, video services, data services to or from
governmental and educational institutions, and certain other cost increases.
The Partnership is unable to predict the effect of these new rate rules on its
business.
In November 1995, the FCC proposed to provide cable operators with the option
of establishing uniform rates for similar service packages offered in multiple
franchise areas located in the same region. Under the FCC's current rules,
cable operators subject to rate regulation must establish rates on a
franchise-specific basis. The FCC recently adopted an order that will permit a
cable television system operator to submit a proposal to establish uniform
rules across multiple franchise areas. The new rules could lower cable
operators' marketing costs and may also allow operators to better respond to
competition from alternative providers. The Partnership is unable to predict
whether these rules will be of any benefit to the Systems.
In April 1996, the FCC revised its cost-of-service rules. Since the adoption
of these new rules, the partnership has made cost-of-service filings for
several of its systems to provide justification for increased rates. Through
March 15, 1997, filings made were found to justify rates in two of the
partnership's Systems. There can be no assurance that other filings that have
been made or will be made will be found to justify an increased rate.
In July 1996, the FCC proposed to give operators more flexibility with respect
to the relative pricing of different tiers of service. Under this proposal,
once an operator has set rates in accordance with existing regulations, the
operator could decrease its basic service tier ("BST") rate and then take a
corresponding increase in its cable programming service tier
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<PAGE> 11
("CPST") rate to offset the lost revenue on the BST. In this proceeding, the
FCC has also asked parties to comment on whether it should place a limit on
the amount of any CPST rate increase or otherwise limit the amount by which the
BST and CPST rate may be adjusted.
The FCC expects that this proposal would give operators rate the structure
flexibility enjoyed by alternative providers of video service who are, or soon
will be, attempting to compete with cable operators but who are not subject to
the rate regulation imposed by statute on cable operators. The Partnership is
unable to predict whether these proposed rules will ultimately be promulgated
by the FCC, and if they are promulgated, what their effect on the Partnership
will be.
The uniform rate requirements in the 1992 Cable Act which require that cable
operators charge uniform rates through their franchise area are relaxed by the
Telecommunications Act. Specifically, the Telecommunications Act clarifies
that the uniform rate provision does not apply where a cable operator faces
"effective competition." In addition, bulk discounts to multiple dwelling
units are exempted from the uniform rate requirements. However, complaints
concerning "predatory" pricing (including with respect to bulk discounts to
multiple dwelling units) may be made to the FCC. The Telecommunications Act
also permits cable operators to aggregate, on a franchise system, regional or
company level, its equipment costs in broad categories. The Telecommunications
Act should facilitate the rationalization of equipment rates across
jurisdictional boundaries. However, these cost-aggregation rules do not apply
to the limited equipment used by subscribers who only receive basic
programming.
"Anti-Buy Through" Provisions. The 1992 Cable Act and corresponding FCC
regulations have established requirements for customers to be able to purchase
video programming on a per channel or per program basis without having to
subscribe to any tier of service (other than the basic service tier), subject
to available technology. The available technology exception sunsets on October
5, 2002. Although most of the Partnership's subscribers are served by systems
that offer addressable technology, most of the Partnership's subscribers do
not currently have the requisite equipment in their home to utilize such
technology. As a result, most of the Partnership Systems are currently exempt
from complying with the requirements of the 1992 Cable Act. The Partnership
cannot predict the extent to which this provision of the 1992 Cable Act and the
corresponding FCC rules may cause customers to discontinue optional nonbasic
service tiers in favor of the less expensive basic cable service.
"Must Carry" Requirements/Retransmission Consents." Under the 1992 Cable
Act, cable television operators are subject to mandatory broadcast signal
carriage requirements that allow local commercial and non-commercial
educational television broadcast stations to elect to require a cable system to
carry the station, subject to certain exceptions, or, in the case of commercial
stations, to negotiate for "retransmission consent" to carry the station. In
addition, there are requirements for cable systems to obtain retransmission
consent for all "distant" commercial television stations (except for
commercial/satellite-delivered independent "superstations" such as WTBS),
commercial radio stations and certain low power television stations carried by
such systems after October 6, 1993. The validity of mandatory signal carriage
requirements is being litigated in the United States Supreme Court, which heard
arguments on the must carry rule in October 1996; however, the carriage
requirements will remain in effect pending the outcome of such proceedings. As
a result of the mandatory carriage rules, the Partnership's Systems have been
required to carry television broadcast stations that otherwise would not have
been carried, thereby causing displacement of possible more attractive
programming. The retransmission consent rules have resulted in the deletion of
certain local and distant television broadcast stations which the Partnership's
Systems were carrying. To the extent retransmission consent fees were paid for
the continued carriage of certain television stations, such costs were not
recoverable. Any future amounts paid in exchange for retransmission consent,
however, may be passed along to subscribers as additional programming costs.
Franchise Matters. The 1984 Cable Act contains franchise renewal procedures
designed to protect against arbitrary denials of renewal. The 1992 Cable Act
made several changes to the renewal process that could make it easier for a
franchising authority to deny renewal. Moreover, even if a franchise is
renewed, a franchising authority may seek to impose new and more onerous
requirements, including requiring significant upgrades in facilities and
services or increased franchise fees. If a franchising authority's consent is
required for the purchase or sale of a cable television system, the franchising
authority may also seek to impose new and more onerous requirements as a
condition to the transfer. The acceptance of these new requirements, however,
may not be made a condition of the transfer. Historically, franchises have
been renewed for cable operators that have provided satisfactory services and
have complied with the terms of their
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franchises. Although the General Partner believes that the Partnership has
generally met the terms of its franchise agreements and has provided quality
levels of service, and anticipates that the Partnership's future franchise
renewal prospects generally will be favorable, there can be no assurance that
any such franchises will be renewed or, if renewed, that the franchising
authority will not impose more onerous requirements on the Partnership than
previously existed.
Other FCC Regulations. The Partnership is subject to a variety of other FCC
rules. covering such diverse areas as equal employment opportunity,
programming, maintenance of records and public inspection of files, technical
standards, leased access and customer service. The FCC has 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 often used in connection with cable
operations. The General Partner believes the Partnership is in compliance in
all material respects with all applicable FCC requirements.
Small Cable Systems. The FCC has implemented rules to reduce the substantive
and procedural burdens of rate regulation applicable to small cable systems
(i.e., cable systems serving 15,000 or fewer subscribers that are owned by or
affiliated with a cable company which served, in the aggregate, 400,000 or
fewer subscribers at the time such rules went into effect). Cable companies
falling outside of this definition may petition the FCC for small company
treatment if they can demonstrate similar circumstances. The FCC's small cable
systems rules amended the FCC's previous definitions of small cable entities
to encompass a broader range of cable systems that are eligible for special
rate and administrative treatment. In addition, these new rules made available
to this expanded category a new regulatory scheme which the FCC expects to
provide both rate relief and reduced administrative burdens. Specifically, the
new rules created a new cost-of-service approach involving a five-element
calculation based on a system's costs. The calculation will produce a per
channel rate for regulated services that will be presumed reasonable if it is
no higher than $1.24 per channel. If the formula generates a higher rate, the
operator may still charge that rate if not challenged by the franchise
authority, or if, upon being challenged, it meets its burden of proving that
the rate is reasonable. Under these new rules, the regulatory benefits
accruing to such small cable systems remain effective even if such small cable
systems are later acquired by cable companies which serve in excess of 400,000
subscribers. The Partnership applied to regulatory authorities for small cable
system rate relief with regard to most of its systems, and as to all such
applications on file, the time period in which to file a challenge has passed.
As to certain of such systems for which an application was filed, the status as
a small cable system has been challenged by other parties. However, none of
these challenges has been resolved by the FCC, and accordingly, in no instance
has the FCC yet denied status as a small cable system to any of the
Partnership's Systems.
1996 Telecommunications Act
On February 1, 1996, Congress passed the Telecommunications Act. The
Telecommunications Act was signed into law by President Clinton on February 8,
1996, and substantially amends the Communications Act (including the
re-regulation of subscriber rates under the 1992 Cable Act). The
Telecommunications Act alters federal, state and local laws and regulations
pertaining to cable television, telecommunications, and other services. In
addition to the amendments previously discussed in this section, the
legislation also allows additional competition in video programming by
telephone companies, and makes other revisions to the Communications Act and
the 1984 and 1992 Cable Acts.
Telephone Company Provision of Video Programming. Under the Telecommunications
Act, telephone companies can compete directly with cable operators in the
provision of video programming. The Telecommunications Act recognizes several
multiple entry options for telephone companies to provide competitive video
programming, including over their telephone facilities, through either common
carrier transport or an "open video system," by radio communication, or as a
regular cable system. LECs, including RBOCs, will be allowed to compete with
cable operators both inside and outside the LECs' telephone service areas. The
Telecommunications Act repeals the statutory ban on telephone company provision
of video programming services in the telephone company's service areas. The
FCC's video dialtone regulations have also been repealed. Pursuant to the
authority granted to the FCC in the Telecommunications Act, the FCC required
all video dialtone operators in order to continue to offer services, to elect
one of the four permissible options for telephone companies by November 6, 1996
(as discussed more fully below). Video dialtone operators were permitted to
apply for extensions based upon "good cause."
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In particular, if a telephone company provides video via radio communications,
it will be regulated under Title II of the Communications Act (the general
sections governing use of the airwaves), rather than cable regulation under
Title VI. If a telephone company provides common carriage transport of video
programming, it will be subject to the requirements of Title II of the
Communications Act (the general common carrier provisions), rather than Title
VI cable regulation. Telephone companies providing video programming through
any other means (other than as an "open video system," as described below) will
be regulated under Title VI cable regulation.
The Telecommunications Act replaces the FCC's video dialtone rules with an
"open video system" plan by which telephone companies can provide video
programming service in their telephone service area. Telephone companies that
comply with the FCC's open video system regulations (which must be prescribed
within six months from enactment) will be subject to a relaxed regulatory
scheme. The open video system requirements are in lieu of Title II common
carrier regulation.
The FCC was directed and has prescribed rules that prohibit open video systems
from discriminating among video programming providers with regard to carriage,
and that ensure that open video system rates, terms and conditions for service
are reasonable and non-discriminatory. Pursuant to the Telecommunications Act,
the FCC has also adopted regulations prohibiting an open video system operator
and its affiliates from occupying more than one-third of the system's activated
channels when demand for channels exceeds supply. The Telecommunications Act
also mandates other open video system regulations, including channel sharing
and sports exclusivity. Open video systems will be subject to the authority of
local governments to manage public rights-of-way. Local franchising
authorities may require open video system operators to pay franchise-type fees,
which may not exceed the rate at which franchise fees are imposed on any cable
operator in the corresponding franchise area.
Buyouts. The Telecommunications Act generally prohibits buyouts of cable
systems (which includes any ownership interest exceeding 10%) by LECs within
the LECs' telephone service area, cable operator buyouts of LEC systems within
the cable operator's franchise area, and joint ventures between cable operators
and LECs in the same markets. There are certain statutory exceptions,
including a rural exemption which permits buyouts where the purchased system
serves an area with fewer than 35,000 inhabitants outside an urban area. Also,
the FCC may grant waivers of the buyout provisions in cases where (1) the cable
operator or LEC would be subject to undue economic distress; (2) the cable
television system or facility would not be economically viable; or (3) the
anti-competitive effects of the proposed transaction are clearly outweighed by
the effect of the transaction in meeting community needs. The relevant local
franchising authority must approve any such waiver.
Public Utility Competition. The Telecommunications Act also authorizes
registered utility holding companies and their subsidiaries to provide video
programming services, notwithstanding the Public Utility Holding Company Act.
Utilities must establish separate subsidiaries for this purpose and must apply
to the FCC for operating authority. Several such utilities have been granted
broad authority by the FCC to engage in activities which could include video
programming.
Cross-Ownership; Reduced Regulations. The Telecommunications Act makes several
other changes to relax ownership restrictions and regulation of cable systems.
It repeals the 1992 Cable Act's three-year holding requirement pertaining to
sales of cable systems. The broadcast/cable cross-ownership restrictions are
eliminated, although the FCC's regulations prohibiting broadcast/cable common
ownership currently remain. The SMATV cable cross-ownership and the MMDS cable
cross-ownership restrictions have been eliminated for cable operators subject
to effective competition.
The Telecommunications Act amends the definition of "cable system" so that a
broader class of entities (including some which may compete with the
Partnership) providing video programming will be exempt from regulation as
cable systems under the Communications Act.
Pole Attachments. The Telecommunications Act also alters the scheme pertaining
to pole attachment rates (rates charged by telephone and utility companies for
delivery of cable services). The current method for determining rates will
continue for five years. The FCC recently adopted an Order to implement the
Telecommunications Act's pole attachment provisions, and is engaged in a
further proceeding regarding pole attachment rates. Any increases pursuant to
this new
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<PAGE> 14
formula may not begin for five years, and will be phased in over five
through ten in equal increments. However, this new FCC formula does not apply
in states which certify that they regulate pole rates.
Miscellaneous Requirements and Provisions. The Telecommunications Act also
imposes other miscellaneous requirements on cable operators, including an
obligation to fully scramble or block at no charge the audio and video portion
of any channel not specifically subscribed to by a household. In addition,
sexually explicit programming must be scrambled or blocked. If the cable
operator is unable to scramble or block its signal completely, it must restrict
transmission to those hours of the day when children are unlikely to view the
programming, as determined by the FCC. On March 24, 1997, the U.S. Supreme
Court let stand a lower court ruling that allows enforcement of this provision
pending consideration of a constitutional challenge. Enforcement of the
scrambling requirement could increase operating expenses for operators of cable
television systems, including the Partnership, and provide a competitive
advantage to less regulated providers of video programming services. The
Telecommunications Act also directs the FCC to adopt regulations to ensure, with
certain exceptions, that video programming is fully accessible through closed
captioning. The FCC recently released a report to Congress on the level at
which video programming is closed captioned. The FCC has also initiated another
proceeding to establish regulations to implement closed captioning requirements.
Although the Telecommunications Act may substantially lessen regulatory
burdens, the cable television industry may be subject to additional competition
as a result thereof. There are numerous rulemakings which have been, and which
will be undertaken by the FCC which will interpret and implement the provisions
of the Telecommunications Act. In addition, certain provisions of the
Telecommunications Act (such as the deregulation of cable programming rates)
are not immediately effective. Further, certain provisions of the
Telecommunications Act have been, and are likely to continue to be subject to
legal challenges. The Partnership is unable at this time to predict the outcome
of such rulemakings or litigation or the substantive effect (financial or
otherwise) of the Telecommunications Act and related rulemakings on the
Partnership.
FCC Implementation. The FCC is presently, and will be, engaged in numerous
proceedings to implement various provisions of the Telecommunications Act.
Recently, the FCC adopted cable television equipment cost aggregation rules and
adopted open video system rules. In addition to the proceedings previously
discussed herein, the FCC has initiated a proceeding to implement most of the
Cable Act reform provisions of the Telecommunications Act.
In this proceeding, the FCC has set forth certain interim rules to govern while
the FCC completes its implementation of the Telecommunications Act. Among
other things, the FCC is requiring on an interim basis that for a LEC to be
deemed to be offering "comparable" programming, such programming must include
the signals of local broadcasters. Cable systems that meet all of the relevant
criteria in the new effective competition test are exempt from rate regulation
as of February 8, 1996 (the date the Telecommunications Act was signed into law
by President Clinton). Cable systems may file a petition with the FCC at any
time for a determination of effective competition.
The FCC has also established interim rules governing the filing of rate
complaints by local franchising authorities. Local franchising authorities may
file rate complaints with the FCC when the local franchising authorities
receive more than one subscriber complaint concerning an operator's rate
increase. If the local franchising authority receives more than one subscriber
complaint within the 90-day period and decides to file its own complaint with
the FCC, it must do so within 180 days after the rate increase became
effective. Before filing a complaint with the FCC, the local franchising
authority must first provide the cable operator written notice of its intent to
do so and must give the operator a minimum of 30 days to file with the local
franchising authority the relevant FCC forms used to justify a rate increase.
The local franchising authority must then forward its complaint and the
operator's response to the FCC within the 180 day deadline. The FCC must issue
a final order within 90 days after it receives a local franchising authority
complaint.
For interim purposes, the FCC has established that an operator serving fewer
than 617,000 subscribers is a "small cable operator" if its annual revenues,
when combined with the total annual revenues of all of its affiliates, do not
exceed $250 million in the aggregate. For interim purposes, "affiliate" will
be defined as a 20% or greater equity interest.
In addition to the interim rules discussed above and other miscellaneous
interim rules, the FCC is also engaged in a rule-making proceeding to create
and implement final rules relating to the cable reform provisions of the
Telecommunications
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Act. Among other issues, the FCC is considering whether to
establish a LEC market share that must be satisfied before a LEC will be deemed
to constitute "effective competition" to an incumbent cable operator (which
would free the cable operator from rate regulation). The Partnership cannot
predict the outcome of this FCC proceeding or what its ultimate effect will be.
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, cable operators can obtain blanket permission to
retransmit broadcast signals. The nature and amount of future copyright
payments for broadcast signal carriage cannot be predicted. The possible
simplification, modification or elimination of the compulsory copyright license
is the subject of continuing legislative review. The elimination or substantial
modification of the cable compulsory license could adversely affect the ability
of the Partnership to obtain suitable programming and could substantially
increase the cost of programming that remained available for distribution to the
customers of the Partnership. The General Partner cannot predict the result of
such legislative activity or the effect of such activity on the Partnership's
condition (financial or otherwise). See "--Regulation and Legislation."
State and Local Regulation
Cable television systems generally are operated pursuant to nonexclusive
franchises, permits or licenses granted by a municipality or other state or
local government entity. Franchises generally are granted for fixed terms and
in many cases are terminable if the franchisee fails to comply with material
provisions of its franchise agreement. The terms and conditions of franchises
vary materially from jurisdiction to jurisdiction. A number of states subject
cable television systems to the jurisdiction of centralized state governmental
agencies, some of which impose regulation of a character similar to that
imposed on a public utility. Attempts in other states to regulate cable
television systems are continuing and can be expected to increase. The
Partnership cannot predict whether any of the states in which the Partnership
currently operates will engage in such regulation in the future. State and
local franchising jurisdiction is not unlimited, however, and must be exercised
consistently with Federal law. The 1992 Cable Act immunizes franchising
authorities from monetary damage awards arising from regulation of cable
television systems or decisions made on franchise grants, renewals, transfers
and amendments.
COMPETITION IN THE CABLE TELEVISION BUSINESS
Cable television companies generally operate under non-exclusive franchises
granted by local authorities that are subject to renewal and renegotiation from
time to time. The 1992 Cable Act prohibits franchising authorities from
granting exclusive cable television franchises and from unreasonably refusing
to award additional competitive franchises. Cable system operators may
therefore experience competition from other operators building a system in an
existing franchise area (i.e., an "overbuild"). The 1992 Cable Act also
permits municipal authorities to operate cable television systems in their
communities without franchises. Heretofore, there have been virtually no
overbuilds in the areas in which the Partnership's Systems are located.
However, in October, 1996, in Newnan, Georgia, the Newnan Water Sewage and
Light Commission announced its intention to construct a fiber optic system and
has already begun to market cable television service to the Partnership's
customers within the city area. The Partnership has approximately 6,000 homes
passed and 3,500 basic subscribers within the City of Newnan. The Newnan Water
Sewage and Light Commission has recently received a franchise for the
unincorporated county area surrounding the city. Given the recent nature of
this competitive development, the Partnership cannot estimate its impact.
Other cable operators operate systems in the vicinity of the Partnership's
Systems and also compete for the right to construct systems in new housing
developments adjoining or otherwise located in proximity to such operator's
existing systems. The Partnership believes that the selection of a cable
operator to construct a system in a new housing development (which may be
located near the cable systems of several different operators) is typically
based upon an
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evaluation by the real estate developer of the programming and pricing offered
by the different cable operators conducting business in proximity to such
housing development.
Cable television systems also face competition from alternative methods of
receiving and distributing television signals and from other sources of home
entertainment. Within the home video programming market, the Partnership
competes primarily with other cable franchise holders and with home satellite
and wireless cable providers, and when existing franchises become available for
renewal (or new franchises become available in the southeastern region of the
United States), with other cable franchise holders. The Partnership believes
that direct broadcast satellite ("DBS"), a service by which packages of
television programming are transmitted to individual homes that are serviced by
a single satellite dish, is currently the most significant competitive threat to
the Partnership's Systems. There are certain disadvantages associated with DBS
technology (e.g., high upfront capital costs, lack of local programming and
topographical limitations which limit reception in hilly areas) that have
limited its competitive impact to date. However, the prices that consumers pay
to obtain a DBS satellite dish have been reduced substantially and recent
published reports indicate that there are now approximately 4.5 million
subscribers to DBS services, which reflects a substantial increase in the number
of such subscribers from those reported in previous years. In addition, many
observers are projecting continued growth for the DBS industry through the end
of the decade. Thus, although it is difficult to assess the ultimate magnitude
of the impact that DBS will have on the cable industry or upon the Partnership's
operations and revenues, DBS services now pose a significant competitive threat
to cable television systems. Furthermore, recently announced plans by
Newscorp/EchoStar to seek approval to offer local broadcast channels on DBS
commencing in the latter part of 1998, if implemented with effective technology
and providing channels local to the markets served by the Partnership's Systems,
could accelerate the timing and increase the impact of the competition. (This
proposed plan calls for local stations on the DBS system in at least 75% of the
country by the end of 1998, via the use of "spot beam" technology, which aims
local signals down to small geographic areas.)
Cable television systems also compete with wireless program distribution
services such as multichannel multipoint distribution services ("MMDS"), which
uses low power microwave frequencies to transmit video programming over-the-air
to customers. The FCC has amended its regulations to enable MMDS systems to
compete more effectively with cable systems by making available additional
channels to the MMDS industry and by refining the procedures by which MMDS
licenses are granted. The FCC also recently ruled that wireless cable
operators may increase their channel capacity and service offerings through
digital compression techniques. Such increased capacity and offerings may make
wireless cable a more significant competitor in the video programming industry.
The 1992 Cable Act generally prohibits a cable operator from holding an FCC
MMDS license in its franchised cable service area. However, the
Telecommunications Act allows such common ownership if the cable operator is
subject to "effective competition". Although the Partnership faces some actual
or potential competition from MMDS operators, such competition is not yet
significant. Additionally, the FCC recently allocated frequencies in the 28
GHz band for a new multichannel wireless video service similar to MMDS. The
Partnership is unable to predict the economic viability of wireless video
services, such as MMDS, or whether such services will present a competitive
threat to the Partnership.
Additional forms of competition for cable systems are master antenna television
("MATV") and satellite master antenna television system ("SMATV"). These
systems are essentially small, closed cable systems which operate within
specific hotels, apartment- or condominium-complexes and individual residences.
Due to the widespread availability of earth stations, such private cable
television systems can offer both improved reception of local television
stations and many of the same satellite-delivered program services which are
offered by franchised cable television systems. MATV and SMATV systems
currently benefit from operating advantages not available to franchised cable
television systems, including fewer regulatory burdens and no requirement to
service low density or economically depressed communities. The
Telecommunications Act, which to some extent deregulates or lessens the
regulatory burden on the cable industry, may reduce some of the advantages of
MATV and SMATV systems. However, since MATV and SMATV systems generally do not
fall within the Cable Act's definition of a "cable system", notwithstanding the
enactment of such legislation, they could still be exempt from other
requirements of the Cable Acts which were not amended. Furthermore, the
Telecommunications Act broadens an exemption from regulation as a "cable
system", which may exempt additional MATV and SMATV systems from regulation
under the Cable Acts.
A federal statutory cross-ownership restriction had historically limited entry
into the cable television business by local telephone companies, which are
potentially strong competitors to cable operators. The Telecommunications Act
repealed
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the cross-ownership restriction and authorizes LECs to provide a wide variety
of video services competitive with services provided by cable systems and to
provide cable services directly to customers in the telephone companies' service
areas, with some regulatory safeguards. See "--Regulation and Legislation."
Some video programming services provided by telephone companies (e.g., "open
video systems") do not require local franchises. Further, certain of the RBOCs
have already entered the cable television business outside their service areas.
For example, US West has purchased cable televisions systems serving subscribers
in and around Atlanta, Georgia (an area in which the Partnership has cable
operations). The Partnership believes that telephone companies will generally
focus their efforts on cable acquisitions in larger metropolitan areas, although
there can be no assurance that this will be the case.
The Telecommunications Act also authorizes registered utility holding companies
and their subsidiaries to provide video programming services, notwithstanding
the applicability of the Public Utility Holding Company Act. See "--Regulation
and Legislation."
Other new technologies may become competitive with non-entertainment services
that cable television systems can offer. Advances in communications technology
as well as changes in the marketplace and the regulatory and legislative
environment are constantly occurring. The Partnership cannot predict the
effect that ongoing or future developments might have on the cable television
industry generally or the Partnership specifically.
EMPLOYEES
Neither Charter Holdings nor Holdings Capital has any employees. As of
December 31, 1996, Charter Holdings' operating subsidiaries employed a total of
approximately 520 full-time equivalent persons in the operation of their cable
television systems. None of these employees are represented by a union and
these employers have never experienced a work stoppage. The Partnership
considers its relationships with its employees to be good.
Charter acts as the management company for the Partnership pursuant to a
Management Agreement, and is the employer of record of the persons who serve as
executive officers of Charter Holdings and Holdings Capital. See "Item 13.
Certain Relationships and Related Transactions."
OTHER MATTERS
The Partnership owns and operates cable television systems and does not engage
in any other identifiable industry segments. The Partnership does not believe
that changes of a seasonal nature are material to the cable television
business. The Partnership has not expended material amounts during the last
two years on research and development activities. As the Partnership is a
service-related organization, little or no raw materials are utilized by the
Partnership. The necessary hardware, coaxial cable and electronics required
for construction of new cable plant are available from a variety of vendors and
are generally available in ample supply. There is no one customer or
affiliated group of customers to whom sales are made in amounts which exceed
ten percent (10%) of the Partnership's revenues. The Partnership believes it
is not affected by inflation except to the extent that the economy in general
is affected thereby.
ITEM 2. PROPERTIES
The Partnership's principal physical assets consist of the components of each
of the Systems, which include a headend, distribution cables and local business
offices. The receiving apparatus is comprised of a tower and antennas for
reception of over-the-air broadcast television signals and one or more earth
stations for reception of satellite signals. Located near these receiving
devices is a building that houses associated electronic gear and processing
equipment. The Partnership owns the receiving and distribution equipment of
each System and owns or leases small parcels of real property for the receiving
sites.
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Cable is either buried in trenches or is attached to utility poles pursuant to
license agreements with the owners of the poles. As is typical in the cable
television industry, the Partnership maintains insurance on its above-ground
plant, but not for its underground plant. The Registrant owns or leases the
local business office of each system from which it dispatches service
employees, monitors the technical quality of the system, handles customer
service and billing inquiries and administers marketing programs. The office
facilities of some systems include certain equipment for program production, as
required under certain of the Partnership's franchises.
The Partnership believes that its properties are generally in good condition,
although the physical components of the cable systems do require maintenance
and periodic upgrades to keep pace with technological advances and to comply
with the requirements of certain franchising authorities. The Systems
currently operate at between 270 and 750 megahertz, whereas the General Partner
believes the standard in the cable television industry to be 450 megahertz.
For a discussion of historical and planned capital expenditures, see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations." Partnership plant is summarized at December 31, 1996 as follows:
<TABLE>
<CAPTION>
42 or Fewer 43 to 54 55 to 62 63 or Greater
Channels Channels Channels Channels Total
-------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C>
Number of Systems ............. 49 10 12 3 74
Miles of Plant ................ 5,661 4,037 4,332 696 14,726
Basic Subscribers ............. 108,300 96,300 106,200 19,800 330,600
% of Total Basic Subscribers .. 32.8% 29.1% 32.1% 6.0% 100%
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
The Partnership is involved from time to time in routine legal matters
incidental to its business. Management, after consultation with its legal
counsel, believes that the resolution of such matters will not have a material
adverse effect on the Partnership's financial position or results of
operations.
A purported class action lawsuit on behalf of the limited partners of Cencom
Cable Income Partners, L.P. was filed in 1995 (the "Action"), which sought,
among other things, to enjoin permanently the CCIP Acquisition. On February
15, 1996, the Court of Chancery of the State of Delaware in and for new Castle
County dismissed all of the plaintiff's claims for injunctive relief (including
that which sought to prevent the consummation of the CCIP Acquisition); the
plaintiff's claims for money damages which might result from the proposed sale
by CCIP of its assets (including the CCIP Acquisition) remain pending. Each of
the defendants in the Action, including Charter and CC-II, believes the Action
to be without merit and is contesting it vigorously. On October 19, 1996, the
plaintiff filed a Consolidated Amended Class Action Complaint (the "Amended
Complaint"). In connection with the filing of the Amended Complaint, the
defendants informed the court that portions of the Amended Complaint were
legally inadequate. The defendants filed an Answer to the Amended Complaint on
December 6, 1996. In January 1997, the defendants filed a Motion for Summary
Judgment to dismiss all remaining claims as to all parties in the Action. The
general partner of CCIP believes that portions of the Amended Complaint are
legally inadequate and intends to file a dispositive motion as to all remaining
claims in the Action. There can be no assurance, however, that the plaintiff
will not be awarded damages, some or all of which may be payable by CC-II, in
connection with the Action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
18
<PAGE> 19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Not applicable.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data has been derived from the audited
financial statements of the Partnership and should be read in conjunction with
the financial statements and notes thereto included pursuant to Item 8 of this
Form 10-K.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service Revenues.................... $120,279,555 $ 72,830,913 $21,561,116
Income (loss) from Operations 835,380 (8,206,746) (4,989,077)
Net loss............................ (40,419,949) (27,585,703) (9,609,052)
BALANCE SHEET DATA:
Total assets........................ 577,015,932 425,561,725 --
Long-term obligations, including
current maturities.................. 493,571,442 259,125,000 --
Partners' (deficit) capital......... 46,015,242 31,598,457 --
MISCELLANEOUS DATA:
Ratio of earnings to fixed charges1/ -- -- --
- ---------------------------------------
</TABLE>
1/ Ratio of earnings to fixed charges is calculated using income from
continuing operations adding back fixed charges; fixed charges include interest
expense and amortization expense for debt issuance costs. Earnings for the
years ended December 31, 1996, 1995 and 1994 were insufficient to cover the
fixed charges by $40,419,949, $27,585,703, and $9,609,052, respectively. As a
result of such insufficiencies, these ratios are not presented above.
19
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SIGNIFICANT ASSET ACQUISITIONS
The Partnership has operated cable television systems for a limited period of
time and had no operations prior to April 30, 1994. The Partnership completed
nine acquisitions during the period of April 30, 1994 through December 31,
1996, summarized as follows:
<TABLE>
<CAPTION>
Approximate
Acquisition Date Purchase Price Location of Systems
----------------- -------------- -------------------
<S> <C> <C>
April 30, 1994 $174.7 million Georgia, Alabama, Louisiana
January 1, 1995 $108.0 million Kentucky, N. Carolina, S. Carolina
May 1, 1995 $ 22.0 million Georgia
May 31, 1995 $ 48.0 million Alabama
July 31, 1995 34.7 million Georgia
November 30, 1995 $ 35.0 million S. Carolina
January 1, 1996 $ 8.4 million S. Carolina
March 29, 1996 $112.0 million Georgia, N. Carolina, Tenn., Ky.
November 29, 1996 $ 22.0 million Alabama, Tennessee
</TABLE>
As of December 31, 1996, the Partnership had two pending acquisitions for the
purchase of cable television systems serving approximately 86,100 basic
subscribers for a total purchase price of approximately $157.2 million. On
February 7, 1997, the Partnership completed the acquisition of the cable
television system in Hickory, N.C., which serves approximately 35,400 basic
subscribers, for a purchase price of approximately $68.1 million, after
adjustments.
The remaining pending acquisition, the CCIP-II/CPLP Acquisition, is subject to
the satisfaction of certain terms and conditions, including the favorable votes
of the holders of the limited partnership interests of CCIP-II. It is
anticipated that these acquisitions will be consummated during the second
quarter of 1997, although there can be no assurance that these acquisitions
will be consummated. See "Part I. Business - Proposed Acquisitions".
20
<PAGE> 21
RESULTS OF OPERATIONS
The following table summarizes the amounts and the percentage of total revenues
for certain items for the periods indicated:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1996 1995 1994
------------------- ------------------ ----------------
Amt. % Amt. % Amt. %
------------ ---- ----------- ---- --------- ----
<S> <C> <C> <C> <C> <C> <C>
Service Revenues:
Basic Service $ 87,056,898 72.4 $53,237,594 73.1 $16,314,348 75.7
Premium Service 14,648,591 12.2 9,635,049 13.2 2,786,478 12.9
Other Services 18,574,066 15.4 9,958,270 13.7 2,460,290 11.4
------------ ---- ----------- ---- --------- ----
120,279,555 100.0 72,830,913 100.0 21,561,116 100.0
------------ ---- ----------- ---- --------- ----
Operating Expenses:
Total Operating and
General & Administrative 60,297,537 50.1 37,247,983 51.2 11,152,604 51.7
Management Fees 6,013,899 5.0 3,642,012 5.0 1,078,000 5.0
Depreciation & Amortization 53,132,739 44.2 40,147,664 55.1 14,319,589 66.4
------------ ---- ----------- ---- --------- ----
Total Operating Expense 119,444,175 99.3 81,037,659 111.3 26,550,193 123.1
------------ ---- ----------- ---- --------- ----
Income (Loss) from
Operations 835,380 0.7 (8,206,746) (11.3) (4,989,077) (23.1)
------------ ---- ----------- ---- --------- ----
Other Income (Expenses):
Interest Income 233,479 0.2 198,400 0.3 34,564 0.2
Interest Expense (41,020,677) (34.1) (18,721,628) (25.7) (4,654,539) (21.6)
Loss from Hurricane (367,000) (0.3) (744,800) (1.0) 0 0.0
Other (101,131) (0.1) (40,183) (0.1) 0 0.0
------------ ---- ----------- ---- --------- ----
Other Income (Expense) (41,255,329) (34.3) (19,308,211) (26.5) (4,619,975) (21.4)
------------ ---- ----------- ---- --------- ----
Net Loss Before Income Tax
Benefit and
Extraordinary Item (40,419,949) (33.6) (27,514,957) (37.8) (9,609,052) (44.5)
Income Tax Benefit 0 0.0 1,888,692 2.6 0 0.0
------------ ---- ----------- ---- --------- ----
Net Loss Before Extraordinary
Item (40,419,949) (33.6) (25,626,265) (35.2) (9,609,052) (44.5)
Extraordinary Item - Loss on
Early Retirement of Debt 0 0.0 (1,959,438) (2.7) 0 0.0
Net Loss ($40,419,949) (33.6) ($27,585,703) (37.9) ($9,609,052) (44.5)
============ ==== =========== ==== ========== ====
</TABLE>
21
<PAGE> 22
COMPARISON OF YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Service Revenues
The Partnership earns substantially all of its revenues from monthly
subscription fees for basic tier, expanded tier, premium channels, equipment
rental and ancillary services provided by its cable television Systems.
Service revenues increased by 237.8% from $21.6 million in 1994 to $72.8
million in 1995, and increased 65.1% to $120.3 million in 1996. These
increases are primarily due to the increase in the number of subscribers to the
cable services offered by the Partnership as a result of the acquisitions of
cable television systems during 1995 and 1996. The Partnership has been able
to increase revenues through the implementation of basic and expanded tier
retail rate increases in certain systems, in accordance with federal law. In
addition to the subscriber increases as a result of acquisitions, the
Partnership has grown its subscriber base internally as a result of
management's marketing efforts to add new subscribers, increased efforts to
retain existing customers, and a limited amount of new-build construction to
increase the coverage area of its systems. See "Item I - Description of the
Partnership Systems" for a summary of the year end subscriber data by operating
cluster.
Premium service subscriptions increased from 49,200 at December 31, 1994 to
142,200 at December 31, 1995, to 151,200 at December 31, 1996. The increases
in total premium units is due primarily to the increase in the number of basic
subscribers as a result of the acquisitions during 1995 and 1996. Also, the
number of premium service subscriptions at December 31, 1995 included
approximately 24,000 Flix and American Movie Classic premium units, carriage of
which was discontinued by certain systems in the Northern Alabama Cluster in
early 1996. In addition, the decrease in the premium ratio, determined by
dividing the number of premium subscriptions by the number of basic
subscribers, may also reflect the fact that there is an increasing variety of
quality programming on the basic tier. As such, the Partnership anticipates
that premium services may continue to decline relative to basic services over
the next few years. As a result, the Partnership offers premium services to
subscribers in a packaged format, providing subscribers with a discount from
the combined retail rates of these packaged services in an effort to maintain
premium subscription levels and attract additional subscriptions.
Operating Expense
Operating and general and administrative expenses increased by 234.0% from
$11.2 million in 1994 to $37.2 million in 1995, and increased by 61.9% to $60.3
million in 1996. These increases are primarily due to the increase in the
number of subscribers served by the Partnership as a result of the acquisitions
of cable television systems during 1995 and 1996. As a percentage of service
revenues, operating and general and administrative expenses have declined from
51.7% to 51.2% to 50.1% for the years ended December 31, 1994, 1995 and 1996,
respectively. The Partnership has been able to achieve certain operating cost
efficiencies as a result of increasing the subscriber base in each of the
operating clusters. However, offsetting these cost savings, the Partnership
continues to experience increases in programming costs, which are expected to
continue to be an on-going issue for the next few years.
Management fee expense relates to the cost associated with the certain
management agreements between the Partnership and Charter. Management fee
expense of the Partnership is based on 5.0% of service revenues, with 40% of
the management fee expense deferred until repayment in full of the CC-I and
CC-II credit facilities, the Debentures and the Senior Notes. The remaining
60% of the management fee expense is calculated and settled on a quarterly
basis, paid in arrears. See "Item 13 - Certain Relationships and Related
Transactions" for a discussion of the management agreements.
Depreciation and amortization expense increased by 180.4% from $14.3 million in
1994 to $40.1 million in 1995, and increased 32.3% to $53.1 million in 1996.
The increase is related to the increased base of property, plant and equipment
and franchise costs primarily as a result of the acquisitions of cable
television systems during 1995 and 1996. In addition, the Partnership
continues to incur capital expenditures for property, plant and equipment costs
related to the upgrade and extension of the cable television systems.
22
<PAGE> 23
Other Income (Expense)
Interest expense increased by 302.2% from $4.7 million in 1994 to $18.7 million
in 1995, and increased by 119.1% to $41.0 million in 1996. The increased
interest expense is a result of the increase in the average outstanding debt
balances between years, including bank debt, the Debentures and the Senior
Notes, as a result of the acquisitions of cable television systems during 1995
and 1996.
Loss from hurricanes relates to the insurance deductible costs expensed by the
Partnership for Hurricane Opal in 1995 and Hurricane Fran in 1996. The
Partnership maintains property and casualty insurance on its aerial plant,
headends and offices, but does not maintain property and casualty insurance
coverage on its underground distribution plant.
Net Loss
Net loss increased 187.1% from $9.6 million in 1994 to $27.6 million in 1995,
and increased 46.5% from $27.6 million in 1995 to $40.4 million in 1996.
Although the Partnership's loss from operations went from a loss of $8.2
million in 1995 to income from operations of $0.8 million in 1996, the
Partnership's increased interest expense continues to be a significant factor
to the Partnership's annual net loss.
Liquidity and Capital Resources
The Partnership's growth by acquisition in 1995 and 1996 has been funded
primarily by borrowings, either through the credit facilities of CC-I and CC-II
or with the proceeds of the Debentures and the Senior Notes. Cash flows
provided by operating activities together with third party borrowings have been
sufficient to fund the Partnership's debt service, capital expenditures and
working capital requirements. In addition, the Partnership has funded portions
of certain acquisitions through the issuance of equity securities. Future cash
flows provided by operating activities and availability for borrowings under
the existing credit facilities are anticipated to be sufficient during the next
12 months for the Partnership's ongoing debt service, capital expenditures and
working capital needs. The Partnership anticipates that pending acquisitions
or other potential future acquisitions could be financed through borrowings,
either presently available under the existing credit facilities, or as a result
of amending the existing credit facilities to allow for expanded borrowing
capacity, combined with additional equity contributions. Although to date the
Partnership has been able to obtain financing on satisfactory terms, there can
be no assurance that this will continue to be the case in the future and
inability to obtain financing on satisfactory terms could negatively impact the
Partnership's ability to pursue a strategy that includes growth through
acquisitions.
In March 1996, the Partnership engaged in a corporate restructuring and
refinancing plan. As a result, Southeast Holdings and Holdings Capital issued
$146.8 million principal amount of Debentures due 2007, from which the net
proceeds of $72.4 million were invested in its subsidiary, Southeast, for use
in operations. Simultaneously with this offering by Charter Holdings and
Holdings Capital, Southeast and Southeast Capital issued $125.0 million
aggregate principal amount of Senior Notes due 2006, from which the proceeds to
the issuers were $121.3 million. The net proceeds of these concurrent
offerings were ultimately used, among other things, as follows: $18.1 million
to repay outstanding credit facilities, $16.1 million to repay other
indebtedness, $43.2 million to redeem the Special Limited Partner units of
CC-I, and $114.9 million to consummate the CCIP Acquisition and related
transaction costs by CC-II. In connection with the offerings of the Debentures
and the Senior Notes, each of CC-I and CC-II amended and restated its bank
credit facility to increase the total borrowing availability, lengthen the
maturity, and improve the terms and interest rates under the prior credit
facilities. As a result of these amendments, availability under the CC-I
facility was adjusted from $110.0 to $105.0 million, and for the CC-II
facility, was increased from $135.0 to $205.0 million.
Both of these credit facilities were again amended in connection with
subsequent acquisitions. In November 1996, CC-I increased its facility to
$150.0 million to complete the acquisition of systems in Alabama and Tennessee
(with a purchase price of $21.9 million, after adjustments), and cover
anticipated borrowings for the proposed CCIP-II/CPLP Acquisition (with a
purchase price of $20.8 million). In February 1997, CC-II increased its
facility to $365.0 million to complete the
23
<PAGE> 24
acquisition of the Hickory, North Carolina system (with a purchase price of
$68.0 million) and cover anticipated borrowings for the CCIP-II/CPLP
Acquisition (with a purchase price of $68.4 million).
At December 31, 1996, the Partnership's long-term debt of $493.6 million
consisted of $106.7 million outstanding under the revolving credit and term
loan facility of CC-I, $178.6 million outstanding under the revolving credit
and term loan facility of CC-II, $125 million of indebtedness from the sale of
the Senior Notes by Southeast, and $83.3 million of indebtedness from the sale
of the Debentures by Charter Holdings. The Partnership had unused and
available borrowing capacity of $43.3 million and $26.4 million under the
credit facilities of CC-I and CC-II, respectively, at December 31, 1996.
Under the CC-I and CC-II credit facilities, cash interest is payable on a
monthly and quarterly basis for borrowings outstanding. With respect to the
CC-I credit facility, the outstanding balance of $106.7 at December 31, 1996
had interest rates ranging between 7.50% and 9.13%, based upon its existing
LIBOR contracts or base rate balances. The weighted average interest rates and
weighted average borrowings were approximately 7.93%, 8.72% and 7.42%, and
$84,693,500, $93,622,900 and $94,125,000 during the years ended December 31,
1996, 1995 and 1994, respectively. With respect to the CC-II credit facility,
the outstanding balance of $178.6 at December 31, 1996 had interest rates
ranging between 7.25% and 8.13%, based upon its existing LIBOR contracts or
base rate balances. The weighted average interest rate and weighted average
borrowings were 7.86% and 8.46% and approximately $174,512,000 and
$121,092,000, during 1996 and 1995, respectively.
For the Senior Notes, cash interest is payable semi-annually, in March and
September, and the first interest payment was paid in September 1996. For the
Debentures, no interest is currently payable. The discount related to the
original sale of the Debentures is amortized through March 2001, thereafter,
cash interest is payable on a semi-annual basis in March and September until
March 2007. The Partnership manages risk arising from fluctuations in interest
rates through the use of interest rate swap and cap agreements required under
the terms of the existing credit facilities. Interest rate swap and cap
agreements are accounted for by the Partnership as a hedge of the debt
obligation. As a result, the net settlement amount of any such swap or cap is
recorded as an adjustment to interest expense in the period incurred. The
effects of the Partnership's hedging practices on its weighted average
borrowing rate and on reported interest expense were not material during 1994,
1995 or 1996. At December 31, 1996, the Partnership had eleven interest swap
and cap agreements with an aggregate notional amount of $250.0 million. The
estimated fair value/redemption price for these contracts as of December 31,
1996 was net deficit of approximately $54,000.
On February 28, 1997, Charter Holdings received a contribution of $30 million
of additional equity as well as a contribution of the assets and related
liabilities for the cable television system located in Stockbridge, Georgia.
The Stockbridge system, which had an appraised value of approximately $3.67
million, was contributed by Charter Holdings to Charter Southeast which in turn
contributed such system to CC-II, and the additional capital was contributed by
Charter Holdings to Charter Southeast which in turn contributed such capital to
CC-I and CC-II to be ultimately used toward the proposed CCIP-II/CPLP
Acquisition. Pending consummation of the CCIP-II/CPLP Acquisition, the equity
contribution was used to pay down outstanding indebtedness of $5.0 million and
$25.0 million under the credit facilities of CC-I and CC-II, respectively. See
"Item 13. Certain Relationships and Related Transactions."
The Partnership incurred capital expenditures of approximately $48.3 million
during 1996 in connection with the improvement and upgrading of the Systems.
The Partnership anticipates that capital expenditures for such purposes will be
approximately $55.0 million to $60.0 million during 1997 for the Systems it
owned at December 31, 1996 and for the Hickory, North Carolina system. In
addition, the Partnership anticipates that capital expenditures for the systems
to be acquired in the CCIP-II/CPLP Acquisition to be approximately $10.0
million to $13.0 million during 1997. However, the Partnership is continually
reevaluating its capital expenditure budget based on economic, technological,
competitive and other factors. In addition, the actual closing date of the
purchase of the CCIP-II/CPLP Acquisition will affect the timing and ultimately
the amount of capital expenditures incurred for these systems during 1997. The
Partnership anticipates to fund its capital expenditures through availability
under its existing CC-I and CC-II credit facilities and from cash generated by
operations. As of December 31, 1996, the Partnership did not have any
significant contractual obligations for capital expenditures.
24
<PAGE> 25
During October 1996, the Partnership became aware that the local power
commission affiliated with the City of Newnan, Georgia, announced its intention
to construct a fiber optic system for the delivery of video and data services to
the city. The power commission's construction would be completed during 1997
and would pass the approximately 6,000 homes inside the city limits, from which
there are currently approximately 3,500 homes that subscribe to cable television
services offered by the Partnership. In addition, the City of Newnan recently
received a franchise for the unincorporated area surrounding the city. The
Partnership completed the upgrade of its existing cable plant to 750 MHz during
December 1996, and began an aggressive marketing effort during the first quarter
of 1997 to promote its new channel offerings and other services. The
Partnership cannot determine the impact, if any, this project by the City of
Newnan will have on long-term results or strategies of the Partnership.
The Partnership has had discussions with several municipalities, counties and
utility companies in Georgia to explore the possibility of sale and lease-back
venture whereby the Partnership would sell the cable television distribution
plant and then enter into a long-term capital lease and continue to operate the
cable system. Pursuant to the proposals currently under discussion, the
Partnership and its venture partner would upgrade the plant to 860 Mhz,
allocating a portion of the spectrum to the venture partner for its purposes.
The Partnership would expect to benefit by gaining access to upgraded plant,
obtaining lower cost financing through the venture partner, and realizing
certain operating costs. There is no assurance that a final agreement will be
reached with respect to any such proposals.
The Partnership has insurance covering risks incurred in the ordinary course of
business, including general liability, property and business interruption
coverage. As is typical in the cable television industry, the Partnership does
not maintain insurance covering its underground plant, the cost of which
management believes is currently prohibitive. Management believes that the
Partnership's insurance coverage is adequate, and intends to monitor the
insurance markets to attempt to obtain coverage for the Partnerships
underground plants at reasonable and cost-effective rates.
The Partnership believes that it has generally complied with the provisions of
the 1992 Act regarding cable programming service rates. However, some systems
may be charging rates which are in excess of allowable rates and, accordingly,
may be subject to challenge by regulatory authorities, such challenge may
result in the Partnership being required to make refunds to subscribers. The
amount of refunds, if any, which could be payable by the Partnership in the
event such systems' rates are successfully challenged by regulatory authorities
is not currently estimable. The Partnership has not reserved any amounts for
payment of such refunds as the General Partner does not believe that the
amounts of any such refunds would have material adverse effect on the
financial position or results of the Partnership.
25
<PAGE> 26
SUPPLEMENTAL ANALYSIS OF OPERATING RESULTS FOR 1996 AND 1995 - UNAUDITED
The following table sets forth certain operating results and statistics for the
year ended December 31, 1996 compared to the year ended December 31, 1995. The
following dollar amounts are in thousands, except for per subscriber amounts:
<TABLE>
<CAPTION>
For the Year For the Year
Ended December 31, 1996 Ended December 31, 1995
----------------------- -----------------------
(Unaudited) (Unaudited)
-------------------------------- --------------------------------
SYSTEMS SYSTEM
ACQUIRED Systems ACQUIRED Systems
ON OR Acquired ON OR Acquired
BEFORE After BEFORE After
01/01/95 01/02/95 Actual 01/01/95 01/02/95 Total
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Service Revenues $ 66,916 $ 53,364 $120,280 $ 60,116 $ 12,715 $ 72,831
-------- -------- -------- -------- -------- --------
Operating Expenses:
Operating Costs 28,890 22,081 50,971 25,805 5,251 31,056
General & Administrative 5,317 4,009 9,326 5,031 1,161 6,192
-------- -------- -------- -------- -------- --------
$ 34,207 26,090 60,297 $ 30,836 $ 6,412 $ 37,248
-------- -------- -------- -------- -------- --------
EBITDA (a) $ 32,709 $ 27,274 $ 59,983 $ 29,280 $ 6,303 $ 35,583
======== ======== ======== ======== ======== ========
EBITDA Margin 48.9% 51.1% 49.9% 48.7% 49.6% 48.9%
======== ======== ======== ======== ======== ========
Operating Statistical
Data, at end of Period
Revenue per sub $ 32.18 $ 34.22 $ 34.05 $ 29.91 $ 30.13 $ 30.10
Homes passed 250,500 246,300 496,800 245,100 133,800 378,900
Basic subscribers 173,300 157,300 330,600 167,500 81,600 249,100
Basic penetration 69.2% 63.9% 66.5% 68.3% 61.0% 65.7%
Premium subscriptions 73,600 77,500 151,100 78,900 63,300 142,200
</TABLE>
(a) EBITDA represents income before interest expense, income taxes,
depreciation and amortization, management fees and other income (expense).
EBITDA is calculated before payment of management fees so as to be
consistent with certain financial terms contained in the revolving credit
and term loan facilities. Management believes that EBITDA is a meaningful
measure of performance because it is commonly used in the cable television
industry to analyze and compare cable television companies on the basis of
operating performance, leverage and liquidity. 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 flows as an indicator of the Partnership's operating
performance. EBITDA does not include the Partnership's debt obligations
or other significant commitments.
26
<PAGE> 27
Results of Operations - Year Ended December 31, 1995 Versus the Year Ended
December 31, 1996 for Systems Acquired On or Before
January 1, 1995
The following discussion is provided to show the results of operations on a
comparable basis for those systems owned by the Partnership during the year
ended December 31, 1996 versus the year ended December 31, 1995. Specifically,
the comparable analysis includes the results of operations for these systems
acquired on or before January 1, 1995, which the Partnership operated for the
entire fiscal years of 1996 and 1995. See "Item 7 - Significant Asset
Acquisitions" for a complete listing of all acquisitions by the Partnership.
Service revenues increased by $6,800,000 or 11.3% when comparing the revenues
for the year ended December 31, 1995 to the results for the comparable systems
for the year ended December 31, 1996. This increase is due to a net gain of
approximately 5,800 basic subscribers between years and, also, to retail rate
increases implemented in certain of the Partnership's systems.
Operating expenses increased approximately $3,371,000 or 10.9% when comparing
the operating expenses for the year ended December 31, 1995 to the results for
the comparable systems for the year ended December 31, 1996. This increase is
primarily due to increases in license fees paid for programming as a result of
additional subscribers, new channels launched and increases in the rates paid
to the programming services. The growth in programming expense is consistent
with industry-wide increases.
The Partnership experienced growth in operating cash flow (EBITDA) of
approximately $3,429,000 or 11.7% when comparing the operating cash flow for
the year ended December 31, 1995 to the results for the comparable systems for
the year ended December 31, 1996, EBITDA margin increased from 48.7% to 48.9%
when comparing the similar periods, primarily due to realizing certain
operating efficiencies associated with the expanded clusters, offset by
increases in license fees paid for programming.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Financial Statements and Schedules" on Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
During the fiscal year ended December 31, 1996, the Registrants were not
involved in any disagreements with its independent certified public accountants
on accounting principles or practices or on financial disclosure.
27
<PAGE> 28
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Charter Holdings has no officers or directors. Holdings Properties, the
general partner of Charter Holdings, manages the business and affairs of, and
has general responsibility and ultimate authority in all matters affecting
business for, Charter Holdings.
The following table sets for certain information, as of March 15, 1997, with
respect to the executive officers and directors of Holdings Properties and
Holdings Capital.
NAME AGE POSITION
Barry L. Babcock 50 Chairman and Director of Holdings
Properties and Holdings Capital
Thomas C. Dircks 39 Director of Holdings Properties
Jerald L. Kent 40 President, Chief Financial Officer and
Director of Holdings Properties
and Holdings Capital
Howard L. Wood 57 Chairman of the Management
Committee and Director of
Holdings Properties and Holdings
Capital
BUSINESS EXPERIENCE
Mr. Babcock has been affiliated with Charter since 1993 and now holds the
position of Chairman. Mr. Babcock also co-founded CCG in 1992. Prior to that
time, he was associated with CCA as the Executive Vice President of CCA from
February 1986 to November 1992, and as Chief Operating Officer of CCA from May
1986 to November 1992.
Mr. Dircks has been a Vice President of Charterhouse Group International, Inc.
since 1988 and is also a certified public accountant.
Mr. Kent has been affiliated with Charter since 1993 and now holds the position
of President. Mr. Kent also co-founded CCG in 1992. Prior to that time, he
was associated with CCA as Executive Vice President and Chief Financial Officer
of CCA from 1987 through November 1992.
Mr. Wood has been affiliated with Charter since 1993, now holding the position
of Chairman of the Management Committee of Charter. Mr. Wood also co-founded
Charter Communications Group ("CCG") in 1992. Prior to that time, he was
associated with Cencom Cable Associates, Inc. ("CCA"), which he joined in July
1987 as Director; at CCA he held the position of President, Chief Executive
Officer and Director from January 1, 1989 to November 1992.
ITEM 11. EXECUTIVE COMPENSATION
During 1996, Charter Holdings had no officers or directors, and neither Charter
Holdings nor its general partner, Holdings Properties, had any employees.
Furthermore, during 1996, none of the executive officers of Holdings
Properties, the general partner of Charter Holdings, received any compensation
in his capacity as an officer or director of Holdings Properties. Charter
performed management services for the Partnership pursuant to the terms of the
Old Management Agreements (as defined in Item 13) through March 28, 1996, and
thereafter, pursuant to the terms of the Charter Management Agreement (see
"Item 13. Certain Relationships and Related Transactions").
28
<PAGE> 29
Holdings Capital does not have any employees nor does it pay any compensation
to its executive officers or directors.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Charter Holdings is beneficially owned by CharterComm Holdings, L.P.
("CharterComm Holdings"), which directly owns all of the limited partnership
interests in Charter Holdings, and indirectly owns all of the general
partnership interests (through its wholly-owned subsidiary, Charter
Communications Holdings Properties, Inc. ["Holdings Properties"], which is the
sole general partner of Charter Holdings). CharterComm Holdings, in turn, has
two general partners, CharterComm, Inc. and CharterComm II, L.L.C. (both
general partners together being the "CharterComm Entities"). The CharterComm
Entities are directly and /or indirectly owned by Charterhouse Group
International, Inc. and its affiliates ("Charterhouse") and Charter, with 93%
and 7% interests, respectively. As a result of its investment, Charterhouse
can exercise effective control over the management and affairs of CharterComm
and CharterComm II, and therefore of Charter Holdings, Holdings Properties,
Holdings Capital, and Charter Southeast.
The following table sets forth information on the beneficial ownership of
interests in Charter Holdings as of March 15, 1997.
<TABLE>
<CAPTION>
Name and Address of Beneficial Owners Type of Interest % of Units
- ------------------------------------- ---------------- -----------
<S> <C> <C>
CHARTER HOLDINGS
CharterComm Holdings ........................ Limited Partnership Units 99.0%
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131
Holdings Properties ......................... General Partnership Units 1.0%
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131
CHARTERCOMM HOLDINGS
CharterComm II, L.L.C.(a) ................... General Partnership Units 51.1%
c/o Charterhouse Group International, Inc.
535 Madison Avenue
New York, New York 10036
CharterComm, Inc.(b) ........................ General Partnership Units 29.9%
c/o Charterhouse Group International, Inc.
535 Madison Avenue
New York, New York 10036
Certain institutional investors ............. Preferred Limited Partnership Units 99.3%
Common Limited Partnership Units 18.9%
Directors and Executive Officers ............ Preferred Limited Partnership Units 0.7%
of Holdings Properties and Holdings Capital Common Limited Partnership Units Less than 1%
as a group - 4 persons
</TABLE>
(a) Charter, which beneficially owns 7% of the issued and outstanding
interests of CharterComm, Inc. and CharterComm II, LLC may be deemed to
beneficially own general partnership units of CharterComm Holdings.
(b) Charterhouse, which beneficially owns 93% of the issued and outstanding
stock of CharterComm, Inc. and CharterComm II, LLC may be deemed to
beneficially own general partnership units of CharterComm Holdings.
29
<PAGE> 30
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MANAGEMENT AGREEMENTS
During the period from January 1, 1996 to March 28, 1996, pursuant to certain
management agreements entered into between each of the Partnership's operating
subsidiaries, on the one hand, and Charter, on the other hand (the "Old
Management Agreements"). In connection with the Offerings of Notes and
Debentures, the Old Management Agreements were replaced. Charter Holdings
entered into a Management Agreement dated March 28, 1996 (the "Charter
Management Agreement") with Charter, pursuant to which Charter Holdings
assigned and delegated to Charter its management rights and obligations under
the Subsidiary Management Agreements (as defined below). Charter Holdings
entered into a management agreement dated March 28, 1996 with Charter Southeast
pursuant to which Charter Southeast assigned and delegated to Charter Holdings
its management rights and obligations under the Subsidiary Management
Agreements. Charter Southeast entered into separate management agreements,
dated as of the closing date of the Offerings, with each of CC-I and CC-II
(collectively, the "Subsidiary Management Agreements"). Pursuant to the
Subsidiary Management Agreements, Charter Southeast has the exclusive right,
authorization and responsibility to manage the day-to-day business and affairs
of the cable systems owned by CC-I and CC-II, and is entitled to receive
consulting/management fees equal to an aggregate of five percent of the gross
subscriber revenues of such systems for its services.
Management fees payable to Charter pursuant to the Charter Management Agreement
are based on 5.0% of the Partnership's annual revenues. The Indenture
prohibits the payment of 40.0% of such management fee until repayment in full
of the Debentures. Unpaid management fees accrue without interest. Pursuant
to the Old Management Agreements and the Charter Management Agreement, during
1996, management fees recognized and expensed by the Partnership were
$6,013,900, and management fees currently payable at December 31, 1996 were
$1,002,400.
CCIP ACQUISITION
The Partnership, through CC-II, acquired certain cable television systems from
CCIP on March 29, 1996 for an aggregate purchase price of approximately $115.0
million, including related acquisition fees and expenses. In connection with
the CCIP Acquisition, each of Charter and Charterhouse received a transaction
fee (see "Transaction Fees" below). The lawsuit related to the CCIP
acquisition remains pending and there can be no assurance that the plaintiffs
in the Action will not be awarded money damages, some or all of which may be
payable by CC-II (see "Item 1. Business - Major Transactions in 1996" and
"Item 3. Legal Proceedings."
PENDING CCIP-II/CPLP ACQUISITION
CC-I and CC-II have entered into agreements to purchase certain cable
television systems from two partnerships currently in the process of
dissolution (CPLP and CCIP-II), each of which has a general partner that is an
affiliate of Charter. Due to provisions in the Indentures for the Senior
Notes and Debentures concerning affiliate transactions having a fair market
value exceeding $10.0 million, an independent fairness opinion will be obtained
as to the fairness of the acquisitions from a financial point of view. As a
result of certain rights available to the partners of CharterComm Holdings, the
holders of outstanding preferred limited partnership interests of CharterComm
Holdings have consented to these acquisitions (see "Rights of Preferred Limited
Partners of CharterComm Holdings" below). In connection with these
acquisitions, each of Charter and Charterhouse will be eligible to receive an
acquisition fee. See "Transaction Fees" below., and "Item 1. Business -
Pending Acquisitions".
TRANSACTION FEES
In connection with acquisitions and financing transactions by Charter Holdings,
Charter Southeast and its subsidiaries, Charter and Charterhouse are typically
each paid financial advisory and investment banking fees. Such fees are
calculated as a percentage of the transaction, based upon the size of the
transaction; the smaller the transaction, the higher the
30
<PAGE> 31
percentage (up to a maximum of approximately 1.5% for each, respectively).
Typically, the fee is approximately 1.0% of the transaction. In connection
with acquisitions into which Charter and Charterhouse are contributing equity,
such fees may be taken in the form of equity interests in the purchasing
entity. In 1996, Charter Holdings and its subsidiaries paid $1,737,500 in
transaction fees to Charter (including $1,500,000 payable with respect to the
CCIP Acquisition) and $2,687,500 to Charterhouse (including $950,000 as
transaction and consulting fees in connection with the issuance of the
Charterhouse Bridge Notes (as defined) and $1,500,000 as a transaction fee in
connection with the CCIP acquisition). In addition, during the first quarter of
1997, each of Charter and Charterhouse received a transaction fee of $425,000 in
connection with an acquisition, and transaction fees are expected to be paid to
each in connection with the CCIP-II/CPLP Acquisition. The Indenture for each of
the Debentures and the Senior Notes limits the payment of such transaction fees,
in the aggregate, to 1.25% of the purchase price of the transaction.
BENEFICIAL OWNERSHIP BY CHARTERHOUSE AND CHARTER
CharterComm Holdings holds a 99.0% limited partnership interest in, and,
through a wholly-owned subsidiary, a 1.0% general partnership interest in
Charter Holdings. CharterComm Holdings is capitalized with three classes of
partnership interests: preferred limited partner interests, common limited
partner interests, and general partner interests. Because Charterhouse
indirectly controls both general partners of CharterComm Holdings, Charterhouse
can, subject to applicable law, exercise effective control over the management
and affairs of the Charter Holdings. Charter has a non-controlling direct
and/or indirect interest in both general partners of CharterComm Holdings. See
"Item 12. Security Ownership of Certain Beneficial Owners and Management."
RIGHTS OF PREFERRED LIMITED PARTNERS OF CHARTERCOMM HOLDINGS
The prior consent of the preferred limited partners of CharterComm Holdings is
required for certain significant corporate transactions, including, among
others, the dissolution of CharterComm Holdings, certain sales or transfers of
the assets of CharterComm Holdings or its subsidiaries, certain acquisitions of
assets by CharterComm Holdings or its subsidiaries and contributions of
property by any partner. In accordance with these provisions, the prior
consent of the preferred limited partners, and where required, the waiver by
the common limited partners, was obtained in connection with the contribution
of $30 million of capital and the Stockbridge system in February 1997 to
Charter Holdings and the immediate downstreaming thereof, the valuation for the
Stockbridge system, and the proposed CCIP-II/CPLP Acquisition. (See "Item 1.
Business - Recent Developments".) In addition, each of the limited partners of
CharterComm Holdings has certain rights to require CharterComm Holdings to
purchase all or any portion of its limited partnership interests upon the
earlier to occur of (x) January 18, 2000 or (y) the occurrence of a Change of
Control (as defined in the CharterComm Holdings L.P. Agreement), at a
redemption price calculated in accordance with the CharterComm Holdings L.P.
Agreement. The redemption price for CharterComm Holdings' (i) preferred
interests equals the accreted value of such interests at the time of redemption
and (ii) common interests equals the fair market value of such interests at the
time of redemption. Under the terms of the CharterComm Holdings L.P.
Agreement, a "Change of Control" is deemed to occur in the event of, among
other things, the voluntary departure of all of Messrs. Babcock, Kent and Wood
from active engagement in the management of CharterComm Holdings.
The CharterComm Holdings L.P. Agreement includes customary events of default
("Events of Default"), including, without limitation, events relating to the
bankruptcy of either general partner of CharterComm Holdings or CharterComm
Holdings itself, the failure of CharterComm Holdings to comply with material
provisions of the CharterComm Holdings L.P. Agreement and certain other
agreements, including the failure to redeem partnership interests of
CharterComm Holdings when required. Upon the occurrence of an Event of Default
and subject to the prior consent of a majority of the preferred limited
partners, each of the preferred limited partners of CharterComm Holdings has
the right to (i) replace the management of CharterComm Holdings, (ii) require
the liquidation of CharterComm Holdings (with the consent of the common limited
partners), or (iii) require CharterComm Holdings to purchase all or any portion
of its partnership units. An Event of Default under the terms of the
CharterComm Holdings L.P. Agreement could therefore result in a change of
management of CharterComm Holdings, and, as result thereof, Charter Southeast.
Any of such events may constitute a Change of Control under the Indenture and
the credit facilities for CC-I and CC-II.
31
<PAGE> 32
REDEMPTION OF SPECIAL LIMITED PARTNERSHIP INTERESTS
Approximately $43.2 million of the net proceeds from the Offerings were used to
redeem outstanding special limited partnership interests in CC-I, which were
outstanding to certain persons who sold systems to CC-I in 1994. As a result
of the redemption of such special limited partnership interests, Charter
Holdings beneficially owns all of the outstanding partnership interests in
CC-I.
CHARTERHOUSE BRIDGE NOTES
Charter Holdings and Charterhouse Equity Partners II, L.P. ("CEP"), a Delaware
limited partnership controlled by Charterhouse, executed a Note Purchase
Agreement dated as of November 30, 1995 (the "Note Purchase Agreement"). By
the terms of the Note Purchase Agreement, Charter Holdings issued bridge notes
(the "Charterhouse Bridge Notes") due November 29, 1996 in the aggregate
principal amount of $15.0 million in favor of CEP. In connection with its
organization, Charter Southeast assumed the Charterhouse Bridge Notes from
Charter Holdings. The proceeds from the Charterhouse Bridge Notes were used by
Charter Southeast to acquire certain cable systems and the principal amount of
$15.0 million plus $571,146 of accrued interest was repaid on March 28, 1996
using proceeds of the Offerings.
SHORT-TERM INTERCOMPANY NOTES
In February 1996, CharterComm, now a general partner of CharterComm Holdings,
exercised an option to acquire the balance (60.0%) of the outstanding shares of
CCP One, Inc. (formerly known as LEB Communications, Inc.) which it did not
otherwise own for a purchase price of $1.1 million. To exercise this option,
CharterComm borrowed such amount from CC-I. Upon the closing of the Offerings,
CCP One, Inc. became an indirect wholly-owned subsidiary of Charter Holdings.
Charter Holdings indirectly assumed from CharterComm the liability for the
short-term intercompany note from CC-I and caused Charter Southeast to repay it
in full, without interest, from the proceeds of the Offerings.
1997 CONTRIBUTION OF STOCKBRIDGE SYSTEM
On February 28, 1997, Charter and Charterhouse, through CharterComm II, LLC,
together contributed a 100% interest in the assets and liabilities of the
Stockbridge system, which had previously been owned and operated by Charter
Communications IV, L.P., as to which the general partner was an affiliate of
Charter (see "--Rights of Preferred Limited Partners of CharterComm Holdings").
This contribution was valued at $3.67 million, based on an independent
valuation.
32
<PAGE> 33
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
See Index to Financial Statements and Schedules on page F-1 of
this Report.
2. Financial Statement Schedules:
See Index to Financial Statements and Schedules on page F-1 of this
Report.
3. Exhibits:
See Index on Page E-1 of this Report.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of 1996.
During the first quarter of 1997, the Registrants filed a Form 8-K
dated February 7, 1997 covering Item 2 with respect to the acquisition
of cable television systems in Hickory, North Carolina. No financial
statements were required to be filed.
33
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this report to be signed on their
behalf by the undersigned, thereto duly authorized.
CHARTER COMMUNICATIONS SOUTHEAST CHARTER COMMUNICATIONS SOUTHEAST
HOLDINGS, L.P. HOLDINGS CAPITAL CORPORATION
By: Charter Communications Holdings
Properties, Inc.
General Partner
By: /s/ Jerald L. Kent By: /s/ Jerald L. Kent
-------------------------------- ----------------------------
Name: Jerald L. Kent Name: Jerald L. Kent
Title: President Title: President
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
Registrants and in the capacities (as to the General Partner) and on the date
indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Barry L. Babcock Chairman and Director of Holdings Capital and
- ------------------------ Holdings Properties
Barry L. Babcock
/s/ Thomas C. Dircks
- ------------------------ Director of Holdings Properties
Thomas C. Dircks
/s/ Jerald L. Kent President, Chief Financial Officer and
- ------------------------ Director of Holdings Capital and Holdings
Jerald L. Kent Properties (Principal Financial Officer)
/s/ Howard L. Wood Chairman of the Management Committee and
- ------------------------ Director of Holdings Capital and Holdings
Howard L. Wood Properties
/s/ Ralph G. Kelly Sr. Vice President and Treasurer of Holdings
- ------------------------ Capital and Holdings Properties (Principal
Ralph G. Kelly Accounting Officer)
</TABLE>
S-1
<PAGE> 35
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
Page
----
<S> <C>
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P. FINANCIAL STATEMENTS:
Report of Independent Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1996 and 1995 F-3
Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statement of Partners' Capital (Deficit) for the years ended December 31, 1996, 1995 and 1994 F-6
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 F-7
Notes to Consolidated Financial Statements F-9
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P. FINANCIAL STATEMENT SCHEDULES:
None required.
</TABLE>
Separate financial statements of Charter Communications Southeast Holdings
Capital Corporation have not been presented as this entity had no operations
and substantially no assets or equity.
F-1
<PAGE> 36
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Charter Communications Southeast Holdings, L.P.:
We have audited the accompanying consolidated balance sheets of Charter
Communications Southeast Holdings, L.P. (a Delaware limited partnership) and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, partners' capital and cash flows for each of the
three years in the period ending December 31, 1996. These consolidated
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Charter Communications
Southeast Holdings, L.P. and its subsidiaries as of December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the three
years in the period ending December 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
February 21, 1997
F-2
<PAGE> 37
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 3,360,507 $ 6,547,438
Accounts receivable, net of allowance for doubtful accounts of
$300,378 and $288,128, respectively 2,123,324 1,314,179
Insurance receivable 414,000 -
Prepaid expenses and other 299,071 454,175
Receivables from affiliates 500,000 796,179
------------ ------------
Total current assets 6,696,902 9,111,971
------------ ------------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment 163,998,045 107,029,408
Franchise costs, net of accumulated amortization of $75,221,372 and
$40,899,887, respectively 389,065,380 303,827,917
Covenant not to compete, net of accumulated amortization of $240,000 960,000 -
------------ ------------
554,023,425 410,857,325
------------ ------------
RESTRICTED FUNDS HELD IN ESCROW 1,782,537 -
OTHER ASSETS 14,513,068 5,592,429
------------ ------------
$577,015,932 $425,561,725
============ ============
</TABLE>
(Continued on following page)
F-3
<PAGE> 38
<TABLE>
<CAPTION>
1996 1995
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
<S> <C> <C>
CURRENT LIABILITIES:
Note payable - related party $ - $ 15,000,000
Accounts payable and accrued expenses 23,958,762 12,330,848
Subscriber deposits 260,244 243,277
Payables to affiliates 2,143,899 1,060,451
------------ ------------
26,362,905 28,634,576
------------ ------------
DEFERRED REVENUE 1,661,503 1,114,699
------------ ------------
LONG-TERM DEBT 493,571,442 259,125,000
------------ ------------
DEFERRED MANAGEMENT FEES PAYABLE TO AFFILIATE 4,293,532 1,898,004
------------ ------------
DEFERRED INCOME TAXES 5,111,308 5,111,308
------------ ------------
REDEEMABLE PREFERRED LIMITED UNITS-- 393.5
Class A units and 100 Class B units, issued
and outstanding in 1995. No Class A and
Class B units issued and outstanding in 1996 - 53,107,175
------------ ------------
SPECIAL LIMITED PARTNER UNITS-- 345.8526
Class A and 54.1163 Class B units, issued
and outstanding in 1995. No Class A and
Class B units issued and outstanding in 1996 - 44,972,506
------------ ------------
PARTNERS' CAPITAL:
General Partner 460,152 315,985
Preferred Limited Partners-- 291.26 Class B
units, issued and outstanding in 1995. No
Class B units issued and outstanding in 1996 - -
Common Limited Partners--1,513.36 and 477.19
units, issued and outstanding, respectively 45,555,090 31,282,472
------------ ------------
Total partners' capital 46,015,242 31,598,457
------------ ------------
$577,015,932 $425,561,725
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE> 39
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
SERVICE REVENUES:
Basic service $ 87,056,898 $ 53,237,594 $ 16,314,348
Premium service 14,648,591 9,635,049 2,786,478
Other 18,574,066 9,958,270 2,460,290
------------ ------------ ------------
120,279,555 72,830,913 21,561,116
------------ ------------ ------------
OPERATING EXPENSES:
Operating costs 50,971,147 31,056,034 9,228,422
General and administrative 9,326,390 6,191,949 1,924,182
Depreciation and amortization 53,132,739 40,147,664 14,319,589
Management fees - related party 6,013,899 3,642,012 1,078,000
------------ ------------ ------------
119,444,175 81,037,659 26,550,193
------------ ------------ ------------
Income (loss) from operations 835,380 (8,206,746) (4,989,077)
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 233,479 198,400 34,564
Interest expense (41,020,677) (18,721,628) (4,654,539)
Loss from hurricanes (367,000) (744,800) -
Other (101,131) (40,183) -
------------ ------------ ------------
(41,255,329) (19,308,211) (4,619,975)
------------ ------------ ------------
Loss before income tax benefit and extraordinary item (40,419,949) (27,514,957) (9,609,052)
INCOME TAX BENEFIT - 1,888,692 -
------------ ------------ ------------
Loss before extraordinary item (40,419,949) (25,626,265) (9,609,052)
EXTRAORDINARY ITEM- Loss on early retirement of debt - (1,959,438) -
------------ ------------ ------------
Net loss (40,419,949) (27,585,703) (9,609,052)
------------ ------------ ------------
REDEMPTION PREFERENCE ALLOCATION:
Special Limited Partner units (828,616) (3,051,040) (1,924,573)
Redeemable Preferred Limited units (1,452,343) (5,539,799) (1,626,333)
NET LOSS ALLOCATED TO REDEEMABLE PREFERRED LIMITED
UNITS 4,063,274 3,408,957 -
------------ ------------ ------------
Net loss applicable to partners' capital account $(38,637,634) $(32,767,585) $(13,159,958)
============ ============ ============
NET LOSS ALLOCATION TO PARTNERS' CAPITAL ACCOUNTS
General Partner $ (386,376) $(12,483,543) (210,000)
Class B Preferred Limited Partners - (16,966,042) (12,159,958)
Common Limited Partners (38,251,258) (3,318,000) (790,000)
------------ ------------ ------------
$(38,637,634) $(32,767,585) $(13,159,958)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 40
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Class B
Preferred Common
General Limited Limited
Partner Partners Partners Total
--------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1993 $ - $ - $ - $ -
Capital contributions 210,000 29,126,000 790,000 30,126,000
Allocation of net loss (210,000) (12,159,958) (790,000) (13,159,958)
--------- ------------ ------------ ------------
BALANCE, December 31, 1994 - 16,966,042 - 16,966,042
Capital contributions 474,000 - 46,926,000 47,400,000
Allocation of net loss (158,015) (16,966,042) (15,643,528) (32,767,585)
--------- ------------ ------------ ------------
BALANCE, December 31, 1995 315,985 - 31,282,472 31,598,457
Capital contributions 530,543 - 52,523,876 53,054,419
Allocation of net loss (386,376) - (38,251,258) (38,637,634)
--------- ------------ ------------ ------------
BALANCE, December 31, 1996 $ 460,152 $ - $ 45,555,090 $ 46,015,242
========= ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 41
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(40,419,949) $(27,585,703) $(9,609,052)
Adjustments to reconcile net loss to net cash
provided by operating activities-
Extraordinary item- Loss on early retirement of debt - 1,959,438 -
Depreciation and amortization 53,132,739 40,147,664 14,319,589
Amortization of debt issuance costs 1,129,147 - -
Amortization of interest rate cap agreements 163,833 116,992 -
Forgiveness of note receivable - related party 100,000 - -
Amortization on discount of debentures 8,271,381 - -
Losses from hurricanes 367,000 744,800 -
Deferred income taxes - (1,888,692) -
Changes in assets and liabilities, net of effects
from acquisitions-
Accounts receivable, net (303,340) 101,411 (114,188)
Insurance receivable (414,000) - -
Prepaid expenses and other 262,855 27,795 (76,104)
Receivables from affiliates 296,179 (796,179) -
Accounts payable and accrued expenses 9,907,625 5,655,755 3,516,308
Subscriber deposits 2,767 34,632 (2,098)
Payables to affiliates, including deferred
management fees 3,478,976 (1,577,521) 679,643
Deferred revenue 452,127 1,114,699 -
------------- ------------ -------------
Net cash provided by operating activities 36,427,340 18,055,091 8,714,098
------------- ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (48,324,063) (19,890,910) (4,995,661)
Payments for acquisitions, net of cash acquired (145,366,096) (251,309,527) (176,387,357)
Payments of organizational expenses (120,551) (1,386,627) (827,976)
Payments for franchise costs (186,145) - -
Restricted funds held in escrow (1,782,537) 463,414 (463,414)
Proceeds from insurance settlement - 500,000 -
------------- ------------ -------------
Net cash used in investing activities (195,779,392) (271,623,650) (182,674,408)
------------- ------------ -------------
</TABLE>
(Continued on following page)
F-7
<PAGE> 42
-2-
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term borrowings $200,000,061 $ - $ -
Payment of debt issuance costs (11,731,992) (4,393,266) (2,036,820)
Payments for interest rate cap agreements (35,000) - (391,500)
Borrowings under revolving credit agreement 60,576,000 247,425,000 96,500,000
Payments under revolving credit agreement (34,401,000) (81,800,000) (3,000,000)
Proceeds from note payable - related party - 15,000,000 -
Payment of note payable - related party (15,000,000) - -
Partners' capital contributions - 47,400,000 1,000,000
Preferred Limited Partners' contributions - 35,000,000 43,476,000
Issuance of Special Limited Partnership units - - 39,996,893
Payment of Special Limited Partnership units (43,242,948) - -
Issuance of note receivable - related party - - (100,000)
------------ ------------ ------------
Net cash provided by financing activities 156,165,121 258,631,734 175,444,573
------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (3,186,931) 5,063,175 1,484,263
CASH AND CASH EQUIVALENTS, beginning of year 6,547,438 1,484,263 -
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year $ 3,360,507 $ 6,547,438 $ 1,484,263
============ ============ ============
CASH PAID FOR INTEREST $ 28,859,818 $ 16,910,470 $ 4,058,098
============ ============ ============
CASH PAID FOR TAXES $ - $ - $ -
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-8
<PAGE> 43
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization and Basis of Presentation
Charter Communications Southeast Holdings, L.P. (Southeast Holdings), a Delaware
limited partnership, was formed in January 1995. Southeast Holdings will
terminate no later than December 31, 2014, as provided in the partnership
agreement (the "Partnership Agreement"). CharterComm Holdings, L.P.
(CharterComm Holdings), the parent of Southeast Holdings is indirectly owned
approximately 85.5% by affiliates of Charterhouse Group International, Inc., a
privately owned investment firm (collectively referred to herein as
"Charterhouse"), indirectly owned approximately 6.5% by Charter Communications,
Inc. (Charter), manager of the Partnership's operating cable television systems,
and 7.0% primarily by other institutional investors.
In February 1996, CharterComm, Inc. (CharterComm) exercised an option to
acquire the remaining balance of the outstanding shares (60%) of CCP One, Inc.
(CCP I) (formerly known as LEB Communications, Inc., General Partner of Charter
Communications, L.P. (CC-I), which it did not otherwise own, for a purchase
price of $1.1 million. CharterComm borrowed the amount of the purchase price
from CC-I to exercise this option. Charter Communications Southeast, L.P.
(Southeast), assumed the liability for the short-term intercompany note from
CharterComm. In addition, the Partnership forgave approximately $100,000 of
debt outstanding under a promissory note (see Note 15) with the original
shareholder.
On March 28, 1996, the net assets of CC-I were transferred from CharterComm to
Southeast in exchange for a 36.3% General Partnership interest in CharterComm
Holdings, the parent of Southeast Holdings. This transfer was accounted for as
a reorganization under common control and, accordingly, the consolidated
financial statements and notes have been restated to include the results and
financial position of CC-I for all periods presented. Thus, the accompanying
consolidated financial statements include the accounts of Southeast Holdings
and its direct and indirect wholly owned subsidiaries, Charter Communications
Southeast Properties, Inc. (Southeast Properties), Charter Communications
Southeast Holdings Capital Corporation (Holdings Capital), Charter
Communications Southeast Capital Corporation (Southeast Capital), CCP II, Inc.
(CCP II), CCP I, Charter Communications II, L.P. (CC-II) and CC-I, collectively
referred to as the "Partnership" herein. All significant intercompany balances
and transactions have been eliminated in consolidation.
On March 28, 1996, the Preferred Limited Partners exchanged their interests in
the Partnership for interests in CharterComm Holdings (see Notes 3 and 4).
CC-I commenced operations effective April 1994, through the acquisition of
certain cable television systems. CC-II commenced operations effective January
1995 through the acquisition of certain cable television systems.
As of December 31, 1996, the Partnership provided cable television service to
approximately 240 franchises serving approximately 330,600 basic subscribers in
Alabama, Georgia, Kentucky, Louisiana, North Carolina, South Carolina and
Tennessee.
F-9
<PAGE> 44
Cash Equivalents
Cash equivalents at December 31, 1996 and 1995, consist primarily of repurchase
agreements with original maturities of 90 days or less. These investments are
carried at cost, which approximates market value. The Partnership is subject
to loss for amounts invested in repurchase agreements in the event of
nonperformance by the financial institution which acts as the counterparty
under such agreements; however, such noncompliance is not anticipated.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost, including all direct and
certain indirect costs associated with the construction of cable transmission
and distribution facilities, and the cost of new customer installation. The
costs of disconnecting a customer are charged to expense in the period
incurred. Expenditures for repairs and maintenance are charged to expense as
incurred, and equipment replacement and betterments are capitalized.
Depreciation is provided using the composite method on a straight-line basis
over the estimated useful lives of the related assets as follows:
Trunk and distribution systems 10 years
Subscriber installations 10 years
Buildings, headends and leasehold improvements 5-20 years
Converters 5 years
Vehicles and equipment 4-10 years
Office equipment 5-10 years
Franchise Costs
Costs incurred in obtaining and renewing cable franchises are initially
deferred and amortized over the legal lives of the franchises. Costs relating
to unsuccessful franchise applications are charged to expense when it is
determined that the efforts to obtain the franchise will not be successful.
Franchise rights acquired through the purchase of cable television systems
represent the excess of the cost of properties acquired over the amounts
assigned to the net tangible assets at date of acquisition. Acquired franchise
rights are amortized using the straight-line method over a period of up to 15
years.
Covenant Not to Compete
Covenant not to compete is amortized over the term of the agreement (five
years).
Other Assets
Organizational expenses are being amortized using the straight-line method over
five years. Debt issuance costs are being amortized over the term of the debt.
The interest rate cap costs are being amortized over the terms of the
agreement, which approximates three years.
During 1995, the Partnership adopted Statement of Financial Accounting
Standards (SFAS) No. 121 entitled, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." In accordance with SFAS
No. 121, the Partnership periodically reviews the carrying value of its
long-lived assets, identifiable intangibles and franchise costs in relation to
historical financial results, current business conditions and trends (including
the impact of existing legislation and regulation) to identify potential
situations in which the carrying value of such assets may not be recoverable.
If a review indicates that the carrying value of such assets may not be
recoverable, the carrying value of such assets in excess of their fair value
will be recorded as a reduction of the assets' cost as if a permanent
impairment has occurred. No impairments have occurred and accordingly, no
adjustments to the consolidated financial statements of the Partnership have
been recorded relating to SFAS No. 121.
F-10
<PAGE> 45
- 3 -
Revenues
Cable service revenues are recognized when the related services are provided.
Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
average estimated period that customers are expected to remain connected to the
cable television system.
Franchise fees collected from cable subscribers and paid to local franchises
are reported as revenues.
Derivative Financial Instruments
The Company manages risk arising from fluctuations in interest rates by using
interest rate swap and cap agreements, as required by its credit agreements.
These agreements are treated as off-balance sheet financial instruments. The
interest rate swap and cap agreements are being accounted for as a hedge of the
debt obligation, and accordingly, the net settlement amount is recorded as an
adjustment to interest expense in the period incurred.
Income Taxes
Income taxes are the responsibility of the partners and are not provided for in
the accompanying financial statements except for CC-II's indirect wholly owned
subsidiary, Peachtree Cable TV, Inc. (Peachtree). Peachtree is a C
corporation, and taxes have been provided for in the accompanying financial
statements in accordance with that described in SFAS No. 109, "Accounting for
Income Taxes." SFAS No. 109 requires accounting for income taxes based on the
liability method, and deferred taxes are determined based on the estimated
future tax effects of differences between the financial reporting and tax bases
of assets and liabilities given the provisions of the enacted tax laws.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. DISTRIBUTIONS AND ALLOCATIONS:
For financial reporting purposes, redemption preference allocations, profits
and losses are allocated in accordance with the liquidation provisions of the
applicable partnership agreements.
Currently, under terms of the Partnership Agreement, allocation of partnership
profits of Southeast Holdings for income tax reporting purposes is based upon
capital contributions, as set forth in the Partnership Agreement.
Currently, partnership losses for income tax reporting purposes are allocated
as follows for Southeast Holdings: (i) 99% to the limited partners and 1% to
the General Partner until the capital account of any such partner is reduced to
zero, (ii) 100% to the General Partner until the capital account of any such
partner is reduced to zero and (iii) to the partners in proportion to the
positive balances of their capital accounts until such balances are reduced to
zero.
F-11
<PAGE> 46
- 4 -
Prior to the reorganization under common control, the Partnership profits of
CC-I were allocated for income tax reporting purposes as follows: (i) to
partners which deficit capital balances, in proportion to such deficits, until
such deficits are reduced to zero; (ii) to the Special Limited Partners, as
discussed in Note 5; (iii) to the Class A Preferred Limited Partners until each
such Limited Partner's capital account equals its unrecovered capital plus its
unrecovered preference amount (preference amount is equal to 17% of the
unrecovered capital and preference amount per annum); (iv) to the Class B
Preferred Limited Partners until each such Limited Partner's capital account
equals its unrecovered capital plus its unrecovered preference amount
(preference amount is equal to 19% of the unrecovered capital and preference
amount per annum); (v) to the Common Limited Partners and the General Partner
until each of such Partner's capital account equals its unrecovered capital;
and (vi) the remaining balance, 79% to the Common Limited Partners and 21% to
the General Partner.
Prior to the reorganization under common control, partnership losses of CC-I
were allocated for income tax reporting purposes as follows: (i) to the Class
A Preferred Limited Partners until the capital accounts of such partners are
reduced to zero; (ii) to the Class B Preferred Limited Partners until the
capital accounts of such partners are reduced to zero; (iii) 79% to the Common
Limited Partners, and 21% to the General Partner until the capital account of
any such partner is reduced to zero; and (iv) to the partners in proportion to
the positive balances of their capital accounts until such balances are reduced
to zero; provided, however, any item of loss or deduction which would cause or
increase a deficit balance in a limited partner's capital account shall be
allocated to the General Partner.
As stated in the Partnership Agreement, the Partnership may make distributions
to the partners out of all available funds at such times and in such amounts as
the General Partner may determine in its sole discretion.
For financial reporting purposes, redemption preference allocations, profits
and losses are allocated in accordance with the liquidation provisions of the
Agreement.
3. REDEEMABLE PREFERRED LIMITED UNITS (CC-II):
Prior to the reorganization under common control, CC-II could, at its option,
redeem all or any portion of the outstanding Preferred Limited Partner units
for an amount equal to the Optional Redemption Price, as defined in CC-II's
Partnership Agreement, on three separate occasions, on or after January 18,
2000; provided, however, CC-II had funds available to pay in cash the Optional
Redemption Price for all the Preferred Limited Partner units to be redeemed.
In the case of any redemption of less than all of the then outstanding
Preferred Limited Partner units, such redemption was to be made pro rata among
all the holders of the Preferred Limited Partner units according to the number
of Preferred Limited Partner units held. In addition, CC-II would have
redeemed all of the outstanding Preferred Limited Partner units at the
Mandatory Redemption Price, as defined in CC-II's Partnership Agreement, on
January 18, 2005.
The Class A and B Preferred Limited Partners' preference return has been
reflected as an addition to the Redeemable Preferred Limited Partner units, and
the decrease has been allocated to the General Partner and Common Limited
Partner consistent with the liquidation and distribution provisions in CC-II's
Partnership Agreement.
F-12
<PAGE> 47
- 5 -
At March 28, 1996, the balance related to the Preferred Limited Partner units
was determined as follows:
Initial contributions $35,000,000
1995 redemption preference allocation 3,729,149
-----------
Balance, December 31, 1995 38,729,149
1996 redemption performance allocation 1,452,343
-----------
March 28, 1996 $40,181,492
===========
On March 28, 1996, in connection with the reorganization under common control,
the Preferred Limited Partners of CC-II exchanged their preferred interests in
CC-II for preferred and common limited partnership interests in CharterComm
Holdings. The Preferred Limited Partners of CC-II's balance at March 28, 1996,
was transferred to CharterComm Holdings and then contributed to the
Partnership.
4. REDEEMABLE PREFERRED LIMITED UNITS (CC-I):
Prior to the reorganization under common control, CC-I could redeem the Class A
Preferred Limited Partner units for an amount equal to the unrecovered capital
plus any unrecovered preference amount on or after April 30, 1996; provided,
however, that CC-I had not redeemed any Class A Preferred Limited Partner units
prior to the redemption of all the Special Limited Partner units. In addition,
the holders of the Class A Preferred Limited Partner units had the right to
cause CC-I to purchase all of the units held by such holders at any time after
April 30, 1998, subject to certain conditions, including approval by the
Special Limited Partner, as stated in CC-I's Partnership Agreement, at a price
equal to the unrecovered capital and the unrecovered preference amount.
The obligation to purchase the Class A Preferred Limited Partner units was
conditioned upon the purchase not causing default under any Senior
Indebtedness, as defined in CC-I's Partnership Agreement, which would afford
the holder thereof the right to accelerate the maturity date of such Senior
Indebtedness. Based on these redemption clauses, the Class A Preferred Limited
Partners' preference return has been reflected as an addition to the Redeemable
Preferred Limited units, and the decrease has been allocated to the General
Partner, Class B Preferred Limited Partners and Common Limited Partners
consistent with the liquidation and distribution provisions of CC-I's
Partnership Agreement.
At March 28, 1996, the balance related to CC-I Class A Preferred Limited
Partner units was determined as follows:
<TABLE>
<S> <C>
Initial contributions $14,350,000
1994 redemption preference allocation 1,626,333
-----------
Balance, December 31, 1994 15,976,333
1995 redemption preference allocation 1,810,650
Allocation of 1995 net loss (3,408,957)
-----------
Balance, December 31, 1995 14,378,026
1996 redemption preference allocation -
Allocation of net loss (4,063,274)
Return of capital - Special Limited Partner units 2,558,173
-----------
Balance, March 28, 1996 $12,872,925
===========
</TABLE>
F-13
<PAGE> 48
- 6 -
On March 28, 1996, in connection with the reorganization under common control
and pursuant to a Co-Sale Agreement, Subscription Agreement and Contribution
Agreement, the Preferred Limited Partners of CC-I exchanged their preferred
interests in CC-I for preferred and common limited partnership interests in
CharterComm Holdings. The Preferred Limited Partners of CC-I's balance at
March 28, 1996, was transferred to CharterComm Holdings and then contributed to
the Partnership.
5. SPECIAL LIMITED PARTNER UNITS (CC-I):
Prior to the reorganization under common control, CC-I's partnership profits
were allocated to the Special Limited Partners until the allocation profits
equal the unrecovered preference amount (preference amounts range from 6% to
17.5% of the unrecovered initial cost of the partnership units and unrecovered
preference amounts per annum). When there was no profit to allocate, the
preference return was reflected as a decrease in Partners' Capital.
Prior to the reorganization under common control, CC-I could redeem the Special
Limited Partner units at any time for an amount equal to the unrecovered
initial cost of the partnership units plus any unrecovered preference amount
with respect to the units. In addition, the Special Limited Partner had the
option to cause CC-I to redeem the units any time after April 30, 2001. Based
on these redemption clauses, the Special Limited Partner units have been
excluded from Partners' Capital and the decrease in Partners' Capital
attributed to the Special Limited Partners' preference return has been
allocated to the other partners in a manner consistent with the liquidation and
distributions provisions of CC-I's Partnership Agreement. In accordance with
CC-I's Partnership Agreement, distributions would be allocated to the Special
Limited Partner equal to the unrecovered preference allocation and the
unrecovered initial cost of the partnership units prior to distributions to any
other partnership unit.
At December 31, 1995, the balance of $44,972,506 related to the Special Limited
Partner units consisted of $39,996,893 of initial cost of the partnership units
and $4,975,613 of preference allocation. For the period from January 1, 1996,
to March 28, 1996, the Special Limited Partners earned an additional $828,616
of preference allocation resulting in a balance of $45,801,122. In accordance
with a purchase agreement and through the use of the capital contribution from
Southeast resulting from the proceeds of the Notes (see Note 12), CC-I paid the
Special Limited Partners $43,242,948 as full consideration for their
partnership interests on March 28, 1996. The difference in the payment amount
and the March 28, 1996, Special Limited Partner balance of $2,558,174 was
reflected as a return of capital to the Preferred Limited Partner units (see
Note 4).
6. ACQUISITIONS:
In April 1994, CC-I acquired certain assets from Citation Cablevision, Inc.,
Subscriber Cablevision, Inc., LaGrange Cablevision, Inc., and The Jefferson
Trust Partnership (collectively referred to as "McDonald") for approximately
$176.4 million which included cable television systems in Alabama, Georgia and
Louisiana.
In January 1995, CC-II completed the acquisition of systems from Crown Media,
Inc. (Crown), a subsidiary of Hallmark Cards, Incorporated for an aggregate
purchase price of approximately $112.8 million. The acquisition of the Crown
systems was part of a series of larger transactions in which Crown sold its
cable television systems to a group of investors, including Charter, CC-II,
certain affiliates of Charter, and third parties, for a total purchase price of
approximately $900.0 million.
In April 1995, Charter Communications III, L.P. (CC-III), a wholly owned
subsidiary of CC-II, acquired the stock of Peachtree, including cable
television systems located in Georgia, for an aggregate purchase price of
approximately $22.3 million. In connection with the completion of the
acquisition, the Partnership recorded approximately $7.0 million of additional
franchise costs and deferred income taxes, resulting from differences between
the financial reporting and tax bases of certain assets acquired.
F-14
<PAGE> 49
- 7 -
In May 1995, CC-III acquired the net assets of certain systems from CableSouth,
Inc. (CableSouth), which include cable television systems in Alabama, for an
aggregate purchase price of approximately $49.2 million.
In July 1995, CC-II acquired the net assets of certain systems from Masada
Cable Partners, L.P. (Masada), which include certain cable television systems
in Georgia, for an aggregate purchase price of approximately $35.2 million.
In November 1995, CC-II acquired the net assets of certain systems from Masada
Cable Partners II, L.P. (Masada II), which include cable television systems in
South Carolina, for an aggregate purchase price of approximately $35.5 million.
In January 1996, CC-II acquired the net assets of Genesis Cable of Carolina,
L.P. (Genesis), which include cable television systems in South Carolina, for
approximately $8.7 million.
In March 1996, CC-II purchased certain systems from Cencom Cable Income
Partners, L.P. (the "CCIP"), an affiliated entity, which include cable
television systems in Georgia, Kentucky, North Carolina and Tennessee, for an
aggregate purchase price of approximately $115.1 million (the "CCIP
Acquisition").
In November, 1996, CC-I acquired the nets assets of certain systems from
Masada Cable Partners, L.P. (Masada III) which included cable television
systems in Alabama and Tennessee, for approximately $22.3 million.
All of the above acquisitions were accounted for using the purchase method of
accounting, and accordingly, results of operations of the acquired assets have
been included in the financial statements from the date of acquisition. The
following shows the purchase price and allocation of purchase price to assets
acquired and liabilities assumed:
<TABLE>
<CAPTION>
McDonald Crown Peachtree CableSouth
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Purchase price:
Cash paid to seller $134,390,464 $109,639,897 $21,969,670 $48,475,475
Special Limited
Partner units issued
to seller 39,996,893 - - -
Assumed liabilities 500,000 337,725 75,000 150,000
Transaction costs 1,500,000 2,822,449 300,000 600,000
------------ ------------ ----------- -----------
$176,387,357 $112,800,071 $22,344,670 $49,225,475
============ ============ =========== ===========
Allocation of
purchase price to
assets acquired:
Cash - $ 3,743,826 $ 9,121 $ -
Accounts receivable $ 703,968 345,444 64,640 134,532
Prepaid expenses and
other assets - 150,455 158,293 38,903
Property, plant and
equipment 28,187,217 51,836,684 5,293,554 4,575,134
Franchise costs 148,291,381 62,473,490 24,131,446 44,586,571
Accounts payable and
accrued expenses (690,893) (5,749,828) (312,384) (109,665)
Subscriber deposits (104,316) - - -
Deferred income taxes - - (7,000,000) -
------------ ------------ ----------- -----------
$176,387,357 $112,800,071 $22,344,670 $49,225,475
============ ============ =========== ===========
</TABLE>
F-15
<PAGE> 50
- 8 -
<TABLE>
<CAPTION>
Masada Masada II Genesis CCIP Systems Masada III
----------- ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Purchase price:
Cash paid to seller $34,547,135 $34,955,123 $8,462,535 $112,144,218 $21,939,353
Assumed liabilities 115,000 125,000 30,000 - 77,000
Transaction costs 500,000 450,000 200,000 3,000,000 275,000
----------- ----------- ---------- ------------ -----------
$35,162,135 $35,530,123 $8,692,535 $115,144,218 $22,291,353
=========== =========== ========== ============ ===========
Allocation of
purchase price to
assets acquired:
Cash $ - $ - $ - $ 1,888,011 $ -
Accounts receivable 20,264 32,554 50,035 455,770 -
Prepaid expenses
and other assets 36,733 21,482 - 97,805 9,946
Property, plant and
equipment 3,530,312 2,541,886 2,885,645 22,040,675 1,082,583
Franchise costs 31,734,688 33,033,114 4,556,855 92,378,171 21,311,776
Noncompete agreement - - 1,200,000 - -
Accounts payable
and accrued
expenses (159,862) (98,913) - (1,621,537) (98,752)
Subscriber deposits - - - - (14,200)
Deferred revenue - - - (94,677) -
----------- ----------- ---------- ------------ -----------
$35,162,135 $35,530,123 $8,692,535 $115,144,218 $22,291,353
=========== =========== ========== ============ ===========
</TABLE>
During May 1996, CC-I and CC-II entered into four separate purchase agreements
to acquire certain cable systems in North Carolina and South Carolina for an
aggregate purchase price of approximately $89.15 million from entities
affiliated with the Partnership. The purchase is contingent upon majority
approval of the Limited Partners of the sellers and is expected to be
consummated during 1997.
The following are unaudited pro forma operating results for the 1996 and 1995
acquisitions as though the acquisitions had been made on January 1 of the
respective year prior to such acquisitions.
For the Years Ended
December 31
--------------------------------
1996 1995
------------ ------------
(Unaudited)
Service revenues $131,226,648 $118,213,920
Income (loss) from operations $ 2,650,634 $ (4,023,316)
Net loss $(42,434,786) $(45,501,970)
F-16
<PAGE> 51
- 9 -
7. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Trunk and distribution systems $114,470,064 $76,418,698
Subscriber installations 33,053,373 17,361,287
Land, buildings, headends and leasehold improvements 21,270,738 13,229,975
Converters 13,365,896 6,446,647
Vehicles and equipment 6,746,741 3,725,059
Office equipment 4,349,814 2,138,248
------------ ------------
193,256,626 119,319,914
Less- Accumulated depreciation (29,258,581) (12,290,506)
------------ ------------
$163,998,045 $107,029,408
============ ============
</TABLE>
8. RESTRICTED FUNDS HELD IN ESCROW:
In connection with the acquisition discussed in Note 21, the Partnership agreed
to deposit a portion of the purchase price into an escrow account to be
transferred to the seller upon consummation of the acquisition. These funds
were transferred to the seller in February 1997.
9. OTHER ASSETS:
Other assets consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Debt issuance costs, net of
accumulated amortization of
$1,733,038 and $561,661 $13,058,961 $3,548,345
Organizational expenses, net
of accumulated amortization
of $968,838 and $487,144 1,366,316 1,727,459
Interest rate cap agreements,
net of accumulated
amortization of $338,708 and
$174,875 87,792 216,625
Note receivable--related party - 100,000
----------- ----------
$14,513,069 $5,592,429
=========== ==========
</TABLE>
10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Property taxes $ 942,894 $ 454,716
Salaries and related benefits 1,171,032 593,720
Accounts payable 1,682,636 318,694
Franchise fees 2,217,571 1,451,629
Programming expenses 2,344,725 1,953,199
Accrued interest 5,004,096 2,407,599
Capital expenditures 7,590,284 2,197,808
Other 3,005,524 2,953,483
----------- -----------
$23,958,762 $12,330,848
=========== ===========
</TABLE>
F-17
<PAGE> 52
- 10 -
11. NOTE PAYABLE:
On November 30, 1995, Southeast Holdings entered into a Convertible Senior Note
(the "Convertible Senior Note") with Charterhouse for $15,000,000. Interest on
the Convertible Senior Note accrued on the unpaid principal amount and payable
quarterly in arrears beginning March 31, 1996; the interest rate was the rate
publicly announced by Chemical Bank in New York as its reference rate plus 3%
per annum. During the year ended December 31, 1995, Southeast Holdings incurred
costs of $100,000 relating to the Convertible Senior Note.
In March 1996, the Convertible Senior Note was repaid using a portion of the
proceeds from the Notes discussed in Note 12. In addition, the Partnership
paid Charterhouse a nonrefundable bridge loan fee of $400,000.
12. LONG-TERM DEBT:
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Senior Secured Discount Debentures $ 83,271,442 $ -
11-1/4% Senior Notes 125,000,000 -
Credit Agreements:
CC-I 106,700,000 92,825,000
CC-II 178,600,000 166,300,000
------------ ------------
493,571,442 259,125,000
Less- Current maturities - -
------------ ------------
$493,571,442 $259,125,000
============ ============
</TABLE>
Senior Secured Discount Debentures
On March 28, 1996, Southeast Holdings and Holdings Capital (collectively the
"Debentures Issuers") issued $146,820,000 of Senior Secured Discount Debentures
(the "Debentures") for proceeds of approximately $75,000,000. The Debentures
are secured by all of Southeast Holdings' ownership interest in Southeast and
rank pari passu in right and priority of payment to all other existing and
future indebtedness of the Debentures Issuers. The Debentures are effectively
subordinated to the claims of creditors of Southeast Holdings' subsidiaries,
including the CC-I and CC-II Credit Agreements (as defined herein). The
Debentures are redeemable at the Debentures Issuers' option at amounts
decreasing from 107% to 100% of principal, plus accrued and unpaid interest to
the redemption date, beginning on March 15, 2001. The Debentures Issuers are
required to make an offer to purchase all of the Debentures, at a purchase
price equal to 101% of the principal amount, together with accrued and unpaid
interest, upon a Change in Control, as defined in the Debentures Indenture. No
interest is payable on the Debentures prior to March 15, 2001. Thereafter,
interest on the Debentures is payable semiannually in arrears beginning
September 15, 2001, until maturity on March 15, 2007. The discount on the
Debentures is being accreted using the effective interest method at an interest
rate of 14% from the date of issuance to March 15, 2001. The unamortized
discount was $63,548,558 at December 31, 1996. At December 31, 1996, the
Debentures were trading at 59% of the principal amount at maturity or
approximately $86.6 million. Proceeds from the Debentures were used to pay
fees and expenses related to the issuance of the Debentures and the balance of
$72,375,061 was contributed to Southeast as equity capital.
F-18
<PAGE> 53
- 11 -
11-1/4% Senior Notes
On March 28, 1996, Southeast and Southeast Capital (the "Notes Issuers") issued
$125,000,000 aggregate principal amount of 11-1/4% Senior Notes (the "Notes").
The Notes are senior unsecured obligations of the Issuers and rank pari passu
in right and priority of payment to all other existing and future indebtedness
of the Notes Issuers. The Notes are effectively subordinated to the claims of
creditors of Southeast's subsidiaries, including the lenders under the CC-I and
CC-II Credit Agreements. The Notes are redeemable at the Notes Issuers' option
at amounts decreasing from 105.625% to 100% of principal, plus accrued and
unpaid interest to the date of redemption, beginning on March 15, 2001. The
Notes Issuers are required to make an offer to purchase all of the Notes, at a
purchase price equal to 101% of the principal amount, together with accrued and
unpaid interest, upon a Change in Control, as defined in the Notes Indenture.
Interest is payable semiannually on March 15 and September 15 until maturity on
March 15, 2006. At December 31, 1996, the Notes were trading at 104.5% of the
initial price paid by the investors or approximately $130.6 million. Proceeds
from the Notes together with capital contributions from Southeast Holdings were
used to repay the Convertible Senior Note, to pay fees and expenses related to
the issuance of the Notes, and to make capital contributions to CC-I and CC-II.
The Debentures and Notes require their respective issuers to comply with
various financial and nonfinancial covenants and restrictions, including
substantial limitations on additional indebtedness, restricted payments,
transactions with affiliates, liens, dividends and certain other items.
Southeast and Southeast Holdings are holding companies with no significant
assets other than their direct and indirect investments in CC-I and CC-II.
Southeast Capital and Holdings Capital were formed solely for the purpose of
serving as co-issuers and have no operations. Accordingly, the Notes Issuers
and Debentures Issuers must rely upon distributions from CC-I and CC-II to
generate funds necessary to meet their obligations, including the payment of
principal and interest on the Notes and Debentures.
CC-I Credit Agreement
During April 1994, CC-I entered into a revolving credit agreement (the "CC-I
Credit Agreement") with a consortium of banks for borrowings up to
$110,000,000. The unpaid principal balance under the CC-I Credit Agreement
converted to a term loan on July 31, 1995. Effective December 31, 1995, the
CC-I Credit Agreement was amended to create a revolving credit facility with
maximum borrowings of $15,000,000. A portion of the proceeds from the
revolving credit facility was used to reduce the principal amount of the term
loan outstanding to $90,000,000. The CC-I Credit Agreement was amended on
March 28, 1996, and again on November 29, 1996, increasing the revolving credit
facility to $75,000,000 and reducing the term loan to $75,000,000. Also, the
maturity date of the CC-I Credit Agreement was extended to September 30, 2005,
due dates on the term loan were extended, and certain financial covenants were
modified.
Principal payments on the term loan are due in quarterly installments beginning
March 31, 1999, and continuing through September 30, 2005. Portions of the
debt bear interest, at CC-I's option, at rates based upon the Base Rate, as
defined in the CC-I Credit Agreement, LIBOR, or prevailing bid rates of
certificates of deposit. The interest rates ranged from 7.5% to 9.125% at
December 31, 1996. The weighted average interest rates and weighted average
borrowings were approximately 7.93%, 8.72% and 7.42%, and $84,693,500,
$93,622,900 and $94,125,000 during the years ended December 31, 1996, 1995 and
1994, respectively. As this debt instrument bears interest at current market
rates, its carrying amount approximates fair market value at December 31, 1996.
Borrowings under the CC-I Credit Agreement are subject to certain financial and
nonfinancial covenants and restrictions, the most restrictive of which requires
maintenance of a ratio of debt to annualized operating cash flow, as defined,
not to exceed 5.25 to 1 at December 31, 1996. Borrowings under the CC-I Credit
Agreement are collateralized by the assets of CC-I. A quarterly commitment fee
of 0.375% per annum is payable on the unused revolving credit facility portion
of the CC-I Credit Agreement.
F-19
<PAGE> 54
- 12 -
Commencing March 31, 1999, and at the end of each calendar quarter thereafter,
the CC-I revolving credit facility commitment (available borrowings) shall be
reduced on an annual basis as set forth below:
<TABLE>
<CAPTION>
Percentage of Percentage Reduction
Principal Due of Revolving Credit
Year on Term Loans Facility Commitment
- ---- ------------- --------------------
<S> <C> <C>
1997 -% -%
1998 - -
1999 8.8 8.8
2000 11.6 11.6
2001 11.6 11.6
2002 14.4 14.4
2003 16.6 16.6
2004 20.0 20.0
2005 17.0 17.0
----- -----
100.0% 100.0%
===== =====
</TABLE>
As a requirement of the CC-I Credit Agreement, CC-I has secured interest swap
and cap agreements with a certain lender bank. The CC-I Credit Agreement
requires CC-I to enter into interest rate protection agreements for amounts not
less than 50% of the outstanding obligations. In addition, the interest rate
protection agreements must provide interest rate protection for a weighted
average period of not less than two years. The fair value of the interest rate
caps or swaps is the estimated amount CC-I would receive (pay) to eliminate the
cap or swap agreement at the reporting date, taking into account current
interest rates and the credit-worthiness of the counterparties. The following
summarizes certain information pertaining to the interest rate protection
agreements as of December 31, 1996:
<TABLE>
<CAPTION>
Contract Fair Value/
Notional Fixed Expiration Redemption
Amount Type Rate Date Price
----------- ---- ---- ------------------ -----------
<S> <C> <C> <C> <C>
$15,000,000 Cap 7.0% July 21, 1997 $ -
15,000,000 Cap 8.0 July 21, 1997 -
15,000,000 Cap 8.0 July 21, 1997 (749)
25,000,000 Swap 5.7 September 18, 1997 (22,750)
10,000,000 Cap 8.5 November 2, 1997 (997)
25,000,000 Swap 4.9 September 18, 1998 *
55,000,000 Swap 5.9 October 21, 1998 *
------------ ---------
Weighted Average
$160,000,000 7.2% Fixed Rate $(24,496)
============ =========
</TABLE>
*These contracts have not been marked to market since their effective dates
are after the reporting date.
CC-II Credit Agreement
In January 1995, CC-II entered into a revolving credit agreement (the "Old
CC-II Credit Agreement") with a consortium of banks for borrowings up to
$80,000,000. During May 1995, CC-II terminated the Old CC-II Credit Agreement
and entered into a new revolving credit agreement (the "CC-II Credit
Agreement") with a consortium of banks for borrowings up to $135,000,000. On
July 31, 1995, November 29, 1995, and March 28, 1996, CC-II and the banks
amended the CC-II Credit Agreement again to provide for term loans
F-20
<PAGE> 55
- 13 -
in the aggregate amount of $40,000,000 and total borrowings of $205,000,000,
including a $165,000,000 revolving credit facility. Principal payments are due
in quarterly installments beginning September 30, 1998, and continuing through
September 30, 2004. Portions of the debt bear interest, at CC-II's option, at
rates based upon the Base Rate, as defined in the CC-II Credit Agreement,
LIBOR, or prevailing bid rates of certificates of deposit. The interest rates
ranged from 7.25% to 8.125% at December 31, 1996. The weighted average
interest rate and weighted average borrowings were 7.86% and 8.46% and
approximately $174,512,000 and $121,092,000, during 1996 and 1995,
respectively. As this debt instrument bears interest at current market rates,
its carrying amount approximates fair market value at December 31, 1996.
Borrowings under the CC-II Credit Agreement are subject to certain financial
and nonfinancial covenants and restrictions, the most restrictive of which
requires maintenance of a ratio of debt to annualized operating cash flow, as
defined, not to exceed 4.5 to 1 at December 31, 1996. Borrowings under the
CC-II Credit Agreement are collateralized by the assets of CC-II. A quarterly
commitment fee of 0.375% per annum is payable on the unused revolving credit
facility portion of the CC-II Credit Agreement.
Commencing September 30, 1998, and at the end of each calendar quarter
thereafter available borrowings shall be reduced on an annual basis as set
forth below:
<TABLE>
<CAPTION>
Percentage of Percentage Reduction
Principal Due of Revolving Credit
Year on Term Loans Facility Commitment
- ---- ------------- --------------------
<S> <C> <C>
1997 -% -%
1998 .5 10.0
1999 .5 11.8
2000 1.0 18.2
2001 1.0 18.0
2002 1.0 18.5
2003 15.0 20.3
2004 81.0 3.2
------ ------
100.0% 100.0%
====== ======
</TABLE>
As a requirement of the CC-II Credit Agreement, CC-II has secured interest rate
swap and cap agreements with a certain lender bank. The CC-II Credit Agreement
requires CC-II to enter into interest rate protection agreements for amounts
not less than 50% of the outstanding obligations. In addition, the interest
rate protection agreements must provide interest rate protection for a weighted
average period of not less than 18 months. The fair value of the interest rate
caps or swaps is the estimated amount CC-II would receive (pay) to eliminate
the cap or swap agreement at the reporting date, taking into account current
interest rates and the creditworthiness of the counterparties. The following
summarizes certain information pertaining to the interest rate protection
agreements as of December 31, 1996:
<TABLE>
<CAPTION>
Contract Fair Value/
Notional Fixed Expiration Redemption
Amount Type Rate Date Value
----------- ---- ----- ------------------ -----------
<S> <C> <C> <C> <C>
$20,000,000 Cap 8.5% March 30, 1998 $ (1,449)
20,000,000 Cap 8.5% April 14, 1998 (2,106)
30,000,000 Cap 8.5% September 23, 1999 56,369
20,000,000 Swap 6.2% October 12, 1999 (82,570)
----------- ---------
Weighted Average
$90,000,000 8.0% Fixed Rate $(29,756)
=========== =========
</TABLE>
F-21
<PAGE> 56
- 14 -
Management believes that the sellers of the interest rate swap and cap
agreements will be able to meet their obligations under the agreements. The
purpose of the Partnership's involvement in the interest rate swap and cap
agreements is to minimize the Partnership's exposure to interest rate
fluctuations on its floating rate debt. Management believes that it has no
material concentration of credit or market risks with respect to its interest
rate protection agreements.
Based upon outstanding indebtedness at December 31, 1996, and the amortization
of term loans and scheduled reductions in available borrowings of the revolving
credit facilities depicted above, aggregate future principal payments on the
total borrowings under both agreements at December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Year Amount
- ---- -----------
<S> <C>
1997 $ -
1998 200,000
1999 16,370,000
2000 39,130,000
2001 38,800,000
Thereafter 190,800,000
------------
$285,300,000
============
</TABLE>
13. DEBT ISSUANCE COSTS:
CC-II refinanced its debt agreement in May 1995. Accordingly, the debt
issuance costs related to the initial debt were written off. The effect of
this write-off was a $1,959,438 charge to expense and was recorded as an
extraordinary item. Additional costs related to the new debt agreements and
related amendments were recorded as debt issuance costs during 1996 and 1995.
14. NET LOSS FOR INCOME TAX PURPOSES:
The following reconciliation summarizes the differences between the
Partnership's net loss (excluding Peachtree), for financial reporting purposes
and net loss for federal income tax purposes for the year ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
Net loss for financial reporting purposes $(39,724,910) $(24,602,647) $(9,609,052)
Depreciation differences between
financial reporting and tax reporting (18,371,557) (9,804,115) (1,561,047)
Amortization differences between
financial reporting and tax reporting 6,167,045 7,154,093 4,561,627
Differences in expenses recorded for
financial reporting and reporting for
tax purposes 4,393,484 1,780,599 775,943
Differences in revenue reported for
financial reporting and tax reporting 490,380 1,114,699 -
Other 19,217 61,576 -
------------ ------------ -----------
Net loss for federal income tax purposes $(47,026,341) $(24,295,795) $(5,832,529)
============ ============ ===========
</TABLE>
Net loss for federal income tax purposes reflects the activity of CC-I prior to
the reorganization under common control as discussed in Note 1.
F-22
<PAGE> 57
- 15 -
The following summarizes the significant cumulative temporary difference
between the Partnership's (excluding Peachtree), financial reporting basis and
federal income tax reporting basis as of December 31:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Assets:
Accounts receivable $ 293,493 $ 276,201
Franchise costs 13,571,106 7,300,502
Accrued expenses 3,092,673 2,357,832
Deferred revenue 1,605,077 1,114,699
Deferred management fees payable to affiliate 4,293,532 -
------------ ------------
$ 22,855,881 $ 11,049,234
============ ============
Liabilities:
Property, plant and equipment $(29,687,881) $(11,385,768)
Other assets (29,670) (47,111)
------------ ------------
$(29,717,551) $(11,432,879)
============ ============
</TABLE>
As previously stated, Peachtree is a C corporation. The benefit for income
taxes is comprised solely of deferred income taxes for the year ended December
31, 1995. The statutory and effective tax rates approximated 40%.
As of December 31, 1996 and 1995, temporary differences and carryforwards that
gave rise to deferred income tax assets and liabilities to Peachtree are as
follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Deferred income tax assets:
Accounts receivable $ 2,754 $ 4,771
Accrued expenses 72,306 7,401
Deferred revenue 22,570 -
Tax loss carryforwards 502,552 548,100
Tax credit carryforwards 361,195 361,195
----------- -----------
Total deferred income tax assets 961,377 921,467
----------- -----------
Deferred income tax liabilities:
Property, plant and equipment (1,484,167) (1,481,396)
Franchise costs and other assets (4,588,518) (4,551,379)
----------- -----------
Total deferred income tax liabilities (6,072,685) (6,032,775)
----------- -----------
Net deferred income tax liability $(5,111,308) $(5,111,308)
=========== ===========
</TABLE>
At December 31, 1996, Peachtree had a net operating loss carryforward for
income tax purposes of approximately $1,276,000 which, if not utilized to
reduce taxable income in future periods, expires in the years 2003 through
2010. All net operating losses have been recognized for financial statement
purposes as a reduction of deferred income taxes. In addition, Peachtree has
an alternative minimum tax credit carryforward of approximately $486,000, which
may be carried forward indefinitely.
F-23
<PAGE> 58
- 16 -
15. RELATED-PARTY TRANSACTIONS:
Charter Communications, Inc. (Charter) provides management services to the
Partnership under the terms of contracts which provide for fees equal to 5% of
the Partnership's gross service revenues. Through December 31, 1998 and 1997,
60% of CC-II's and CC-I's fees shall be paid quarterly with the balance being
deferred. Thereafter, the entire fee may be deferred until termination of the
partnerships. Expenses recognized under this contract during 1996, 1995 and
1994 were approximately $6,013,900, $3,642,000 and $1,078,000, respectively.
Management fees currently payable of approximately $1,002,400 and $630,852 are
included in Payables to Affiliates at December 31, 1996 and 1995, respectively.
The Partnership entered into a new management agreement with Charter as of
March 28, 1996. In addition to the deferral of management fees discussed
above, payments due on the Notes and Debentures shall be paid before any
management fees are paid; provided that there exists no default on subordinated
debt.
Receivables from Affiliates includes a $500,000 refundable advance toward the
purchase of the Abbeville System from Cencom Partners, L.P., an affiliated
entity. The amount will be refunded to the Partnership if the sale is not
consummated or applied to the Partnership's purchase of the Abbeville System.
The Partnership and all entities affiliated with Charter collectively utilize a
combination of insurance coverage and self-insurance programs for medical,
dental and workers' compensation claims. The Partnership is allocated charges
monthly based upon its total number of employees, historical claims and medical
cost trend rates. During 1996, 1995 and 1994, the Partnership expensed
approximately $1,135,900, $619,000 and $162,000, respectively, relating to
insurance allocations.
In 1996, the Partnership and other affiliated entities employed the services of
Charter's National Data Center (the "National Data Center"). The National Data
Center performs certain subscriber billing services and provides computer
network, hardware and software support for the Partnership and other affiliated
entities. The cost of these services is allocated based on the number of
subscribers. Management considers this allocation to be reasonable for the
operations of the Partnership. During 1996, the Partnership expensed
approximately $344,500 relating to these services.
In 1996, certain of the Partnership's employees became participants in the 1996
Charter Communications/Charterhouse Group Appreciation Rights Plan (the
"Appreciation Rights Plan"). The Appreciation Rights Plan covers certain key
employees and consultants within the group of companies and partnerships
controlled by affiliated of Charterhouse and managed by Charter (collectively,
the "Investment Group"). The obligation and related expenses of the
Appreciation Rights Plan is the responsibility of and has been recorded at
CharterComm Holdings.
CC-I, CC-II and other affiliated entities maintain regional offices. The
regional offices perform certain operational services on behalf of the
Partnership and other affiliated entities. The cost of these services was
allocated to the Partnership and affiliated entities based on their number of
subscribers. Management considers this allocation to be reasonable for the
operations of the Partnership. During 1996, 1995 and 1994, the Partnership
expensed approximately $1,294,300, $1,006,000 and $315,000, respectively,
relating to these services.
The Partnership pays certain acquisition advisory fees to Charter and
Charterhouse which typically equal approximately 1% of the total purchase price
paid for cable television systems acquired. Total acquisition fees paid to
Charter in 1996, 1995 and 1994 were $1,737,500, $450,000 and $1,500,000,
respectively. Total acquisition fees paid to Charterhouse in 1996, 1995 and
1994 were $1,737,500, $100,000 and $0, respectively. In addition, Charter
received $2,900,000 of partnership interests as consideration for certain
acquisitions during 1995.
At December 31, 1995, CC-I had an unsecured receivable included in other
assets, of $100,000 bearing interest at 6% from a related party. During 1996,
CC-I forgave the amount outstanding under this note.
F-24
<PAGE> 59
- 17 -
In January 1996, CC-II entered into a Financial Service Agreement with
Charterhouse for consulting and financial services. The Partnership received
services through December 31, 1996, for a nonrefundable fee of $550,000, which
was expensed during 1996.
16. COMMITMENTS AND CONTINGENCIES:
Leases
The Partnership leases certain facilities and equipment under noncancelable
operating leases. Rent expense incurred under leases during 1996, 1995 and
1994 was approximately $522,000, $324,200 and $19,300, respectively.
Approximate future minimum lease payments are as follows:
1997 $373,300
1998 301,700
1999 207,200
2000 120,100
2001 107,200
Thereafter 364,300
The Partnership rents utility poles in its operations. Generally, pole rental
agreements are short term, but the Partnership anticipates that such rentals
will recur. Rent expense incurred for pole attachments during 1996, 1995 and
1994 was approximately $2,091,900, $1,213,200 and $430,900, respectively.
Insurance Coverage
The Partnership currently does not have, and does not in the near term
anticipate having, property and casualty insurance on its underground
distribution plant. Due to large claims incurred by the property and casualty
insurance industry, the pricing of insurance coverage has become inflated to
the point where, in the judgment of the Partnership's management, the insurance
coverage is cost prohibitive. Management believes its experience with such
insurance coverage is consistent with general industry practice. Management
will continue to monitor the insurance markets to attempt to obtain coverage
for the Partnership's distribution plant at reasonable rates.
Litigation
A purported class action lawsuit on behalf of the CCIP limited partners was
filed in 1995 (the "Action"), which sought, among other things, to enjoin
permanently the CCIP Acquisition. On February 15, 1996, all of the plaintiff's
claims for injunctive relief were dismissed (including that which sought to
prevent the consummation of the CCIP Acquisition); the plaintiff's claims for
money damages which may have resulted from the CCIP Acquisition remain pending.
Each of the defendants in the Action, including the Partnership, believes the
Action, which remains pending, to be without merit and is contesting it
vigorously. In October 1996, the plaintiff filed a Consolidated Amended Class
Action Complaint (the "Amended Complaint"). The general partner of CCIP
believes that portions of the Amended Complaint are legally inadequate and
filed a dispositive motion as to all remaining claims in the Action. There can
be no assurance, however, that the plaintiff will not be awarded damages, some
or all of which may be payable by the Partnership, in connection with the
Action.
The Partnership is a party to lawsuits which are generally incidental to its
business. In the opinion of management, after consulting with legal counsel,
the outcome of these lawsuits will not have a material adverse effect on the
Partnership's consolidated financial position and results of operations.
17. REGULATION IN THE CABLE TELEVISION INDUSTRY:
The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. In addition, recent
legislative and regulatory changes and additional regulatory proposals under
consideration may materially affect the cable television industry.
F-25
<PAGE> 60
- 18 -
Congress enacted the Cable Television Consumer Protection and Competition Act
of 1992 (the "1992 Cable Act"), which became effective on December 4, 1992.
The 1992 Cable Act generally allows for a greater degree of regulation of the
cable television industry. Under the 1992 Cable Act's definition of effective
competition, nearly all cable systems in the United States are subject to rate
regulation of basic cable services, provided the local franchising authority
becomes certified to regulate basic service rates. The 1992 Cable Act and the
Federal Communications Commission's (FCC) rules implementing the 1992 Cable Act
have generally increased the administrative and operational expenses of cable
television systems and have resulted in additional regulatory oversight by the
FCC and local franchise authorities.
While management believes that the Partnership has complied in all material
respects with the rate provisions of the 1992 Cable Act, in jurisdictions that
have not yet chosen to certify, refunds covering a one-year period on basic
services may be ordered upon future certification if the Partnership is unable
to justify its rates through a benchmark or cost-of-service filing or small
system cost-of-service filing pursuant to FCC rules. Management is unable to
estimate at this time the amount of refunds, if any, that may be payable by the
Partnership in the event certain of its rates are successfully challenged by
franchising authorities or found to be unreasonable by the FCC. Management
does not believe that the amount of any such refunds would have a material
adverse effect on the consolidated financial position or results of operations
of the Partnership.
The 1992 Cable Act modified the franchise renewal process to make it easier for
a franchising authority to deny renewal. Historically, franchises have been
renewed for cable operators that have provided satisfactory services and have
complied with the terms of the franchise agreement. Although management
believes that the Partnership has generally met the terms of its franchise
agreements and has provided quality levels of service, and anticipates the
Partnership's future franchise renewal prospects generally will be favorable,
there can be no assurance that any such franchises will be renewed or, if
renewed, that the franchising authorities will not impose more onerous
requirements on the Partnership than previously existed.
Recent Telecommunications Legislation
During 1996, Congress passed and the President signed into law the
Telecommunications Act of 1996 (the "Telecommunications Act") which alters
federal, state, and local laws and regulations pertaining to cable television,
telecommunications and other services. Under the Telecommunications Act,
telephone companies can compete directly with cable operators in the provision
of video programming.
Certain provisions of the Telecommunications Act could materially affect the
growth and operation of the cable television industry and the cable services
provided by the Partnership. Although the new legislation may substantially
lessen regulatory burdens, the cable television industry may be subject to
additional competition as a result thereof. There are numerous rule makings to
be undertaken by the FCC which will interpret and implement the
Telecommunications Act's provisions. In addition, certain provisions of the
Telecommunications Act (such as the deregulation of cable programming rates)
are not immediately effective. Further, certain of the Telecommunications
Act's provisions have been and are likely to be subject to judicial challenges.
Management is unable at this time to predict the outcome of such rule makings
or litigation or the substantive effect of the new legislation and the rule
makings on the consolidated financial position and results of operations of the
Partnership.
18. 401(k) PLAN:
In 1994, the Partnership adopted the Charter Communications, Inc. 401(k) Plan
(the "401(k) Plan") for the benefit of its employees. All employees who have
completed one year of employment are eligible to participate in the 401(k)
Plan. The 401(k) Plan is a tax-qualified retirement savings plan to which
employees may elect to make pretax contributions up to the lesser of 10% of
their compensation or dollar thresholds established under the Internal Revenue
Code. The Partnership contributes an amount equal to 50% of the first 5%
contributed by each employee. During 1996, 1995 and 1994, the Partnership
contributed approximately $149,200, $87,900 and $5,800, respectively.
F-26
<PAGE> 61
- 19 -
19. INSURANCE SETTLEMENTS:
In October 1995, Hurricane Opal caused damage to certain of the Partnership's
Alabama and Georgia systems. The Partnership has received a $500,000 insurance
advance during 1995 which approximated the expenses in excess of the insurance
deductible. In addition, the Partnership recorded a $744,800 nonoperating loss
in 1995 for its portion of the insurance deductible.
In September 1996, Hurricane Fran caused damage to certain of the Partnership's
North Carolina systems. The estimated total damage to these systems was
approximately $930,000. The Partnership received an insurance advance of
approximately $150,000 during 1996 and expects settlement in 1997. In
addition, the Partnership recorded a $367,000 nonoperating loss in 1996 for its
portion of the insurance deductible.
20. SIGNIFICANT NONCASH TRANSACTIONS:
The Partnership engaged in the following significant noncash financing
transactions:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Redemption preference allocation--Special
Limited Partner units (CC-I) (see Note 5) $ 828,616 $3,051,040 $1,924,573
Redemption preference allocation--
Redeemable Preferred Limited units (CC-I) (see Note 4) - 2,715,977 1,626,333
Redemption preference allocation--
Redeemable Preferred Limited units (CC-II) (see Note 3) 1,452,343 3,729,149 -
Recording of franchise costs and deferred income
taxes in connection with the Peachtree
acquisition (see Note 6) - 7,000,000 -
Exchange of Redeemable Preferred Limited
Units (CC-I) (see Note 4) 12,872,925 - -
Exchange of Redeemable Preferred Limited
Units (CC-II) (see Note 3) 40,181,492 - -
Return of capital - Special Limited Partner Units
(CC-I) (see Note 5) 2,558,173 - -
</TABLE>
21. SUBSEQUENT EVENT:
In February 1997, CC-II acquired the net assets of certain cable television
systems serving approximately 38,000 basic subscribers in North Carolina for
approximately $68.1 million from Prime Cable of Hickory, L.P. In order to
finance the transaction, CC-II amended the CC-II Credit Agreement to increase
available borrowings to approximately $365.0 million.
F-28
<PAGE> 62
EXHIBIT INDEX
Sequentially
Exhibit Numbered
No. Description Pages
------- ----------- ------------
3.1 Certificate of Limited Partnership of Charter Holdings,
filed as Exhibit 3.1 to the Registration Statement on Form
S-4 (Registration No. 333-3774), and incorporated herein by
this reference.
3.2 Amended and Restated Agreement of Limited Partnership of
Charter Holdings, filed as Exhibit 3.2 to the Registration
Statement on Form S-4 (Registration No. 333-3774), and
incorporated herein by this reference.
*3.2(a) First Amendment to Amended and Restated Agreement of
Limited Partnership of Charter Holdings, dated February 28,
1997
3.3 Certificate of Incorporation of Holdings Capital, filed
as Exhibit 3.3 to the Registration Statement on Form S-4
(Registration No. 333-3774), and incorporated herein by this
reference.
3.4 By-laws of Holdings Capital, filed as Exhibit 3.4 to the
Registration Statement on Form S-4 (Registration No.
333-3774), and incorporated herein by this reference. .
4.1 Indenture dated March 15, 1996 among the issuers and
Boatmen's Trust Company, as Trustee, filed as Exhibit 4.1 to
the Registration Statement on Form S-4 (Registration No.
333-3774), and incorporated herein by this reference.
4.5 Form of new Debenture (included in Exhibit 4.1).
10.1 CCI Credit Facility: Amended and Restated Loan Agreement
dated as of March 28, 1996, among Charter Communications,
L.P., the Banks, Toronto Dominion (Texas), Inc., PNC Bank,
National Association and Credit Lyonnais Cayman Island
Branch, as Co-Agents, Toronto Dominion (Texas), Inc., as
Agent, and Toronto Dominion (Texas), Inc., as Administrative
Agent, filed as Exhibit 10.1 to the Registration Statement on
Form S-4 (Registration No. 333-3774), and incorporated herein
by this reference.
*10.1(a) First Amendment dated as of November 29, 1996 to CCI Credit Facility.
*10.2(a) CC-II Credit Facility: Second Amended and Restated Revolving Credit
Agreement dated as of February 7, 1997, among Charter Communications
II, L.P., Charter Communications III, L.P., Peachtree Cable TV, Inc.,
the Banks, Credit Lyonnais New York Branch and Toronto Dominion
(Texas), Inc., as Arranging Agents, NationsBank of Texas, N.A. and
CIBC Inc., as Managing Agents, Toronto Dominion (Texas), Inc., as
Administrative agent and Credit Lyonnais New York Branch, as
Documentation Agent.
10.3 Management Agreement dated March 28, 1996, between Charter
Holdings and Charter Communications, Inc., filed as Exhibit
10.3 to the Registration Statement on Form S-4 (Registration
No. 333-3774), and incorporated herein by this reference.
10.4 Management Agreement dated March 28, 1996, between Charter
Southeast and Charter Holdings, filed as Exhibit 10.4 to the
Registration Statement on Form S-4 (Registration No.
333-3774), and incorporated herein by this reference.
10.5 Management Agreement dated March 28, 1996, between Charter
Southeast and CC-I, filed as Exhibit 10.5 to the Registration
Statement on Form S-4 (Registration No. 333-3774), and
incorporated herein by this reference.
10.6 Management Agreement dated March 28, 1996, between Charter
Southeast and CC-II, filed as Exhibit 10.6 to the
Registration Statement on Form S-4 (Registration No.
333-3774), and incorporated herein by this reference.
10.10 Asset Purchase Agreement dated as of July 1, 1995, among
CCIP, Charter Communications Properties, Inc., CC-II and
CC-I, filed as Exhibit 10.10 to the Registration Statement on
Form S-4 (Registration No. 333-3774), and incorporated herein
by this reference.
10.11 Certificate of Limited Partnership of CC-I, filed as
Exhibit 10.11 to the Registration Statement on Form S-4
(Registration No. 333-3774), and incorporated herein by this
reference.
E-1
<PAGE> 63
10.12 Amended and Restated Agreement of Limited Partnership of
CC-I dated March 28, 1996, filed as Exhibit 10.12 to the
Registration Statement on Form S-4 (Registration No.
333-3774), and incorporated herein by this reference.
*10.12(a) First Amendment to Amended and Restated Agreement of
Limited Partnership of CC-I, dated February 28, 1997
10.13 Certificate of Limited Partnership of CC-II, filed as
Exhibit 10.13 to the Registration Statement on Form S-4
(Registration No. 333-3774), and incorporated herein by this
reference.
10.14 Amended and Restated Agreement of Limited Partnership of
CC-II dated March 28, 1996, filed as Exhibit 10.14 to the
Registration Statement on Form S-4 (Registration No.
333-3774), and incorporated herein by this reference.
*10.14(a) First Amendment to Amended and Restated Agreement of
Limited Partnership of CC-II, dated February 28, 1997
10.15 Certificate of Limited Partnership of CC-III, filed as
Exhibit 10.15 to the Registration Statement on Form S-4
(Registration No. 333-3774), and incorporated herein by this
reference.
10.16 Amended and Restated Agreement of Limited Partnership of
CC-III dated March 28, 1996, filed as Exhibit 10.16 to the
Registration Statement on Form S-4 (Registration No.
333-3774), and incorporated herein by this reference.
10.17 Articles of Organization of Peachtree, filed as Exhibit
10.17 to the Registration Statement on Form S-4 (Registration
No. 333-3774), and incorporated herein by this reference.
10.18 By-laws of Peachtree, filed as Exhibit 10.18 to the
Registration Statement on Form S-4 (Registration No.
333-3774), and incorporated herein by this reference.
10.19 Certificate of Limited Partnership of Charter Southeast,
filed as Exhibit 3.1 to the Registration Statement on Form
S-4 of Charter Communications Southeast, L.P. (Registration
No. 333-3772), and incorporated herein by this reference.
10.20 Amended and Restated Agreement of Limited Partnership of
Charter Southeast dated March 28, 1996, filed as Exhibit 3.2
to the Registration Statement on Form S-4 of Charter
Communications Southeast, L.P. (Registration No. 333-3772),
and incorporated herein by this reference.
10.20(a) First Amendment to Amended and Restated Agreement of
Limited Partnership of Charter Holdings, dated February 28,
1997, filed as Exhibit 3.2(a) to the Annual Report of Form
10-K for the year ended December 31, 1996, of Charter
Communications Southeast, L.P., and incorporated herein by
this reference.
*10.21 Asset Sale Agreement by and between Prime Cable of Hickory, L.P.,
as Seller, and Charter Communications II, L.P., as Buyer, dated
August 6, 1996, filed herewith.
*10.22 Asset Purchase Agreement between Cencom Cable Income Partners II,
L.P., as Seller, and Charter Communications II, L.P., as Purchaser,
dated as of May 30, 1996 (Anderson County, SC), filed herewith.
*10.23 Second Amended and Restated Asset Purchase Agreement between Cencom
Partners, L.P., as Seller, and Charter Communications, L.P., as
Purchaser, dated as of January 16, 1997 (Sanford, NC), filed herewith.
*10.24 Second Amended and Restated Asset Purchase Agreement between Cencom
Partners, L.P., as Seller, and Charter Communications II, L.P., as
Purchaser, dated as of January 16, 1997 (Abbeville, SC), filed
herewith.
*10.25 Second Amended and Restated Asset Purchase Agreement between Cencom
Partners, L.P., as Seller, and Charter Communications II, L.P., as
Purchaser, dated as of January 16, 1997 (Lincolnton, NC), filed
herewith.
*12.1 Ratio of Earnings to Fixed Charges Calculation - Charter
Communications Southeast Holdings, L.P, filed herewith.
*21.1 List of Subsidiaries of Registrants.
_________________________________
* Filed herewith.
E-2
<PAGE> 1
EXHIBIT 3.2(a)
FIRST AMENDMENT TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
This First Amendment ("First Amendment") to that certain
Amended and Restated Agreement of Limited Partnership of Charter Communications
Southeast Holdings, L.P., a Delaware limited partnership (the "Partnership"),
dated as of March 28, 1996 (the "Partnership Agreement") by and between Charter
Communications Holdings Properties, Inc., a Delaware corporation ("Holdings
Properties"), and CharterComm Holdings, L.P., a Delaware limited partnership
("CharterComm Holdings"), is made as of the 28th day of February, 1997, by and
between Holdings Properties and CharterComm Holdings.
RECITALS
WHEREAS, pursuant to that certain Contribution Agreement (the
"Contribution Agreement"), dated as of February 28, 1997, by and among Charter
Communications, Inc., CharterComm II, Inc., CharterComm II, L.L.C., CharterComm
Holdings, the Partnership, Charter Communications Southeast, L.P., a Delaware
limited partnership ("Charter Southeast"), Charter Communications II, L.P. and
Charter Communications, L.P., CharterComm Holdings contributed $30,000,000,
certain cable television systems which serve areas in and around Stockbridge,
Georgia (the "BiJo System") and certain promissory notes in the aggregate
principal amount of $3.08 million held by BiJo Cablevision, Inc. (the "BiJo
Notes") to the Partnership;
WHEREAS, pursuant to the Contribution Agreement, the
Partnership contributed such $30,000,000, the BiJo System and the BiJo Notes to
Charter Southeast; and
WHEREAS, the parties hereto desire to amend the Partnership
Agreement to provide for the foregoing transactions.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto, intending legally to be bound, do hereby agree
as follows:
<PAGE> 2
Amendment of Partnership Agreement.
A. All references in the Partnership Agreement to Charter
Communications Southeast Holdings Properties, Inc. shall be deemed to refer to
Holdings Properties because Holdings Properties is the General Partner of the
Partnership.
B. Schedule A to the Partnership Agreement is hereby deleted and
replaced in its entirety with Schedule A-1 attached hereto. For such purpose,
the parties hereto waive compliance with Section 4.03(D) of the Partnership
Agreement.
C. Section 4.01(C) of the Partnership Agreement is hereby deleted
in its entirety.
2. General.
A. Ratification. Except as amended by this First Amendment, all
the terms and provisions of the Partnership Agreement are hereby ratified and
reaffirmed in all respects.
B. Successors. This First Amendment shall be binding on the
parties hereto and their successors and assigns.
C. Counterparts. This First Amendment may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument."
[Remainder of page intentionally left blank.]
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Agreement has been executed as of the
day and year first above written.
GENERAL PARTNER:
CHARTER COMMUNICATIONS
HOLDINGS PROPERTIES, INC.
By:
------------------------
Name:
Title:
LIMITED PARTNER:
CHARTERCOMM HOLDINGS, L.P.
By: CharterComm, Inc.,
its General Partner
By:
------------------------
Name:
Title:
By: CharterComm II, L.L.C.
its General Partner
By:
------------------------
Name:
Title:
-3-
<PAGE> 4
Schedule A-1
LIMITED PARTNERS' CAPITAL CONTRIBUTIONS
AND PARTNERSHIP UNITS
Capital Contributions
<TABLE>
<CAPTION>
Initial Number of LP 2/28/97 Number of LP Total Number of
Capital Units Capital Units Acquired LP Units
Name of Limited Partner Contributions Acquired Contribution on 2/28/97 Acquired
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CharterComm
Holdings $151,335,545 1,513.35545 $33,670,000 336.70000 1850.05000
Address:
c/o Charter Communications, Inc.
12444 Powerscourt Drive
Suite 400
St.Louis, Missouri 63131
</TABLE>
- 4 -
<PAGE> 1
EXHIBIT 10.1(a)
FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT (this
"Amendment"), dated as of the 29th day of November, 1996 (the "Amendment
Date"), by and among CHARTER COMMUNICATIONS, L.P., a Delaware limited
partnership (the "Borrower"), TORONTO DOMINION (TEXAS), INC., PNC BANK,
NATIONAL ASSOCIATION, CREDIT LYONNAIS NEW YORK BRANCH, UNION BANK OF
CALIFORNIA, N.A. (FORMERLY, UNION BANK), BANQUE PARIBAS, FLEET BANK, N.A., ABN
AMRO BANK N.V. AND THE LONG-TERM CREDIT BANK OF JAPAN, LTD. (together with any
financial institution which subsequently becomes a `Bank' under the Loan
Agreement, as such term is defined therein, the "Banks"), TORONTO DOMINION
(TEXAS), INC., PNC BANK, NATIONAL ASSOCIATION and CREDIT LYONNAIS NEW YORK
BRANCH, as co-agents (in such capacity, the "Co-Agents"), CREDIT LYONNAIS NEW
YORK BRANCH, as documentation agent (in such capacity, the "Documentation
Agent"), and TORONTO DOMINION (TEXAS), INC., as Administrative Agent for the
Co-Agents and the Banks (the "Administrative Agent," and together with the
Documentation Agent and the Co-Agents, the "Agents"),
W I T N E S S E T H:
WHEREAS, the Agents, the Borrower, and the Banks are parties to that
certain Amended and Restated Loan Agreement dated as of March 28, 1996, (as
heretofore and hereafter amended, modified and supplemented from time to time,
the "Loan Agreement"); and
WHEREAS, the Borrower has requested that the Banks amend the Loan
Agreement to, among other things, (a) extend the Maturity Date, (b) increase
the Revolving Loan Commitment, (c) adjust the amortization schedule, (d) modify
certain financial covenants, (e) modify the Restricted Payments schedule, and
(f) allow the Borrower to acquire certain cable television systems from Masada
Cable Partners, L.P. and Cencom Partners, L.P. (an affiliate of the Borrower);
and
WHEREAS, the Agents and the Banks are willing to consent to such
amendments and such other matters as set forth herein on the terms and
conditions contained herein in return, in part, for the payment of the
Amendment Fee (as defined herein);
<PAGE> 2
NOW, THEREFORE, in consideration of the premises set forth above, the
covenants and agreements hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree that all capitalized terms used herein shall have the
meanings ascribed thereto in the Loan Agreement, and further agree as follows:
1. Amendments to Article 1.
(a) Article 1 of the Loan Agreement, Definitions, is hereby amended by
deleting the existing definitions of "Acquisition Loan Commitment,"
"Acquisition Loans," "Acquisition Loan Notes," and "Acquisition Loan
Termination Date" in their entireties.
(b) Article 1 of the Loan Agreement, Definitions, is hereby further
amended by deleting the existing definitions of "Commitment," "Commitment
Ratios," "Loans," "Maturity Date," "Notes," "Request for Advance," "Revolving
Loan Commitment," "Revolving Loan Notes," and "scheduled payments of
principal," in their entireties and by substituting in lieu thereof the
following:
"'Commitment' shall mean the Revolving Loan Commitment."
"`Commitment Ratios' shall mean the percentages in which certain of
the Banks are severally bound to make Advances to the Borrower under the
Revolving Loan Commitment, as set forth below (together with dollar
amounts) as of the date of the First Amendment to this Agreement:
<TABLE>
<CAPTION>
Portion of
Revolving Revolving Loan
Loan Commitment
Banks Commitment Ratio
- ------------------------------------------------ -------------- --------------
<S> <C> <C>
The Toronto-Dominion Bank $15,625,000.00 20.833333333%
</TABLE>
- 2 -
<PAGE> 3
<TABLE>
<CAPTION>
Portion of
Revolving Revolving Loan
Loan Commitment
Banks Commitment Ratio
- ------------------------------------------------ -------------- --------------
<S> <C> <C>
Credit Lyonnais New York Branch $15,625,000.00 20.833333333%
PNC Bank, National Association $11,931,818.00 15.909090667%
ABN AMRO Bank N.V. $ 7,500,000.00 10.000000000%
Banque Paribas $ 7,159,091.00 9.545454667%
Union Bank of California, N.A. (formerly, Union
Bank) $ 7,159,091.00 9.545454667%
Fleet Bank, N.A. $ 5,000,000.00 6.666666667%
The Long-Term Credit Bank of Japan, Ltd. $ 5,000,000.00 6.666666667%
============== ==============
Total $75,000,000.00 100.00%"
</TABLE>
"`Loans' shall mean, collectively, the Term Loans and the Revolving
Loans."
"`Maturity Date' shall mean September 30, 2005, or such earlier date
as payment of the Loans shall be due (whether by acceleration or
otherwise)."
"`Notes' shall mean, collectively, the Term Loan Notes and the
Revolving Loan Notes."
"`Request for Advance' shall mean any certificate signed by an
Authorized Signatory of the Borrower requesting an Advance hereunder,
which certificate shall be denominated a "Request for Advance," and shall
be in substantially the form of Exhibit D attached hereto. Each Request
for Advance shall, among other things, (a) specify the date of the
Advance, which shall be a Business Day, the amount of the Advance, the
type of Advance and, with respect to Fixed Rate Advances, the Interest
Period selected by the Borrower, (b) state that there shall not exist, on
the date of the
-3-
<PAGE> 4
requested Advance and after giving effect thereto, a Default, and (c)
specify the use of the proceeds of the Loans being requested."
"'Revolving Loan Commitment' shall mean the several obligations of
certain of the Banks to advance the aggregate sum of up to $75,000,000
(as the same may be reduced from time to time in accordance with the
terms hereof) to the Borrower in accordance with their respective
Commitment Ratios and on the terms and conditions herein."
"'Revolving Loan Notes' shall mean those certain promissory notes in
the aggregate principal amount of $75,000,000, one such note issued to
each of the Banks by the Borrower, each one substantially in the form of
Exhibit E to this Agreement, and any extensions, renewals, amendments or
substitutions to any of the foregoing."
"'scheduled payments of principal' shall mean, for any period, (a)
with respect to the Term Loans, the amounts required to be repaid
hereunder during such period, and (b) with respect to the Revolving
Loans, (i) for purposes of determining Fixed Charges, the excess, if any,
of (A) the highest amount of the Revolving Loans outstanding at any time
during such period over (B) the amount of the Revolving Loan Commitment
on the last day of such period, and (ii) for purposes of determining Pro
Forma Debt Service, the difference (to the extent positive) between (A)
the Revolving Loans outstanding on the calculation date and (B) the
Revolving Loan Commitment on the last day of the period being tested."
(c) Article 1 of the Loan Agreement, Definitions, is hereby further
amended by adding the following definition in alphabetical order:
"'Documentation Agent' shall mean Credit Lyonnais New York Branch,
acting as documentation agent for the Agent, the Administrative Agent,
the Banks and the Co-Agents."
2. Amendments to Article 2. Article 2 of the Loan Agreement, Loans, is
hereby amended as follows:
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<PAGE> 5
(a) Section 2.1 of the Loan Agreement, The Loans, is hereby amended by
deleting Section 2.1 (c) in its entirety.
(b) Section 2.3 of the Loan Agreement, Interest, is hereby amended by
deleting the table set forth in Section 2.3(f) thereof in its entirety and by
substituting in lieu thereof the following:
<TABLE>
<CAPTION>
the Applicable the Applicable the Applicable
If the Margin for Base Margin for CD Rate Margin for LIBOR
Leverage Rate Advances Advances Advances
Ratio is: then shall be and shall be and SHALL BE
- -------------------- ---- -------------------- --- -------------------- --- ----------------
<S> <C> <C> <C>
Greater than 5.00:1 1.000% 2.125% 2.000%
Greater than
4.50:1, but less
than or equal to
5.00:1 0.875% 2.000% 1.875%
Greater than
4.00:1, but less
than or equal to
4.50:1 0.750% 1.875% 1.750%
Greater than
3.50:1, but less
than or equal to
4.00:1 0.625% 1.750% 1.625%
Greater than
3.00:1, but less
than or equal to
3.50:1 0.500% 1.625% 1.500%
Greater than
2.50:1, but less
than or equal to
3.00:1 0.375% 1.500% 1.375%
Less than or equal
to 2.50:1 0.250% 1.375% 1.250%"
</TABLE>
(c) Section 2.4 of the Loan Agreement, Commitment Fees, is hereby amended
by deleting Section 2.4(b) in its entirety.
(d) Section 2.5 of the Loan Agreement, Commitment Reduction, is hereby
amended by deleting such Section in its entirety and by substituting in lieu
thereof the following:
-5-
<PAGE> 6
"Section 2.5 Commitment Reduction.
(a) Optional. The Borrower may without penalty at any time
terminate or permanently reduce the Commitment by giving the
Administrative Agent and the Banks at least ten (10) Business Days' notice
thereof; provided, however, that any reduction shall reduce the Commitment
in a principal amount of at least $1,000,000 and an integral multiple of
$1,000,000. The Borrower shall make a repayment of the Revolving Loans
outstanding under the Commitment plus accrued interest on such outstanding
Loans, together with any costs incurred on account of such repayment under
Section 2.10 hereof, on or before the effective date of the reduction of
the Commitment, such that the principal amount of the Revolving Loans
outstanding after such repayment does not exceed the Commitment as so
reduced. Reductions to the Commitment hereunder shall be applied to the
reductions in Section 2.5(b)(ii) hereof in inverse order.
(b) Mandatory.
(i) Asset Sale Reductions. After payment in full of the Term Loan,
the Commitment shall be permanently reduced by the amount of the
aggregate Net Proceeds of sales, leases, transfers, or other dispositions
of the Borrower's assets permitted hereunder (excluding such sales,
leases, transfers or other dispositions in the ordinary course of the
Borrower's business) to the extent that the Net Proceeds with respect
thereto are in excess of $4,500,000 in the aggregate for the period from
the Agreement date to the Maturity Date. Reductions to the Commitment
hereunder shall be applied pro rata to the remaining reductions set forth
in Section 2.5(b)(ii) hereof.
(ii) Scheduled Reductions. Commencing March 31, 1999, and at the
end of each calendar quarter thereafter, the Commitment shall be
automatically and permanently reduced as set forth below (which
reductions are in addition to those set forth elsewhere in this
Agreement):
-6-
<PAGE> 7
<TABLE>
<CAPTION>
Percentage Reduction
to Commitment as of
Quarters Ended March 30, 1999
-------------------------------------------- --------------------
<S> <C>
March 31, 1999, June 30, 1999, September 30,
1999 and December 31, 1999 2.200%
March 31, 2000, June 30, 2000,
September 30, 2000 and December 31, 2000 2.900%
March 31, 2001, June 30, 2001,
September 30, 2001 and December 31, 2001 2.900%
March 31, 2002, June 30, 2002,
September 31, 2002 and December 31, 2002 3.600%
March 31, 2003, June 30, 2003,
September 30, 2003 and December 31, 2003 4.150%
March 31, 2004, June 30, 2004
September 30, 2004 and December 31, 2004 5.000%
March 31, 2005, June 30, 2005,
and September 30, 2005 5.667%"
</TABLE>
(e) Section 2.6 of the Loan Agreement, Prepayment, is hereby amended by
deleting clause (b) set forth therein in its entirety.
(f) Section 2.7 of the Loan Agreement, Repayment, is hereby amended by
deleting such Section in its entirety and by substituting in lieu thereof the
following:
"Section 2.7 Repayment.
(a) Scheduled Term Loan Repayments. Commencing March 31, 1999, the
principal balance of the Term Loans outstanding on the date hereof shall
be amortized in consecutive quarterly installments on December 31, March
31, June 30, and September 30 of each year until paid in full, in such
amounts as follows:
-7-
<PAGE> 8
<TABLE>
<CAPTION>
Percentage of
Principal Outstanding
on Agreement Date
(after giving effect
to the reduction
required under
Section 3.1(d)
hereof) Due on Last
Quarters Ended Day of Each Quarter
- -------------------------------------------------------- ----------------------
<S> <C>
March 31, 1999, June 30, 1999, September 30, 1999 and
December 31, 1999 2.200%
March 31, 2000, June 30, 2000, September 30, 2000 and
December 31, 2000 2.900%
March 31, 2001, June 30, 2001, September 30, 2001 and
December 31, 2001 2.900%
March 31, 2002, June 30, 2002, September 31, 2002 and
December 31, 2002 3.600%
March 31, 2003, June 30, 2003, September 30, 2003 and
December 31, 2003 4.150%
March 31, 2004, June 30, 2004, September 30, 2004 and
December 31, 2004 5.000%
March 31, 2005, June 30, 2005, and September 30, 2005 5.667%
</TABLE>
(b) Repayments Upon Reduction of Commitment and Sales of Assets.
The Borrower shall also repay outstanding principal of the Revolving
Loans from time to time as necessary to the extent that the Revolving
Loans exceed the Commitment as it may be reduced from time to time in
accordance with Section 2.5 hereof. In the event of any sale, lease,
transfer or other disposition of assets permitted hereunder (excluding
such sales, leases, transfers or other dispositions in the ordinary
course of the Borrower's business) to the extent that the Net Proceeds
with respect thereto are in excess of $4,500,000 in the aggregate for the
period from the Agreement Date to the Maturity Date, the Borrower shall,
on the date of such sale, lease, transfer or other disposition, make a
repayment of the principal of the Loans then outstanding in an amount
equal to the Net Proceeds of such sale, lease, transfer or other
disposition to the extent that they exceed $4,500,000. Any such Net
Proceeds which constitute a portion of the sales price which was
previously held in escrow or paid in
-8-
<PAGE> 9
installments shall be paid to the extent required by the terms hereof
to the Banks as a repayment of principal at such time as such Net
Proceeds are received by the Borrower. All amounts paid by the
Borrower pursuant to this subsection shall be applied to the Loans
then outstanding on a pro rata basis (based upon the Revolving Loans
and the Term Loans then outstanding), and shall be applied pro rata
to the remaining payments of the Term Loans required under Section
2.7(a) hereof and to the Revolving Loans to the remaining reductions
in Section 2.5(b)(ii) hereof on a pro rata basis for the remaining
reductions under Section 2.5(b)(ii) hereof.
(c) Annual Excess Cash Flow Recapture. In addition to the
foregoing, the Borrower agrees that commencing on April 30, 2000, and
continuing on each April 30th thereafter, the Borrower shall make a
repayment of the principal of the Loans then outstanding in an amount
equal to fifty percent (50%) of the Borrower's Annual Excess Cash Flow
for the Borrower's preceding fiscal year, together with accrued interest
on the portion of the Loans so repaid. All amounts paid by the Borrower
pursuant to this subsection shall be applied to the Loans then
outstanding on a pro rata basis, and shall be applied pro rata to the
remaining payments of the Term Loans required under Section 2.7(a) hereof
and to the Revolving Loans to the remaining reductions in the Revolving
Loans under Section 2.5(b)(ii) hereof on a pro rata basis for the
remaining reductions under Section 2.5(b)(ii) hereof. Amounts applied to
the Revolving Loans pursuant to this subsection shall also permanently
reduce the Commitment by a corresponding amount (with such reduction to
be applied on a pro rata basis to the remaining reductions in Section
2.5(b)(ii) hereof).
(d) Additional Equity. In the event that after the Agreement Date
(other than additional equity for the purpose of making the payments
contemplated by Section 7.7(e) hereof) the Borrower receives a
contribution of equity (whether such contribution is in the form of
additional equity or inter-company Indebtedness) in excess of $4,500,000
(other than any such contribution made in connection with the Cencom
Acquisition) in the aggregate subsequent to the Agreement Date resulting
from the issuance
-9-
<PAGE> 10
of Indebtedness or equity by the Limited Partner, Charter Holdings
or CharterComm, the Borrower shall make a repayment of the principal
amount of the Loans then outstanding in the amount of such excess
proceeds received by the Borrower. All amounts paid by the Borrower
pursuant to this subsection shall be applied to the Loans then
outstanding on a pro rata basis (based upon the Revolving Loans and the
Term Loans then outstanding), and shall be applied pro rata to the
remaining payments of the Term Loans required under Section 2.7(a) hereof
and to the Revolving Loans to the remaining reductions in Section
2.5(b)(ii) hereof on a pro rata basis for the remaining reductions under
Section 2.5(b)(ii) hereof. Amounts applied to the Revolving Loans
pursuant to this subsection shall also permanently reduce the applicable
Commitment by a corresponding amount (with such reduction to be applied
on a pro rata basis to the remaining reductions in Section 2.5(b)(ii)
hereof).
(e) Reimbursement. In addition to any principal repayment required
to be made under Section 2.7(a), (b), (c) or (d) hereof, the Borrower
shall reimburse the Banks pursuant to Section 2.10 hereof for any loss or
out-of-pocket expense incurred by the Banks in connection with such
repayment.
(f) Final Payment. A final payment of all principal amounts with
respect to the Term Loans and the Revolving Loans and all other
Obligations then outstanding shall be due and payable on the Maturity
Date."
(g) Section 2.8 of the Loan Agreement, Notes; Loan Accounts, is hereby
amended by deleting the clause ", one Acquisition Loan Note" where it appears
in Section 2.8(a).
(h) Section 2.9 of the Loan Agreement, Manner of Payment, is hereby
amended by deleting the phrase ", then pro rata to payment of principal then
due on the Acquisition Loans" where it appears in Section 2.9(c).
3. Amendments to Article 5. Article 5 of the Loan Agreement, General
Covenants, is hereby amended as follows:
-10-
<PAGE> 11
(a) Section 5.9 of the Loan Agreement, Use of Proceeds, is hereby amended
by deleting existing Section 5.9 in its entirety and by substituting in lieu
thereof the following:
"Section 5.9 Use of Proceeds. The Borrower will use the aggregate
proceeds of the Revolving Loans to finance (a) Capital Expenditures, for
working capital and for other partnership needs as permitted under this
Agreement, and (b) in an aggregate amount not to exceed $42,750,000, the
Acquisitions of certain Systems in (i) Tennessee and Alabama currently
owned by Masada Cable Partners, L.P. (the "Masada Acquisition") and (ii)
Sanford, North Carolina currently owned by Cencom Partners, L.P. (the
"Cencom Acquisition")."
(b) Section 5.12 of the Loan Agreement, Interest Rate Hedging, is hereby
amended by inserting at the end of such Section the following new language:
"Upon any increase in the Loans outstanding hereunder as a result of the
increase in the Revolving Loan Commitment pursuant to the First Amendment
to this Agreement, the Borrower shall have ninety (90) days from the date
of such increase to enter into Interest Hedge Agreements sufficient to
satisfy this Section 5.12 with respect to such increased amounts."
4. Amendments to Article 7. Article 7 of the Loan Agreement, Negative
Covenants, is hereby amended as follows:
(a) Section 7.1 of the Loan Agreement, Indebtedness of the Borrower, is
hereby amended by deleting subsection (c) thereof in its entirety and by
substituting in lieu thereof the following:
"(c) Capitalized Lease Obligations in an amount not in excess of
$2,000,000;"
(b) Section 7.4 of the Loan Agreement, Liquidation, Change in Ownership,
Disposition or Acquisition of Assets, is hereby amended by deleting subsection
(b) thereof in its entirety and by substituting in lieu thereof the following:
-11-
<PAGE> 12
"(b) The Borrower shall not at any time acquire any assets, property
or business of any other Person, or acquire stock, partnership or other
ownership interests in any other Person, other than (i) in the ordinary
course of business of the Borrower, (ii) as permitted by the limitations
on Capital Expenditures set forth in Section 7.15 hereof, (iii)
Acquisitions of cable television systems with the proceeds of the
Revolving Loans for an aggregate purchase price not to exceed $7,500,000,
(iv) subject to delivery by the Borrower to the Administrative Agent of
all documents reasonably requested by the Majority Banks in connection
with such Acquisition, including, without limitation, opinions of
counsel, UCC-1 financing statements, reliance letters and lien search
results, the Masada Acquisition and the Cencom Acquisition, and (v)
subject to delivery of evidence satisfactory to the Majority Banks that
the Borrower will be in compliance with the terms and conditions of this
Agreement before and after giving effect to such Acquisition,
Acquisitions after April 30 of any year (commencing April 30, 2000) with
the portion of Annual Excess Cash Flow for the immediately preceding
calendar year not required to be used as a payment of the Loans."
(c) Section 7.7 of the Loan Agreement, Restricted Payments and Purchases,
is hereby amended by deleting existing subsections (c) and (d) thereof in their
entirety and by substituting in lieu thereof the following:
"(c) So long as no Default then exists, or would be caused thereby,
the Borrower may make distributions,directly or indirectly, to the
Limited Partner solely for the purpose of making payments with respect to
(i) on or prior to June 30, 2001, the Southeast Notes, and (ii)
thereafter, the Southeast Notes and the Charter Holdings Debentures,
which payments shall not exceed the lesser of (1) the payments actually
due on such Indebtedness and (2) the amounts set forth below:
<TABLE>
<CAPTION>
Maximum Total
Distribution
Period for such period
- --------------------------------------------------------------- ---------------
<S> <C>
January 1, 1996 through December 31, 1996 $ 3,000,000
</TABLE>
-12-
<PAGE> 13
<TABLE>
<CAPTION>
Maximum Total
Distribution
Period for such period
- --------------------------------------------------------------- ---------------
<S> <C>
January 1, 1997 through December 31, 1997 $ 5,000,000
January 1, 1998 through December 31, 1998 $ 5,000,000
January 1, 1999 through December 31, 1999 $ 5,000,000
January 1, 2000 through December 31, 2000 $ 5,000,000
January 1, 2001 through December 31, 2001 $ 6,000,000
January 1, 2002 through December 31, 2002 $ 7,000,000
January 1, 2003 through December 31, 2003 $ 9,000,000
January 1, 2004 through December 31, 2004 $10,000,000
January 1, 2005 through September 30, 2005 $12,000,000;
</TABLE>
(d) So long as no Default then exists or would be caused
thereby, commencing April 30, 2000, and on each April 30
thereafter subsequent to making the payments required pursuant to
Section 2.7(c) hereof, the Borrower may make additional
distributions, directly or indirectly, to the Limited Partner in
an amount equal to fifty percent (50%) of the Borrower's Annual
Excess Cash Flow for the Borrower's immediately preceding fiscal
year;"
(d) Section 7.7 of the Loan Agreement, Restricted Payments and
Purchases, is hereby further amended by adding the following immediately
before the period at the end of subsection (f) thereof:
"; and
(g) Upon the completion of each of the Masada Acquisition and
the Cencom Acquisition, the Borrower may pay a search and
acquisition fee to Charter
-13-
<PAGE> 14
Communications, Inc. and Charterhouse Group in an amount not to
exceed in the aggregate 1.25% of the purchase price for such
acquisitions."
(e) Section 7.8 of the Loan Agreement, Leverage Ratio, is hereby
amended by deleting the existing table contained in existing Section 7.8
in its entirety and by substituting in lieu thereof the following:
<TABLE>
<CAPTION>
Leverage
"Period Ratio
- ---------------------------------------------- --------
<S> <C>
From October 1, 1996 through December 31, 1997 5.25:1
From January 1, 1998 through June 30, 1998 5.00:1
From July 1, 1998 through December 31, 1998 4.75:1
From January 1, 1999 through June 30, 1999 4.50:1
From July 1, 1999 through December 31, 1999 4.25:1
From January 1, 2000 through December 31, 2000 4.00:1
From January 1, 2001 and thereafter 3.50:1"
</TABLE>
(f) Section 7.9 of the Loan Agreement, Annualized Operating Cash Flow to
Fixed Charges Ratio, is hereby amended by deleting such Section in its entirety
and by substituting in lieu thereof the following:
"Section 7.9 Annualized Operating Cash Flow to Fixed Charges Ratio. As
of the end of each calendar quarter commencing on January 1, 1999 and
continuing until the Maturity Date, the Borrower shall not permit the
ratio of its Annualized Operating Cash Flow for the calendar quarter end
being tested to its Fixed Charges for the four (4) calendar quarters
immediately preceding the calculation date to be less than 1.0 to 1.0."
(g) Section 7.10 of the Loan Agreement, Annualized Operating Cash Flow to
Pro Forma Debt Service, is hereby amended
-14-
<PAGE> 15
by deleting such Section in its entirety and by substituting in lieu thereof
the following:
"Section 7.10 Annualized Operating Cash Flow to Pro Forma Debt Service.
(a) As of the end of any calendar quarter, and (b) at the time of any
Advance (after giving effect to such Advance), the Borrower shall not
permit the ratio of its Annualized Operating Cash Flow for the calendar
quarter end being tested in the case of Section 7.10(a) above, or the
most recent quarter end for which financial statements are required to be
delivered to the Administrative Agent and the Co-Agents pursuant to
Sections 6.1 and 6.2 hereof in the case of Section 7.10(b) above, to its
Pro Forma Debt Service for the immediately succeeding four (4) calendar
quarters to be less than (x) for all periods ending on or prior to
December 31, 2000, 1.15 to 1.0, and (y) for all periods ending after
December 31, 2000, 1.10 to 1.0."
(h) Section 7.15 of the Loan Agreement, Capital Expenditures, is hereby
amended by deleting such Section in its entirety and by substituting in lieu
thereof the following:
"Section 7.15 Capital Expenditures. The Borrower shall not permit the
aggregate amount of its Capital Expenditures in any period set forth
below to exceed as of the end of such period the sum of (a) the limit for
such period, as set forth below, plus (b) any unexpended portion of the
Capital Expenditures limit set forth below for the immediately preceding
period.
<TABLE>
<CAPTION>
Capital
Period Expenditures Limit
- ---------------------------------------------- ------------------
<S> <C>
From January 1, 1996
through December 31, 1996 $21,500,000
From January 1, 1997 through December 31, 1997 $20,000,000
From January 1, 1998 through December 31, 1998 $15,000,000"
</TABLE>
5. Representations and Warranties. The Borrower hereby represents and
warrants in favor of the Agents and the Banks as follows:
-15-
<PAGE> 16
(a) The Borrower has the partnership power and authority (i) to enter into
this Amendment and the Revolving Loan Notes and (ii) to do all other acts and
things as are required or contemplated hereunder to be done, observed and
performed by it;
(b) This Amendment and the Revolving Loan Notes have been duly authorized,
validly executed and delivered by one or more Authorized Signatories of the
Borrower and constitute the legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their respective
terms, subject, as to enforcement of remedies, to the following qualifications:
(i) an order of specific performance and an injunction are discretionary
remedies and, in particular, may not be available where damages are considered
an adequate remedy at law, and (ii) enforcement may be limited by bankruptcy,
insolvency, liquidation, reorganization, reconstruction and other similar laws
affecting enforcement of creditors' rights generally (insofar as any such law
relates to the bankruptcy, insolvency or similar event of the Borrower); and
(c) The execution and delivery of this Amendment, the Revolving Loan
Notes, and the performance by the Borrower under the Loan Agreement and the
other Loan Documents to which it is a party, as amended hereby, do not and will
not require the consent or approval of any regulatory authority or governmental
authority or agency having jurisdiction over the Borrower which has not already
been obtained, nor is in contravention of or in conflict with the partnership
agreement or other similar agreement of the Borrower, or the provision of any
statute, judgment, order, indenture, instrument, agreement, or undertaking, to
which the Borrower is a party or by which any of its assets or properties are
or may become bound.
6. Conditions Precedent. The effectiveness of this Amendment is subject
to the prior fulfillment of each of the following conditions:
(a) Counsel to the Administrative Agent shall have received on behalf of
each Bank a duly executed Revolving Loan Note in substantially the form
attached hereto as Exhibit A;
-16-
<PAGE> 17
(b) The Administrative Agent or the Banks, as appropriate, shall have
received each of the following, in form and substance satisfactory to the
Administrative Agent and the Banks:
(i) A certificate, signed by an Authorized Signatory of the
Borrower, certifying on the date hereof that there exists no Default
under the Loan Agreement, after giving effect to this Amendment, and
demonstrating the Borrower's compliance with Sections 7.8, 7.9, 7.10 and
7.15 of the Loan Agreement, after giving effect to this Amendment;
(ii) An opinion of general counsel to the Borrower, addressed to the
Banks and the Administrative Agent and satisfactory to the Administrative
Agent and its special counsel, dated as of the date hereof; and
(iii) All such other documents as the Administrative Agent or any
Bank may reasonably request, certified by an appropriate governmental
official or an Authorized Signatory if so reasonably requested;
(c) The Administrative Agent shall have received from the Borrower for the
account of each of the Banks a duly executed fee letter agreement with respect
to the amendment fee payable to each such Bank (the "Amendment Fee") and the
increase fee (the "Increase Fee") payable to each such Bank.
(d) The Administrative Agent shall have received a duly executed Master
Assignment and Assumption Agreement dated as of the date hereof.
7. Condition Subsequent. On or prior to the date that the Borrower
provides a Request for Advance with respect to the Cencom Acquisition, the
Administrative Agent shall have received from the Borrower a certificate
certifying that not less than $3,000,000 of additional cash equity has been
received by the Borrower.
8. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same
instrument.
-17-
<PAGE> 18
9. Governing Law. This Amendment shall be construed in accordance with
and governed by the laws of the State of New York.
10. Severability. Any provision of this Amendment which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction.
11. No Other Amendment or Waiver. Except for the amendments set forth
above, the text of the Loan Agreement and all other Loan Documents shall remain
unchanged and in full force and effect. No waiver by the Administrative Agent,
the other Agents or the Banks under the Loan Agreement or any other Loan
Document is granted or intended except as expressly set forth herein, and the
Administrative Agent, the other Agents and the Banks expressly reserve the
right to require strict compliance in all other respects (whether or not in
connection with any Requests for Advance). Except as set forth herein, the
amendments agreed to herein shall not constitute a modification of the Loan
Agreement or any of the other Loan Documents, or a course of dealing with the
Administrative Agent, the other Agents and the Banks, or any of them, at
variance with the Loan Agreement or any of the other Loan Documents, such as to
require further notice by the Administrative Agent, the other Agents, the
Banks, the Majority Banks, or any of them, to require strict compliance with
the terms of the Loan Agreement and the other Loan Documents in the future.
12. Loan Documents. This document shall be deemed to be a Loan Document
for all purposes.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-18-
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, all as of the day and year first
above written.
<TABLE>
<S> <C>
BORROWER: CHARTER COMMUNICATIONS, L.P., a Delaware limited
partnership
By: Its General Partner
CCP ONE, INC. (formerly known as LEB Communications,
Inc.), a Delaware corporation
By:
------------------------------------------------------
Its:
--------------------------------------------------
ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC., as
Administrative Agent
By:
------------------------------------------------------
Its:
--------------------------------------------------
CO-AGENTS, DOCUMENTATION
AGENT and BANKS:
TORONTO DOMINION (TEXAS), INC., as a Co-Agent and as a
Bank
By:
------------------------------------------------------
Its:
--------------------------------------------------
</TABLE>
<PAGE> 20
CREDIT LYONNAIS NEW YORK BRANCH, as Documentation Agent,
a Co-Agent and as a Bank
By:
------------------------------------------------------
Its:
--------------------------------------------------
By:
------------------------------------------------------
Its:
--------------------------------------------------
PNC BANK, NATIONAL ASSOCIATION, as a Co-Agent and as a
Bank
By:
------------------------------------------------------
Its:
--------------------------------------------------
UNION BANK OF CALIFORNIA, N.A. (formerly, Union Bank),
as a Bank
By:
------------------------------------------------------
Its:
--------------------------------------------------
BANQUE PARIBAS, as a Bank
By:
------------------------------------------------------
Its:
--------------------------------------------------
By:
------------------------------------------------------
Its:
--------------------------------------------------
<PAGE> 21
ABN AMRO BANK N.V., as a Bank
By:
------------------------------------------------------
Its:
--------------------------------------------------
By:
------------------------------------------------------
Its:
--------------------------------------------------
FLEET BANK, N.A., as a Bank
By:
------------------------------------------------------
Its:
--------------------------------------------------
THE LONG-TERM CREDIT BANK OF JAPAN, LTD., as a Bank
By:
------------------------------------------------------
Its:
--------------------------------------------------
<PAGE> 1
EXHIBIT 10.2(a)
===============================================================================
CHARTER COMMUNICATIONS II, L.P.
CHARTER COMMUNICATIONS III, L.P.
PEACHTREE CABLE TV, INC.
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
__________________________________
Dated as of February 7, 1997
__________________________________
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article 1. Definitions and Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Additional Defined Term . . . . . . . . . . . . . . . . . . . . . . . . . 18
1.3 Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . 18
1.4 Classes and Types . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Article 2. Loans and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.1 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.2 Borrowings and Conversions . . . . . . . . . . . . . . . . . . . . . . . . 19
2.3 Changes of Commitments and Term Loan Repayment . . . . . . . . . . . . . . 20
2.4 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.5 Several Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.6 Pro Forma Restrictions on Indebtedness . . . . . . . . . . . . . . . . . . 24
2.7 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.8 Notes and Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.9 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.10 Borrowers' Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 25
Article 3. Payments of Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.1 Repayments of Principal . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Article 4. Payments; Computations; Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.1 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.2 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4.3 Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.4 NonReceipt of Funds by the Administrative Agent . . . . . . . . . . . . . 28
4.5 Sharing of Payments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . 28
Article 5. Yield Protection and Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.1 Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2 Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . . . 30
5.3 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.4 Base Rate Loans pursuant to Sections 5.1 and 5.3 . . . . . . . . . . . . . 31
5.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.6 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Article 6. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.1 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Cencom. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.3 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Article 7. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.4 Financial Condition and Outstanding Agreements . . . . . . . . . . . . . . 39
7.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.6 Assets and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7.7 Margin Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.9 No Default or Burdensome Obligations . . . . . . . . . . . . . . . . . . . 40
7.10 Approval of Regulatory Authorities . . . . . . . . . . . . . . . . . . . . 40
7.11 Binding Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.12 Partnership Documents . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.13 Franchise and Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.14 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.15 Name Changes; Purchases; Acquisitions . . . . . . . . . . . . . . . . . . 42
7.16 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.17 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.18 Foreign Trade Regulations and Government Regulation . . . . . . . . . . . 43
7.19 Purchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Article 8. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.1 Financial Statements and Other Information . . . . . . . . . . . . . . . . 44
8.2 Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
8.4 Maintenance of Existence; Conduct of Business . . . . . . . . . . . . . . 46
8.5 Maintenance of and Access to Properties . . . . . . . . . . . . . . . . . 47
8.6 Compliance with Applicable Laws . . . . . . . . . . . . . . . . . . . . . 47
8.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.8 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.9 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.10 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.11 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . 48
8.12 Debt Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.13 Pro Forma Debt Service . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.14 Interest Rate Protection Arrangements . . . . . . . . . . . . . . . . . . 48
8.15 Type of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.16 Acquisitions and Dispositions . . . . . . . . . . . . . . . . . . . . . . 49
8.17 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . 50
8.18 Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.19 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.20 Management Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.21 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.22 Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.23 Amendment of Purchase Agreements . . . . . . . . . . . . . . . . . . . . . 51
8.24 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.25 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.26 Qualified Distributions . . . . . . . . . . . . . . . . . . . . . . . . . 52
Article 9. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Article 10. The Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.1 Appointment, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.2 Reliance by Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
10.3 Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.4 Rights as a Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.5 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.6 NonReliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
10.7 Failure to Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10.8 Resignation or Removal . . . . . . . . . . . . . . . . . . . . . . . . . 58
Article 11. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.1 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11.3 Indemnity and Expenses . . . . . . . . . . . . . . . . . . . . . 59
11.4 Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . 60
11.5 Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . 60
11.6 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 62
11.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.9 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.10 Independent Remedies . . . . . . . . . . . . . . . . . . . . . . 64
11.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 64
11.12 Service of Process . . . . . . . . . . . . . . . . . . . . . . . 64
11.13 Recourse to Partners . . . . . . . . . . . . . . . . . . . . . . 65
11.14 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 65
11.15 Waiver of Trial by Jury . . . . . . . . . . . . . . . . . . . . . 65
</TABLE>
-iii-
<PAGE> 5
Schedule 1 Commitments
Exhibits
- --------
1.1 Franchises
2.2 Borrowing Notice
2.8-1 Tranche A Notes
2.8-2 Tranche B Notes
2.8-3 Tranche C Notes
7.2 Capital Structure
7.4(b) Projections
7.4(c) Material Agreements
7.5 Litigation
7.6 Liens
7.9 Defaults
7.10 Approvals
7.13 Licenses, Etc.
7.15 Name Changes, Etc.
8.1 Operating Report
8.8 Indebtedness
8.10 Investments
8.17 Affiliate Transactions
11.6 Assignment and Assumption
-iv-
<PAGE> 6
AGREEMENT, dated as of February 7, 1997, among CHARTER COMMUNICATIONS
II, L.P., a limited partnership duly organized and validly existing under the
laws of the State of Delaware ("CC II, L.P."), CHARTER COMMUNICATIONS III,
L.P., a limited partnership duly organized and validly existing under the laws
of the State of Delaware ("CC III, L.P."), PEACHTREE CABLE TV, INC., a
corporation duly organized and validly existing under the laws of the State of
Nevada ("Peachtree"; CC II, L.P., CC III, L.P. and Peachtree are referred to
collectively herein as the "Borrowers"); each of the banks and other financial
institutions which is a signatory hereto (individually a "Bank" and
collectively the "Banks"); CREDIT LYONNAIS NEW YORK BRANCH and TORONTO DOMINION
(TEXAS), INC., as Arranging Agents for the Banks (in such capacity, together
with their respective successors in such capacity, the "Arranging Agents");
CIBC INC., NATIONSBANK OF TEXAS, N.A., BANK OF MONTREAL, CHICAGO BRANCH, BANQUE
PARIBAS, PNC BANK, NATIONAL ASSOCIATION, ROYAL BANK OF CANADA, SOCIETE GENERALE
and SUMITOMO BANK, as Managing Agents for the Banks (in such capacity, together
with their respective successors in such capacity, the "Managing Agents");
UNION BANK OF CALIFORNIA, N.A., CORESTATES BANK, N.A., ABN AMRO BANK, N.V., and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND," NEW
YORK BRANCH, as Co-Agents for the Banks (in such capacity, together with their
respective successors in such capacity, the "Co-Agents"); CREDIT LYONNAIS NEW
YORK BRANCH, as Documentation Agent for the Banks (in such capacity, together
with its successors in such capacity, the "Documentation Agent"), and TORONTO
DOMINION (TEXAS), INC., as Administrative Agent for the Banks (in such
capacity, together with its successors in such capacity, the "Administrative
Agent").
W I T N E S S E T H:
WHEREAS, the Borrowers, certain of the Agents and certain of the Banks
are party to a certain Amended and Restated Revolving Credit Agreement, dated
as of March 28, 1996, which amended and restated that certain Revolving Credit
Agreement, dated May 5, 1995, as amended by Amendment No. 1 thereto, dated as
of July 31, 1995, and Amendment No. 2 thereto, dated as of November 30, 1995
(the "Prior Credit Agreement");
WHEREAS, the Borrowers, the Agent and the Banks have agreed to amend
and restate the Prior Credit Agreement as set forth herein and have agreed that
(a) the security interests in the Collateral (as defined in the Prior Credit
Agreement) granted to the Administrative Agent for the benefit of the Banks to
secure the performance of the Borrowers' obligations under the Prior Credit
Agreement shall continue unimpaired and in full force and effect; and (b) this
Agreement and the Loan Documents (as hereinafter defined) constitute an
amendment, restatement, extension, consolidation and modification, but not a
novation, of the Prior Credit Agreement and the Loan Documents (as defined in
the Prior Credit Agreement); and
WHEREAS, the Borrowers, the Agents and the Banks have agreed that, the
provisions of the Prior Credit Agreement and the other Loan Documents (as
defined in the Prior Credit
<PAGE> 7
Agreement) are hereby superseded and replaced by this Agreement and the other
Loan Documents (as hereinafter defined) if and to the extent the same are
amended, restated, extended, consolidated or modified by this Agreement or the
Loan Documents (as hereinafter defined);
NOW, THEREFORE, the parties hereto agree to amend and restate the
Prior Credit Agreement, in its entirety, as follows:
Article 1. Definitions and Accounting Matters.
1.1 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (terms defined in the singular to have the
same meanings when used in the plural and vice versa):
"Administrative Agent's Office" shall mean the office of the
Administrative Agent at 909 Fannin, Suite 1700, Houston, Texas 77010, or such
other office as the Administrative Agent may designate by notice to the
Borrowers, the Agents and the Banks.
"Affiliate" shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise) of power to
direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by
contract or otherwise), provided that, in any event, any Person which owns
directly or indirectly 5% or more of the securities having ordinary voting
power for the election of directors or any other governing body of a
corporation or 5% or more of the partnership or other ownership interests of
any other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person.
"Agents" shall mean, collectively, the Arranging Agents, the Managing
Agents, the Co-Agents, the Administrative Agent and the Documentation Agent.
"Annualized Operating Cash Flow" shall mean, as of any date of
determination thereof, the product of Operating Cash Flow for the immediately
preceding full calendar quarter multiplied by four.
"Applicable Lending Office" shall mean, for each Bank and for each
Type of Loan, the office of such Bank (or of an affiliate of such Bank) as such
Bank may from time to time specify to the Administrative Agent and the
Borrowers as the office by which its Loans of such Type are to be made and
maintained.
"Applicable Margin" shall mean (a) with respect to Tranche A Loans and
Tranche B Loans, the interest margin applicable to Tranche A and Tranche B Base
Rate Loans, Tranche A and Tranche B LIBOR Loans and Tranche A and Tranche B CD
Loans, based upon the
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<PAGE> 8
Debt Ratio at the end of the most recently completed calendar quarter, as set
forth on the table below; and (b) with respect to Tranche C Loans, 1.50% for
Tranche C Base Rate Loans, 2.50% for Tranche C LIBOR Loans, and 2.625% for
Tranche C CD Loans. Increases in the Applicable Margin for Tranche A Loans and
Tranche B Loans shall be effective (a) two Business Days after the due date of
financial statements pursuant to clause (1) or (2), as the case may be, of
Section 8.1 hereof showing a Debt Ratio requiring an increase, if such
financial statements are delivered on or before the due date thereof, or (b)
the due date of such financial statements if such financial statements are not
delivered on or before the due date thereof; and decreases in the Applicable
Margin shall be effective the later of (x) two Business Days after the due date
of financial statements pursuant to clause (1) or (2), as the case may be, of
Section 8.1 hereof showing a Debt Ratio requiring a decrease and (y) the date
on which such financial statements are actually delivered; provided that if an
Event of Default shall occur and be continuing, then, upon notice from the
Administrative Agent, the Applicable Margin for Tranche A and Tranche B Loans
shall be calculated as if the Debt Ratio was equal to 5.25:1
<TABLE>
<CAPTION>
Debt Ratios
Less Than But Greater
or Equal to Than Base LIBOR CD
----------- ------------- ---- ----- ---
<S> <C> <C> <C> <C>
5.25:1 5.00:1 1.000% 2.000% 2.250%
5.00:1 4.50:1 0.875% 1.875% 2.000%
4.50:1 4.00:1 0.750% 1.750% 1.875%
4.00:1 3.50:1 0.625% 1.625% 1.750%
3.50:1 3.00:1 0.500% 1.500% 1.625%
3.00:1 2.50:1 0.375% 1.375% 1.500%
2.50:1 0.250% 1.250% 1.375%
</TABLE>
"Assessment Rate" shall mean, for any CD Loans, the average rate
(rounded upwards, if necessary, to the nearest 1/100 of 1%) charged to insured
banks by the Federal Deposit Insurance Corporation (or any successor thereto)
for deposit insurance for Dollar time deposits on the first day of the Interest
Period for such Loans, as determined by the Administrative Agent.
"Bankruptcy Code" shall mean 11 U.S.C. Section 101, et seq., as
amended.
"Base Rate" shall mean on a daily basis, the higher of (a) the
arithmetic average of the rates per annum established by The Toronto-Dominion
Bank and Credit Lyonnais New York Branch, at their respective offices in New
York City, from time to time as the reference rate for short-term commercial
loans in Dollars to United States corporate borrowers (which
-3-
<PAGE> 9
the Borrowers acknowledge is not necessarily the lowest rate charged to
borrowers of any Agent or any Bank) or (b) the Federal Funds Rate plus 5/8 of
1% per annum.
"Base Rate Loans" shall mean Loans which bear interest at rates based
upon the Base Rate.
"Basic Subscribers" shall mean, as at any date of determination
thereof, the sum of (a) the total number of households (exclusive of "second
outlets", as such term is commonly understood in the cable television industry,
and also exclusive of customers billed on a bulk- billing or commercial account
basis) subscribing on such date to the cable television systems of the
Borrowers and their Subsidiaries and paying the standard monthly service fees
and charges imposed by the applicable Borrower or the applicable Subsidiary for
basic cable television service, provided that such term shall not include any
household whose account is more than 60 days past due on such date or which has
not paid for at least one month's service; plus (b) the total number of
Equivalent Subscribers as at the last day of the month ending on (or most
recently ended prior to) such date.
"Business Day" shall mean any day on which commercial banks are not
authorized or required to close in New York City and Houston, Texas, where such
term is used in the definition of "Quarterly Date" in this Section 1.1 or if
such day relates to a borrowing of, a payment or prepayment of principal of or
interest on, or the Interest Period for, a LIBOR Loan or a notice by the
Borrowers with respect to any such borrowing, payment, prepayment or Interest
Period, any day which is also a London Banking Day.
"Capital Expenditures" shall mean, for any period, expenditures
(including Capital Lease Obligations paid or incurred) for fixed assets, plant
and equipment (including renewals, improvements and replacements, but excluding
(a) Investments, (b) the purchase price for the Systems and (c) repairs which
are not capitalized on the books and financial records of the Borrowers) during
such period.
"Capital Lease Obligations" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"CC II Certificate of Limited Partnership" shall mean the Certificate
of Limited Partnership of CC II, L.P., dated as of June 28, 1994, and filed
with the Secretary of State of the State of Delaware on June 28, 1994, as
amended from time to time.
"CC II General Partner" shall mean CCP II, Inc., a Delaware
corporation; provided, however, that if Charter Southeast is substituted as the
general partner of CC II, L.P. in accordance with Section 8.22 hereof, then,
from and after the date of such substitution, all references to CC II General
Partner herein shall be references to Charter Southeast.
"CC II Partnership Agreement" shall mean the Amended and Restated
Agreement of Limited Partnership of CC II, L.P., dated as of March 28, 1996,
and as further amended from
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<PAGE> 10
time to time with the prior written consent of the Majority Banks, which
consent shall not be unreasonably withheld.
"CC III Certificate of Limited Partnership" shall mean the Certificate
of Limited Partnership of CC III, L.P., dated as of October 4, 1994, and filed
with the Secretary of State of the State of Delaware on October 4, 1994, as
amended from time to time.
"CC III General Partner" shall mean CCP III, Inc., a Delaware
corporation (formerly known as "BellWest Communications"), in its capacity as
general partner of CC III, L.P.; provided, however, that if Charter Southeast
is substituted as the general partner of CC III, L.P. in accordance with
Section 8.22 hereof, then, from and after the date of such substitution, all
references to CC III General Partner shall be references to Charter Southeast.
"CC III General Partner Pledge Agreement" shall mean the amended and
restated stock pledge agreement, dated March 28, 1996, between CC II, L.P. and
the Administrative Agent, as the same shall be modified and supplemented and in
effect from time to time.
"CC III Partnership Agreement" shall mean the Amended and Restated
Agreement of Limited Partnership of CC III, L.P., dated as of March 28, 1996,
as amended from time to time with the prior written consent of the Majority
Banks, which shall not be unreasonably withheld.
"CD Loans" shall mean Loans the interest rates on which are determined
on the basis of rates referred to in clause (b) of the definition of "Fixed
Base Rate" in this Section 1.1.
"Cencom Purchase Agreements" shall mean collectively the three
separate Asset Purchase Agreements entered into between (a) Cencom Partners
L.P. and CC II, L.P. dated as of January 16, 1997, (b) Cable Income Partners
II, L.P. and CC II, L.P. dated as of May 30, 1996 (by assignment from Charter
Communications, L.P.), and (c) Cencom Partners, L.P. and CC II, L.P. dated as
of January 16, 1997, providing for the sale to CC II, L.P. of cable television
systems located in Abbeville, South Carolina: Anderson County, South Carolina;
and Lincolnton, North Carolina, respectively, for an aggregate purchase price
of $68,400,000].
"Charter Group" shall mean Charter Communications Group, a Missouri
general partnership.
"Charter Southeast" shall mean Charter Communications Southeast, L.P.,
a Delaware limited partnership.
"Closing Date" shall mean the date of the making of the Tranche A,
Tranche B and Tranche C Loans concurrently with the consummation of the
transactions contemplated by the Hickory Purchase Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall have the meaning assigned to such term in the
Security Documents.
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<PAGE> 11
"Commitment" shall mean, as to any Bank, its Tranche A Loan
Commitment, its Tranche B Loan Commitment, its Tranche C Loan Commitment or two
or more of the above as the context may require.
"Commitment Reduction Dates" shall mean the Quarterly Date occurring
in September 1998, and the Quarterly Dates occurring in each December, March,
June and September thereafter.
"Debt Ratio" shall mean, as of any date of determination thereof, the
ratio of (i) the aggregate amount of Specified Indebtedness on a consolidated
basis as at such date of determination to (ii) Annualized Operating Cash Flow
as at such date of determination.
"Default" shall mean an Event of Default or an event which with notice
or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall each mean lawful money of the United States of
America.
"Environmental Laws" shall mean all environmental, health and safety
laws, regulations, resolutions, and ordinances applicable to any Borrower or
its Subsidiaries or any other Loan Party, or any of their respective assets or
properties, including, without limitation all laws, regulations, resolutions,
ordinances and decrees relating to the release of any toxic or hazardous waste
or other chemical substance, pollutant or contaminant into the environment or
the generation, treatment, storage or disposal of any Hazardous Substance.
"Equivalent Subscribers" shall mean, as at any date of determination
thereof, the total number of equivalent households served on a bulk-billing or
commercial account basis which shall be deemed equal to the quotient obtained
by dividing (a) the total fees and charges billed by the Borrowers or their
respective Subsidiaries during the month ended on (or most recently ended prior
to) such date on a bulk-billing or commercial account basis, by (b) the average
standard monthly service fees and charges that Basic Subscribers of the type
described in clause (a) of the definition of such term in this Section 1.1 were
billed during such month by the Borrowers or their respective Subsidiaries,
provided that such term shall not include any equivalent household served on a
bulk-billing or commercial account basis whose account is more than 60 days
past due on such date or which has not paid for at least one month's service.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time, and the regulations
promulgated thereunder.
"ERISA Affiliate" shall mean any corporation or trade or business
which is a member of the same controlled group of corporations (within the
meaning of Section 414(b) of the Code) as any of the Borrowers or is under
common control (within the meaning of Section 414(c) of the Code) with any of
the Borrowers.
"Event of Default" shall have the meaning assigned to such term in
Article 9 hereof.
"Excess Cash Flow" shall mean, for any fiscal period, Operating Cash
Flow for such period (calculated without giving effect to the last sentence of
the definition of "Operating Cash Flow" in this Section 1.1) minus (a)
Management Fees paid during such period (to the
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<PAGE> 12
extent permitted under the Fee Subordination Agreement), (b) Interest Expense
for such period, (c) Capital Expenditures incurred during such period, (d) all
scheduled payments (but not prepayments) of principal of Specified Indebtedness
(other than Indebtedness to the Banks hereunder) for such period including the
principal component of payments for such period in respect of Capital Lease
Obligations, (e) the excess, if any, of the aggregate amount of the Tranche A
Loans outstanding at the beginning of such period over the aggregate amount of
the Commitments scheduled to be in effect at the end of such period (after
giving effect to any reductions of the Tranche A Loan Commitments effected
during or prior to such period pursuant to Section 2.3(b), 2.3(c) or 2.3(d)
hereof), (f) all payments of principal of the Tranche B Loans or Tranche C
Loans during such period, and (g) all Qualified Distributions made during such
period.
"Federal Funds Rate" shall mean for any day, the rate equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
such weighted average is published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for such a
Business Day, the average of the quoted rates for such Business Day for such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by the Administrative Agent.
"Fee Subordination Agreement" shall mean the Amended and Restated Fee
Subordination Agreement, of even date herewith, among the Borrowers, the
Manager and the Administrative Agent, as the same shall be modified and
supplemented from time to time.
"Fixed Base Rate" shall mean, with respect to any Fixed Rate Loans:
(a) if such Loans are LIBOR Loans, the rate per annum determined
on the basis of the offered rates for United States dollar deposits (having
terms comparable to the Interest Period and in amounts comparable to the
principal amount of the LIBOR Loans to which such Interest Period relates)
which appeared on the Reuters Screen LIBO Page as of 11:00 A.M. (London time)
two London Banking Days prior to the date of determination thereof. If at
least two such offered rates appeared on the Reuters Screen LIBO Page, the rate
for any day shall be the arithmetic mean (rounded upward to the nearest whole
multiple of 1/16 of 1% per annum, if such average is not such a multiple) of
such offered rates, or if fewer than two offered rates appeared, "Fixed Base
Rate" shall mean the rate of interest for United States dollar deposits (having
terms comparable to the Interest Period and in amounts comparable to the LIBOR
Loans to which such Interest Period relates) offered by the principal London
office of The Toronto-Dominion Bank to major banks in the London interbank
market at approximately 11:00 A.M. (London time) two London Banking Days prior
to the determination thereof.
(b) if such Loans are CD Loans, the arithmetic average of the
rates per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%)
determined by the Administrative Agent to be the rates quoted to the
Administrative Agent at approximately 10:00 a.m. New York time (or as soon
thereafter as practicable) on the first day of the Interest Period for such
Loans by a certificate of deposit dealer of recognized national standing
selected by the
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<PAGE> 13
Administrative Agent for the purchase at face value of certificates of deposit
of Credit Lyonnais and The Toronto-Dominion Bank having terms comparable to
such Interest Period and in amounts comparable to the principal amount of the
respective CD Loans to which such Interest Period relates.
"Fixed Charge Coverage Ratio" shall mean, as of any date of
determination thereof, the ratio of (a) Annualized Operating Cash Flow to (b)
Fixed Charges.
"Fixed Charges" shall mean, as at any date of determination thereof,
the sum of (a) Interest Expense for the immediately preceding four full
calendar quarters; plus (b) all payments of principal of Specified Indebtedness
(other than Indebtedness to the Banks hereunder) for such period including the
principal component of payments for such period in respect of Capital Lease
Obligations; plus (c) the excess, if any, of the aggregate amount of the
Tranche A Loans outstanding at the beginning of such period over the aggregate
amount of the Tranche A Loan Commitments scheduled to be in effect at the end
of such period plus (d) all payments of principal of the Tranche B Loans or
Tranche C Loans during such period; plus (e) Capital Expenditures incurred
during the immediately preceding four full calendar quarters; plus (f)
Management Fees paid during such period (to the extent permitted under the Fee
Subordination Agreement); plus (g) Qualified Distributions made during such
period.
"Fixed Rate" shall mean on any date of determination thereof, for any
Fixed Rate Loans, a rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) determined by the Administrative Agent to be equal to (a)
if such Loans are LIBOR Loans, the Fixed Base Rate for such Loans for the
Interest Period for such Loans divided by one minus the Reserve Requirement for
such Loans; and (b) if such Loans are CD Loans, the sum of the Fixed Base Rate
for such Loans for the Interest Period for such Loans divided by one minus the
Reserve Requirement for such Loans for such Interest Period plus the Assessment
Rate for such Interest Period (it being understood that the rate of interest
charged on any Fixed Rate Loan may be adjusted during the Interest Period
thereof to account for changes in the Reserve Requirement applicable thereto).
"Fixed Rate Loans" shall mean CD Loans and LIBOR Loans.
"Franchises" shall mean the franchises and other governmental
ordinances, licenses and agreements pursuant to which
(a) the Borrowers or their respective Subsidiaries are authorized
to offer cable television services in the jurisdictions listed under the
caption "Current Franchises" on Exhibit 1.1 hereto;
(b) from and after the consummation of the transactions
contemplated by the Hickory Purchase Agreement, the Borrowers or their
respective Subsidiaries will be authorized to offer cable television services
in the jurisdictions listed under the caption "Hickory Franchises" on Exhibit
1.1 hereto;
(c) from and after the consummation of the transactions
contemplated by the Cencom Purchase Agreements, the Borrowers or their
respective Subsidiaries will be
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<PAGE> 14
authorized to offer cable television services in the jurisdictions listed under
the caption "CCIP Franchises" on Exhibit 1.1 hereto;
and any such franchises, ordinances, licenses and agreements to which any
of the Borrowers or any of their respective Subsidiaries becomes a party
pursuant to an acquisition permitted under this Agreement or a Permitted Asset
Swap.
"GAAP" shall mean United States generally accepted accounting
principles consistently applied.
"Guarantee" by any Person shall mean any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Indebtedness
of any other Person or in any manner providing for the payment of any
Indebtedness or other obligation of any other Person or otherwise protecting
the holder of such Indebtedness against loss (whether by virtue of partnership
arrangements, agreements to keep well, to purchase assets, goods, securities or
services, or to take or pay or otherwise), provided that the term "Guarantee"
shall not include endorsements for collection or deposit in the ordinary course
of business. The term "Guarantee" used as a verb shall have a correlative
meaning.
"Hazardous Substance" shall mean any hazardous substance, hazardous or
toxic waste, hazardous material, pollutant or contaminant, as those or similar
terms are used in the Environmental Laws and shall include, without limitation,
asbestos and asbestos related products, chlorofluorocarbons, oils or petroleum
derived compounds, polychlorinated biphenyls, pesticides and radon
"Hickory Purchase Agreement" shall mean the Asset Purchase Agreement
dated August 6, 1996, between Prime Cable of Hickory, L.P. and CC II, L.P.,
providing for the sale to CC II, L.P. of cable television systems located in
Hickory, North Carolina, for an aggregate purchase price of $68,000,000 subject
to certain closing adjustments.
"Indebtedness" shall mean, as to any Person at any date (without
duplication): (a) indebtedness created, issued, incurred or assumed by such
Person for borrowed money or evidenced by bonds, debentures, notes or similar
instruments; (b) all obligations of such Person to pay the deferred purchase
price of property or services, excluding, however, trade accounts payable
(other than for borrowed money) arising in, and accrued expenses incurred in,
the ordinary course of business of such Person so long as such trade accounts
payable are paid within 120 days of the date incurred or, if unpaid, are being
disputed in good faith by such Person and for which an adequate reserve has
been established; (c) all Indebtedness of others secured by a Lien on any asset
of such Person, but if such Indebtedness secured thereby is not assumed by such
Person, then only to the extent of the higher of the fair market value or the
book value of the property or asset subject to such Lien; (d) all Indebtedness
or other obligations of others Guaranteed by such Person; (e) all Capital Lease
Obligations and obligations of such Person pursuant to sale and leaseback
transactions; (f) obligations of such Person under Interest Rate Protection
Arrangements; and (g) reimbursement obligations of such Person (whether
contingent or otherwise) in respect of letters of credit, bankers acceptances,
surety or other bonds and similar instruments; notwithstanding the foregoing,
the term
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<PAGE> 15
"Indebtedness" shall not include unearned revenue, subscriber advance payments,
subscriber deposits and accrued and unpaid Management Fees.
"Indentures" shall mean (a) the Indenture, dated as of March 15, 1996,
between Charter Southeast and Charter Communications Southeast Capital
Corporation, as issuers, and Boatmen's Trust Company, as trustee; and (b) the
Indenture, dated as of March 15, 1996, between Charter Communications Southeast
Holdings, L.P. and Charter Communications Southeast Holdings Capital
Corporation, as issuers, and Harris Trust and Savings Bank, as trustee.
"Interest Expense" shall mean, for any period, the sum of (a) the
aggregate amount of interest and fees on all items of Indebtedness of the
Borrowers or their respective subsidiaries accrued during such period (other
than interest the payment of which is deferred pursuant to the terms of
agreements or instruments governing the payment thereof); plus (b) the portion
of Capital Lease Obligations of the Borrowers or their respective subsidiaries
which constitutes imputed interest during such period; plus (c) the net amount
accrued, whether or not actually paid by the Borrowers or their respective
Subsidiaries, pursuant to any Interest Rate Protection Arrangements (or minus
the net amount receivable, whether or not actually received by the Borrowers or
their respective Subsidiaries, pursuant to any Interest Rate Protection
Arrangement).
"Interest Period" shall mean:
(a) with respect to any LIBOR Loan, the period commencing on the
date such Loan is made and ending on the numerically corresponding day in the
first, second, third, sixth or ninth calendar month thereafter, as the
Borrowers may select as provided in Sections 2.1 and 2.2 hereof (provided that
Interest Periods of 12 months' duration may be established on an "as available"
basis), except that each such Interest Period which commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar
month.
(b) with respect to any CD Loan, the period commencing on the date
such Loan is made and ending on the day 30, 60, 90,180 or 270 days thereafter,
as the Borrowers may select as provided in Sections 2.1 and 2.2 hereof
(provided that Interest Periods of 360 days may be established on an "as
available" basis).
Notwithstanding the foregoing: (1) no Interest Period may commence before and
end after any Quarterly Date unless, after giving effect thereto, the aggregate
principal amount of the Loans having Interest Periods which end after such
Quarterly Date shall be equal to or less than the aggregate principal amount of
the Loans permitted to be outstanding hereunder after giving effect to the
repayment of the Loans scheduled to be made on such Quarterly Date pursuant to
Section 2.3(a) hereof; (2) each Interest Period which would otherwise end on a
day which is not a Business Day shall end on the next succeeding Business Day
(or, in the case of an Interest Period for a LIBOR Loan, if such next
succeeding Business Day falls in the next succeeding calendar month, on the
next preceding Business Day); and (3) notwithstanding clause (1) above, no
Interest Period for any Fixed Rate Loan shall have a duration of less than
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<PAGE> 16
one month (in the case of a LIBOR Loan) or 30 days (in the case of a CD Loan)
and, if the Interest Period for any Fixed Rate Loans would otherwise be a
shorter period, such Loans shall not be available hereunder.
"Interest Rate Insurance Agreements" shall mean one or more interest
rate insurance agreements whereby a financial institution agrees to insure that
interest on a mutually agreed principal amount computed on a mutually agreed
floating basis will not exceed interest on such principal amount computed on
the basis of a mutually agreed fixed rate (including so-called "caps" and
"captions").
"Interest Rate Protection Arrangements" shall mean Interest Swap
Agreements and Interest Rate Insurance Agreements.
"Interest Swap Agreement" shall mean any interest rate swap or other
agreement having a similar purpose or effect (including so-called "swaptions")
providing for the exchange of notional interest obligations.
"Investment" by the Borrowers shall mean any investment in any Person
whether by means of share purchase, loan, advance, extension of credit,
Guarantee, capital contribution or otherwise.
"Leases" shall mean leases and subleases (other than any leases or
subleases the obligation to pay rent or other amounts under which is a Capital
Lease Obligation), licenses, easements, grants, pole attachment and conduit or
trench agreements and other attachment rights and similar instruments under
which any of the Borrowers has the right to use real or personal property or
rights of way.
"LIBOR Loans" shall mean Loans the interest rates on which are
determined on the basis of rates referred to in clause (a) of the definition of
"Fixed Base Rate" in this Section 1.1.
"Lien" shall mean any mortgage, deed of trust, pledge, security
interest, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction).
"Loan Documents" shall mean the Notes, the Security Documents and the
Fee Subordination Agreement.
"Loan Party" shall mean any Person (other than a Bank, or an Agent)
which is a party to a Loan Document.
"Loans" shall mean the loans provided for by Section 2.1 hereof.
"London Banking Days" means any day on which dealings in deposits in
Dollars are transacted in the London interbank market.
"Majority Banks" shall mean, (a) if no Loans are outstanding at any
time prior to the Tranche A Loan Commitment Termination Date, Banks holding 66
2/3% of the aggregate
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<PAGE> 17
Tranche A Loan Commitments, or (b) at any time Loans are outstanding hereunder,
Banks holding 66 2/3% of the principal amount of the Loans then outstanding.
"Management Agreements" shall mean (a) the Management Agreement, dated
as of March 28, 1996 between CC II, L.P. and the Manager; and (b) any
Management Agreements entered into between CC III, L.P. or Peachtree, on the
one hand, and the Manager, on the other, to the extent the same have been
approved in writing by the Majority Banks, in each case as amended from time to
time, which in the case of an amendment which materially alters the duties and
obligations of the Manager thereunder shall require the prior written consent
of the Majority Banks, which consent shall not be unreasonably withheld.
"Management Fees" shall mean fees and other amounts payable to the
Manager (other than reimbursement for out-of-pocket expenses which shall not be
Management Fees) pursuant to the Management Agreements.
"Manager" shall mean Charter Southeast, in its capacity as Manager
under the Management Agreements.
"Material Adverse Effect" shall mean any material adverse effect upon
the business, assets, liabilities, financial condition, results of operations
or business prospects of the Borrowers and their respective Subsidiaries (if
any), taken as a whole, or upon the ability of the Borrowers to construct,
operate and maintain the Systems, taken as a whole, or to ensure performance by
the Borrowers under the Franchises, taken as a whole, this Agreement or any
other Loan Document, resulting from any act, omission, situation, status event
or undertaking, either singly or taken together.
"Multiemployer Plan" shall mean a plan defined as such in Section
3(37) of ERISA to which contributions have been made by any of the Borrowers or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Proceeds" shall mean, with respect to any sale, lease, transfer
or other disposition of assets or securities by the Borrowers or any of their
respective Subsidiaries, the aggregate amount of cash received for such assets
or securities (including, without limitation, any payments received for
non-competition covenants, consulting or management fees, any portion of the
amount received evidenced by a buyer promissory note or other evidence of
Indebtedness), net of (a) amounts received, if any, for taxes payable by the
Borrowers with respect to any such sale (after application of any available
losses, credits or other offsets), (b) reasonable and customary transaction
costs properly attributable to such transaction and payable by the Borrowers
(other than to an Affiliate) in connection with such sale, lease, transfer or
other disposition of assets or securities, (c) until actually received by the
Borrowers or any of their respective Subsidiaries, any portion of the amount
received held in escrow or evidenced by a buyer promissory note, or a
non-compete agreement or covenant, management agreement or consulting
agreement, for which compensation is paid over time, and (d) any portion of the
amount received which is used to discharge or otherwise satisfy any
Indebtedness incurred in connection with the initial acquisition of such assets
or securities by the Borrowers or any
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<PAGE> 18
of their respective Subsidiaries. Upon receipt by the Borrowers or any of
their respective Subsidiaries of amounts referred to in item (c) of the
preceding sentence, such amounts shall then be deemed to be "Net Proceeds."
"Operating Cash Flow" shall mean, for any fiscal period, the
consolidated net income of the Borrowers and their respective Subsidiaries
after taxes for such period, plus (to the extent such items shall have been
deducted in computing such net income after taxes) the sum (calculated without
duplication) of (a) all non-cash expenses including, without limitation, all
non-cash expenses in respect of trade or barter transactions, depreciation, and
amortization, (b) Interest Expense for such period, (c) Management Fees accrued
during such period whether or not paid, (d) all charges to income resulting
from or relating to extraordinary transactions and (e) fees and expenses
incurred in connection with the negotiation, execution and delivery of (1) this
Agreement and the Loan Documents and the making of Tranche A, Tranche B or
Tranche C Loans on the Closing Date, (2) the Purchase Agreements and the
consummation of the transactions contemplated thereunder and (3) the
Partnership Documents, and minus (to the extent such items shall have been
added in computing such net income for such period) all credits to income
resulting from trade or barter transactions or extraordinary transactions
(including, without limitation, any gain from the sale or write up of capital
assets or from the acquisition, retirement or sale of any securities of the
Borrowers or any of their respective Subsidiaries) all as determined in
accordance with GAAP. If any of the Borrowers or any of their respective
Subsidiaries acquires (or disposes of) cable television systems during a fiscal
period, Operating Cash Flow for that fiscal period shall be determined as if
the systems so acquired (or disposed of) had been acquired (or disposed of) on
the first day of such fiscal period (the operating results of acquired systems
for that portion of a fiscal period in which they were not owned by a Borrower
or a Subsidiary shall be determined in accordance with the financial
information prepared by the prior owners thereof, subject to such adjustments
as the Arranging Agents may reasonably require).
"Partnership Documents" shall mean the CC II Partnership Agreement,
the CC III Partnership Agreement, the CC II Certificate of Limited Partnership,
the CC III Certificate of Limited Partnership and the Management Agreements.
"Partnership Pledge Agreement" shall mean the amended and restated
pledge agreement dated March 28, 1996, among CC II General Partner, CC III
General Partner, CC II, L.P., Charter Southeast and the Administrative Agent as
the same shall be amended, modified and supplemented and in effect from time to
time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Peachtree Pledge Agreement" shall mean the amended and restated stock
pledge agreement, dated March 28, 1996, between CC III, L.P. and the
Administrative Agent, as the same shall be modified and supplemented and in
effect from time to time.
"Permitted Asset Swap" shall mean the exchange (whether such exchange
is effected pursuant to a sale of securities or assets or otherwise) of any of
the Systems (or any portion thereof) for cable television assets located in, or
in geographical areas contiguous to, the
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<PAGE> 19
geographical areas covered by the Franchises on terms and conditions reasonably
acceptable to the Majority Banks.
"Permitted Liens" shall mean: (a) pledges or deposits by the Borrowers
or their respective Subsidiaries under workers' compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in connection
with bids, tenders, contracts (other than for the payment of Indebtedness of
the Borrowers or their respective Subsidiaries) or Leases to which any of the
Borrowers or any of their respective Subsidiaries is a party, or deposits to
secure public or statutory obligations of the Borrowers or their respective
Subsidiaries or deposits of cash or U.S. Government Bonds to secure surety or
appeal bonds to which any of the Borrowers is a party, or deposits as security
for contested taxes or import duties or for the payment of rent; (b) Liens
imposed by law, such as carriers', warehousemen's, materialmen's, mechanics'
and landlords' Liens, or Liens arising out of judgments or awards against any
Borrower with respect to which such Borrower at the time shall currently be
prosecuting an appeal or proceedings for review or the time for doing so has
not yet expired; (c) Liens for property taxes not yet subject to penalties for
non-payment and Liens for taxes the payment of which is being contested as
permitted by Section 8.2 hereof or the time for doing so has not yet expired;
(d) minor survey exceptions, minor encumbrances, easements or reservations of,
or rights of others for rights of way, highways and railroad crossings, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other reservations of rights with respect to, or restrictions as to
the use of, real properties, which do not in the aggregate materially detract
from the value of said properties or materially impair their use in the
operation of the business of the Borrowers taken as a whole; (e) Liens
incidental to the conduct of the business of the Borrowers or to the ownership
of their respective properties which were not incurred in connection with
Indebtedness of any Borrower or its Subsidiaries, which Liens do not in the
aggregate materially detract from the value of said properties or materially
impair their use in the operation of the business of the Borrowers taken as a
whole; (f) Liens relating to Indebtedness permitted by Section 8.8(b), 8.8(c),
8.8(d) and 8.8(e) hereof; and (g) Liens arising under the terms of the
Franchises or under any laws, rules or regulations relating thereto including,
without limitation, the Communications Act of 1934, as amended.
"Person" shall mean an individual, a corporation, a partnership, a
trust, an unincorporated organization, an association, limited liability
company, a joint venture, a trust or other similar organization, a government
or any political subdivision thereof, or any other legal entity.
"Plan" shall mean an employee benefit or other plan established or
maintained by any Borrower or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Pole Rental Lease" shall mean Leases under which any Borrower or any
Subsidiary has the right to use municipal or utility company, telephone or
other poles, conduits or trenches for the purpose of supporting or housing
cables comprising an element of the cable television systems of the Borrowers
and their respective Subsidiaries.
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<PAGE> 20
"Post Default Rate" shall mean for any Loan a rate per annum equal to
2% above the interest rate for such Loan as provided in Section 3.2(a) hereof.
"Pro Forma Balance Sheet" shall mean an unaudited consolidated pro
forma balance sheet of the Borrowers and their respective Subsidiaries as of
the Closing Date or the date of the borrowing referred to in Section 6.2
hereof, giving effect to the Loans to be made on such date and the application
of the proceeds thereof.
"Pro Forma Debt Service" shall mean, as at any date, the sum
(calculated without duplication) of (a) all payments of principal and fees on
all items of Specified Indebtedness (other than Indebtedness to the Banks
hereunder) scheduled to be made during the immediately succeeding four full
calendar quarters, including the principal component of payments for such
period in respect of Capital Lease Obligations; plus (b) Interest Expense
scheduled to accrue during the immediately succeeding four full calendar
quarters; plus (c) the excess, if any, of the aggregate amount of the Tranche A
Loans outstanding on such date over the aggregate amount of the Tranche A Loan
Commitments scheduled to be in effect at the end of the immediately succeeding
four full calendar quarters; plus (d) all payments of principal on the Tranche
B or Tranche C Loans scheduled to be made during the immediately succeeding
four full calendar quarters; plus (e) Management Fees anticipated to be paid in
cash during the immediately succeeding four full calendar quarters to the
extent payment would be permitted under the Fee Subordination Agreement
(assuming Annualized Operating Cash Flow does not increase or decrease during
such period); plus (f) the amount of Qualified Distributions permitted to be
made during the immediately succeeding four full calendar quarters (calculated
as if the annual Qualified Distributions permitted under Section 8.26 hereof
are to be made in equal quarterly installments). In calculating Pro Forma Debt
Service, the Interest Expense on Indebtedness which does not bear interest at a
fixed rate throughout the relevant period and is not fixed by way of Interest
Rate Protection Arrangements throughout such period shall be calculated for the
periods in which it is not so fixed using a rate of interest equal to the LIBOR
Rate for three-month Interest Periods plus the Applicable Margin then in
effect; provided, however, that if the LIBOR Rate for three-month Interest
Periods cannot then be determined, in the reasonable opinion of the
Administrative Agent, then such Interest Expense shall be calculated using the
Base Rate plus the Applicable Margin then in effect.
"Pro Forma Debt Service Coverage" shall mean, as at any date of
determination thereof, the quotient, expressed as a percentage (which may be in
excess of 100%) determined by dividing (a) Annualized Operating Cash Flow for
the applicable period by (b) Pro Forma Debt Service.
"Projections" shall mean the projections, each set of which is
entitled "Charter Communications II, L.P. Projections of Taxable Income (Loss)
and Cash Flow" dated April 14, 1995, June 13, 1995, July 21, 1995, November 14,
1995, March 22, 1996, and December 23, 1996, respectively, prepared by the
Borrowers and previously delivered to the Banks.
"Purchase Agreements" shall mean, collectively, the Hickory Purchase
Agreement and the Cencom Purchase Agreements.
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<PAGE> 21
"Qualified Distributions" shall mean partnership distributions of CC
II, L.P., made in accordance with Section 8.26 hereof.
"Quarterly Dates" shall mean the last Business Day of each March,
June, September and December the first of which shall be the last Business Day
of March 1997.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System (or any successor thereto), as the same may be
amended or supplemented from time to time.
"Regulatory Change" shall mean, with respect to any Bank, any change
after the date of this Agreement in United States federal, state or foreign
laws or regulations (including Regulation D) or the adoption or making after
such date of any interpretations, directives or requests applying to a class of
banks including such Bank of or under any United States federal or state, or
any foreign, laws or regulations (whether or not having the force of law) by
any court or governmental or monetary authority charged with the interpretation
or administration thereof.
"Reserve Requirement" shall mean, for any Fixed Rate Loans on a daily
basis, the maximum rate at which reserves (including any marginal, supplemental
or emergency reserves) are required to be maintained (in the case of CD Loans)
or the actual rate at which reserves (including any marginal, supplemental or
emergency reserves) are maintained (in the case of LIBOR Loans), in each case
during the Interest Period therefor, under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against (a) in the case of LIBOR Loans, "Eurocurrency liabilities" (as
such term is used in Regulation D) or (b) in the case of CD Loans, non-
personal Dollar time deposits in an amount of $100,000 or more. Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks by reason of any
Regulatory Change against (x) any category of liabilities which includes
deposits by reference to which the Fixed Base Rate for LIBOR Loans or CD Loans
(as the case may be) is to be determined as provided in the definition of
"Fixed Base Rate" in this Section 1.1 or (y) any category of extensions of
credit or other assets which include any Type of Fixed Rate Loan.
"Restricted Payments" shall mean: (a) prepayments (other than
prepayments of Capital Lease Obligations and Indebtedness permitted under
Section 8.8(b) hereof) of principal of, or interest on, or any other amounts
owing in respect of, any Indebtedness of the Borrowers or their respective
Subsidiaries other than Indebtedness to the Banks; (b) except for Qualified
Distributions, or as otherwise provided in Section 8.18 hereof, partnership
distributions of CC II, L.P. or CC III, L.P. (in cash, property or obligations)
on, or other payments or distributions on account of, or the setting apart of
money for a sinking or other analogous fund for, or the purchase, redemption,
retirement or other acquisition of, any portion of any partnership interest
(whether general or limited) in CC II, L.P. or CC III, L.P.; and (c) payments
of Management Fees except to the extent permitted under the Fee Subordination
Agreement.
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<PAGE> 22
"Security Agreement" shall mean the Amended and Restated Security
Agreement, dated as of March 28, 1996, among the Borrowers and the
Administrative Agent, as the same shall be amended, modified and supplemented
and in effect from time to time.
"Security Documents" shall mean the Security Agreement, the
Partnership Pledge Agreement, the Peachtree Pledge Agreement, the CC III
General Partner Pledge Agreement and such other agreements, instruments and
documents as the Administrative Agent may reasonably require to effect the
purposes of the Security Agreement, the Partnership Pledge Agreement, the
Peachtree Pledge Agreement, the CC III General Partner Pledge Agreement and
this Agreement.
"Senior Officer" shall mean any individual general partner, the Chief
Executive Officer, President, any Vice President or Comptroller of or the chief
financial officer of CC II General Partner, CC III General Partner or the
Borrowers.
"Specified Indebtedness" shall mean all Indebtedness of the Borrowers
and their respective Subsidiaries other than accrued Management Fees the
payment of which has been deferred pursuant to the Fee Subordination Agreement.
"Subsidiary" shall mean, with respect to any Person, any corporation
or other entity, whether now existing or hereafter organized or acquired, of
which a majority of the securities or other ownership interests having ordinary
voting power for the election of directors or other persons performing similar
functions (irrespective of whether or not at the time stock of any other class
or classes of such corporation or any other type of ownership interest of such
other entity shall have or might have voting power by reason of the happening
of any contingency) are at the time owned by such Person and/or one or more
Subsidiaries of such Person.
"Systems" shall mean the Borrowers' and their respective Subsidiaries'
cable television systems operating in the areas referred to in the Franchises
and any additions or modifications thereto or extensions thereof and any cable
television systems acquired by any Borrower or any of their respective
Subsidiaries pursuant to a Permitted Asset Swap.
"Tranche A Loans" shall mean the Loans made pursuant to Section 2.1(a)
hereof.
"Tranche A Loan Commitment" shall mean, as to any Bank, the obligation
of such Bank to make Tranche A Loans to the Borrowers in an aggregate principal
amount up to but not exceeding the amount set forth opposite such Bank's name
on Schedule 1 hereto under the caption "Tranche A Loan Commitment" (as the same
may be modified as a result of an assignment pursuant to Section 11.6 hereof or
reduced pursuant to Section 2.3 hereof).
"Tranche A Loan Commitment Termination Date" shall mean June 30, 2005.
"Tranche A Notes" shall mean the promissory notes of the Borrowers
evidencing the Tranche A Loans, substantially in the form of Exhibit 2.8-1
hereto.
"Tranche A Share" shall mean, at any date of determination thereof, a
fraction, the numerator of which is the aggregate principal amount of the
Tranche A Loans outstanding on such date, and the denominator of which is the
aggregate principal amount of all the Loans outstanding on such date.
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<PAGE> 23
"Tranche B Loans" shall mean the Loans made pursuant to Section 2.1(b)
hereof.
"Tranche B Loan Commitment" shall mean, as to any Bank, the obligation
of such Bank to make on the Closing Date Tranche B Loans to the Borrowers in an
aggregate principal amount up to but not exceeding the amount set forth next to
such Bank's name on Schedule 1 hereto under the caption "Tranche B Loan
Commitment" (as the same may be modified as a result of an assignment pursuant
to Section 11.6 hereof or reduced pursuant to Section 2.3 hereof).
"Tranche B Notes" shall mean the promissory notes of the Company
evidencing the Tranche B Loans, substantially in the form of Exhibit 2.8-2
hereto.
"Tranche B Share" shall mean, at any date of determination thereof, a
fraction, the numerator of which is the aggregate principal amount of the
Tranche B Loans outstanding on such date, and the denominator of which is the
aggregate principal amount of all the Loans outstanding on such date.
"Tranche C Loans" shall mean the Loans made pursuant to Section 2.1(c)
hereof.
"Tranche C Loan Commitment" shall mean, as to any Bank, the obligation
of such Bank to make on the Closing Date Tranche C Loans to the Borrowers in an
aggregate principal amount up to but not exceeding the amount set forth next to
such Bank's name on Schedule 1 hereto under the caption "Tranche C Loan
Commitment" (as the same may be modified as a result of an assignment pursuant
to Section 11.6 hereof or reduced pursuant to Section 2.3 hereof).
"Tranche C Notes" shall mean the promissory notes of the Company
evidencing the Tranche C Loans, substantially in the form of Exhibit 2.8-3
hereto.
"Tranche C Share" shall mean, at any date of determination thereof, a
fraction, the numerator of which is the aggregate principal amount of the
Tranche C Loans outstanding on such date, and the denominator of which is the
aggregate principal amount of all the Loans outstanding on such date.
1.2 Additional Defined Terms. The following terms defined elsewhere
in this Agreement shall have the respective meanings therein defined:
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<PAGE> 24
<TABLE>
<CAPTION>
Term Definition
------ ----------
<S> <C>
Additional Costs 5.1(a)
Administrative Agent Caption
Affected Loans 5.4
Affected Type 5.4
Applicable Amount 2.3(b)
Arranging Agents Caption
Banks Caption
Borrowers Caption
Cencom Loan Date 6.3
Class 1.4
Co-Agents Caption
Documentation Agent Caption
Managing Agents Caption
Note 2.8(a)
Peachtree Stock 7.2(b)
Required Payment 4.4
Type 1.4
</TABLE>
1.3 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared in accordance with GAAP.
To enable the ready determination of compliance by the Borrowers with the
various covenants set forth in Article 8 hereof, the Borrowers will not change
the last day of their respective fiscal years from December 31, or the last
days of the first three fiscal quarters in their respective fiscal years from
March 31, June 30 and September 30, respectively.
1.4 Classes and Types. Loans hereunder are distinguished by "Class"
and by "Type." The "Class" of a Loan (or of a Commitment to make such a Loan)
refers to the determination whether such Loan is a Tranche A Loan, a Tranche B
Loan or a Tranche C Loan, each of which constitutes a Class. The "Type" of
Loan refers to the determination whether such Loan is a LIBOR Loan, a Base Rate
Loan or a CD Loan. Identification of a Loan may be by Class or Type or both
Class and Type (e.g., a "Base Rate Tranche A Loan" indicates that such Loan is
both a Base Rate Loan and a Tranche A Loan).
Article 2. Loans and Commitments.
2.1 Loans.
(a) Each Bank severally agrees, on the terms of this Agreement, to
make loans to the Borrowers during the period from and including the date of
the execution hereof to but excluding the Tranche A Loan Commitment Termination
Date in an aggregate principal amount at any one time outstanding up to but not
exceeding the amount of such Bank's Tranche A Loan Commitment as then in
effect. Subject to the terms of this Agreement,
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<PAGE> 25
during such period the Borrowers may borrow, repay and reborrow the amount of
the Tranche A Loan Commitments. Each Tranche A Loan may be a Base Rate Loan,
CD Loan or LIBOR Loan, provided that no more than five Loans which are Fixed
Rate Loans may be outstanding at any time.
(b) Each Bank severally agrees, on the terms of this Agreement, to
make, on the Closing Date, loans to the Borrowers in the principal amount of
such Bank's Tranche B Loan Commitment. Each Tranche B Loan may be a Base Rate
Loan, CD Loan or LIBOR Loan.
(c) Each Bank severally agrees, on the terms of this Agreement, to
make on the Closing Date a term loan to the Borrowers in the principal amount
of such Bank's Tranche C Loan Commitment. Each Tranche C Loan may be a Base
Rate Loan, CD Loan or LIBOR Loan.
(d) The Loans of each Type made by each Bank shall be made and
maintained at such Bank's Applicable Lending Office for Loans of such Type.
2.2 Borrowings and Conversions.
(a) The Borrowers shall give the Administrative Agent (which shall
promptly notify the Banks) notice (substantially in the form of Exhibit 2.2
hereto) of each borrowing of a Tranche A Loan and of each conversion of a loan
of any Class from one Type of Loan to another hereunder. Each such notice
shall be given on a Business Day and shall be irrevocable and effective only
upon receipt by the Administrative Agent and shall specify (1) the aggregate
amount (which shall be at least $200,000 in the case of a Tranche A Base Rate
Loan and at least $1,000,000 in the case of a Tranche A Fixed Rate Loan) and
date (which shall be a Business Day) of the Loan to be borrowed, (2) the Type
of Loan to be borrowed, and (3) in the case of Fixed Rate Loans, the duration
of the Interest Period therefor. Each such notice shall be given not later
than 12:00 noon New York time on the day which is not less than the number of
Business Days prior to the date of such borrowing or conversion specified below
opposite the Type of such Loan:
<TABLE>
<CAPTION>
Type Business Days
---- -------------
<S> <C>
Base Rate Loan 1
CD Loan 3
LIBOR Loan 3
</TABLE>
Each notice of a borrowing which increases the aggregate principal amount of
the Tranche A Loans outstanding shall be accompanied by a letter from the
Borrowers setting forth the use of proceeds of the Loans requested in such
notice. Notwithstanding anything herein to the contrary, no notice pursuant to
this Section 2.2 shall be necessary upon the expiration of the Interest Period
for a Fixed Rate Loan unless the Borrowers have requested a new Fixed Rate Loan
with respect to the principal amount thereof; such Loans shall automatically be
converted to Base Rate Loans.
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<PAGE> 26
(b) If an Event of Default shall have occurred and be continuing,
(1) each Base Rate Loan shall remain a Base Rate Loan and may not be reborrowed
as a Fixed Rate Loan; and (2) each Fixed Rate Loan shall remain a Fixed Rate
Loan until the expiration of the Interest Period therefor at which time it
shall automatically convert to a Base Rate Loan. Subject to clause (2) of the
immediately preceding sentence, if an Event of Default shall have occurred and
be continuing, the Borrowers shall not have the right to borrow Fixed Rate
Loans.
(c) Not later than 12:00 noon New York time on the date specified
for each borrowing hereunder, each Bank shall make available to the
Administrative Agent at the Administrative Agent's Office the amount of the
Loan to be made by it on such date in immediately available funds for the
account of the Borrowers. The amount so received by the Administrative Agent
shall, subject to the terms and conditions of this Agreement, be made available
to the Borrowers by depositing the same, in immediately available funds, in an
account of the Borrowers maintained with the Administrative Agent at the
Administrative Agent's Office designated by the Borrowers or by wiring the
same, in immediately available funds, to any account specified by the Borrowers
in the notice of borrowing.
2.3 Changes of Commitments and Term Loan Repayment.
(a) On each Commitment Reduction Date set forth in column (a)
below the aggregate amount of the Tranche A Loan Commitments shall be reduced
by an amount equal to the amount set forth in column (b) below opposite such
Commitment Reduction Date until the aggregate amount of the Tranche A Loan
Commitments shall have been reduced to $0:
<TABLE>
<CAPTION>
(a) (b)
Commitment
Reduction Amount of
Date Falling In Reduction
--------------- ---------
<S> <C>
September and December 1998 $4,750,000
March, June, September and December 1999 $3,705,000
March, June, September and December 2000 $5,700,000
March, June, September and December 2001 $5,937,500
March, June, September and December 2002 $6,412,500
March, June, September and December 2003 $8,906,250
March, June, September and December 2004 $9,737,500
March and June 2005 $9,452,500
</TABLE>
Notwithstanding the foregoing, the Tranche A Loan Commitments shall terminate
and all outstanding Loans and accrued interest thereon shall be payable in full
on the Tranche A
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<PAGE> 27
Commitment Termination Date. The principal of the Tranche B Loans and of the
Tranche C Loans shall be repaid by the Borrowers in quarterly installments
payable on each Quarterly Date commencing with September 30, 1998, the amount
of the installment of principal payable on a Quarterly Date set forth in column
(x) below to be equal to (i) in the case of the Tranche B Loans, the amount
set forth opposite such Quarterly Date in column (y) below and (ii) in the case
of the Tranche C Loans, the amount set forth opposite such Quarterly Date in
column (z) below:
<TABLE>
<CAPTION>
(x) (y) (z)
Quarterly Tranche B Tranche C
Date Falling In Loan Repayment Loan Repayment
- ---------------- -------------- --------------
<S> <C> <C>
September and December 1998 $2,500,000 $ 187,500
March, June, September and December 1999 $1,950,000 $ 93,750
March, June, September and December 2000 $3,000,000 $ 93,750
March, June, September and December 2001 $3,125,000 $ 93,750
March, June, September and December 2002 $3,375,000 $ 187,500
March, June, September and December 2003 $4,687,500 $ 187,500
March, June, September and December 2004 $5,125,000 $ 2,812,500
March and June (and, for Tranche C Loans only, $4,975,000 $15,187,500
September and December) 2005
</TABLE>
The then unpaid balance of the Tranche B Loans shall be payable in full on June
30, 2005. The then unpaid balance of the Tranche C Loans shall be payable in
full on December 31, 2005.
(b) Subject to the provisions of Section 2.9(a) hereof, the
Borrowers shall have the right, at any time or from time to time, to terminate
or reduce the aggregate amount of the Tranche A Loan Commitments and to prepay
the Tranche B Loans or Tranche C Loans in accordance with the following
procedure. The Borrowers shall give not less than five Business Days' prior
notice to the Administrative Agent of each such termination or reduction and
prepayment. The notice shall specify the aggregate amount (which shall not be
less than $1,000,000) by which the Borrowers wish to terminate or reduce the
Tranche A Loan Commitments and to prepay the Tranche B Loans and Tranche C
Loans (the "Applicable Amount"). The notice shall also specify the effective
date thereof. On the effective date specified in the notice, the Tranche A
Loan Commitments shall be reduced by the Tranche A Share of the Applicable
Amount and the Borrowers shall prepay the Tranche B Loans in an amount equal to
the Tranche B Share of the Applicable Amount and the Tranche C Loans in an
amount equal to the Tranche C Share of the Applicable Amount. Each notice
pursuant
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<PAGE> 28
to this Section 2.3(b) shall be irrevocable and effective only upon receipt by
the Administrative Agent; provided that the Tranche A Loan Commitments may not
be terminated pursuant to this Section 2.3(b) when Tranche A Loans are
outstanding and may not be reduced to an aggregate amount less than the
outstanding principal amount of the Tranche A Loans. Each reduction of the
Tranche A Loan Commitments pursuant to this Section 2.3(b) shall be applied pro
rata to the then remaining reductions scheduled under Section 2.3(a). Each
prepayment of the Tranche B Loans and the Tranche C Loans pursuant to this
Section 2.3(b) shall be applied pro rata to the then remaining payments
scheduled under Section 2.3(a).
(c) The Tranche A Loan Commitments shall be reduced by the Tranche
A Share of the Net Proceeds of any sale or lease of assets (including, without
limitation, the Net Proceeds, if any, of any Permitted Asset Swap), effective
upon the fifth day following the receipt thereof by the Borrowers or any of
their respective Subsidiaries. Each reduction of the Tranche A Loan
Commitments pursuant to this Section 2.3(c) shall be applied pro rata to the
then remaining reductions scheduled under Section 2.3(a); provided that the
Tranche A Loan Commitments shall at no time be less than $0. The Tranche B
Loans and Tranche C Loans shall be prepaid in amounts equal to the Tranche B
Share and Tranche C Share, respectively of the Net Proceeds of any sale or
lease of assets (including, without limitation, the Net Proceeds, if any, of
any Permitted Asset Swap), effective upon the fifth day following the receipt
thereof by the Borrowers or any of their respective Subsidiaries. Each such
prepayment of the Tranche B Loans and Tranche C Loans pursuant to this Section
2.3(c) shall be applied pro rata to the then remaining payments scheduled under
Section 2.3(a).
(d) On April 30 of each calendar year, commencing on April 30,
1999, the Tranche A Loan Commitments shall be reduced by the Tranche A Share of
50% of Excess Cash Flow for the immediately preceding fiscal year. Each
reduction of the Tranche A Loan Commitments pursuant to this Section 2.3(d)
shall be applied pro rata to the then remaining reductions scheduled under
Section 2.3(a); provided that the Tranche A Loan Commitments shall at no time
be less than $0. On April 30 of each calendar year, commencing on April 30,
1999, the Tranche B Loans and Tranche C Loans shall be prepaid in an amount
equal to the Tranche B Share and Tranche C Share, respectively, of 50% of
Excess Cash Flow for the immediately preceding fiscal year. Each such
prepayment of the Tranche B Loans and Tranche C Loans pursuant to this Section
2.3(d) shall be applied pro rata to the then remaining payments scheduled under
Section 2.3(a).
(e) If the transactions contemplated by the Cencom Purchase
Agreements are not consummated on or before September 30, 1997, the aggregate
Tranche A Loan Commitments shall, effective as of the close of business on
September 30, 1997, automatically be reduced by $25,000,000, such reductions to
be applied pro rata to the then remaining reductions scheduled under Section
2.3(a); provided, that the Tranche A Loan Commitments shall at no time be less
than $0.
(f) If at any time from and after the date hereof, Charter
Southeast or any parent company thereof shall incur indebtedness the proceeds
of which are used, directly or indirectly, to make contributions to the capital
of any of the Borrowers (it being understood
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<PAGE> 29
that contributions by one Borrower to the capital of another Borrower shall not
be included in the foregoing), then the Tranche A Loan Commitments shall be
reduced by an amount equal to the Tranche A Share of the amount so contributed
and the Tranche B Loans and Tranche C Loans shall be prepaid in an amount equal
to the Tranche B Share and Tranche C Share, respectively, of the amount so
contributed. Each reduction of the Tranche A Loan Commitments pursuant to this
Section 2.3(f) shall be applied pro rata to the then remaining reductions
scheduled under Section 2.3(a) and each prepayment of the Tranche B Loans and
Tranche C Loans pursuant to this Section 2.3(f) shall be applied pro rata to
the then remaining payments scheduled under Section 2.3(a).
(g) The Tranche A Loan Commitments once terminated or reduced may
not be reinstated.
(h) Notwithstanding anything herein to the contrary, so long as no
Default shall have occurred and be continuing, no reduction of the Tranche A
Loan Commitments or prepayment of the Tranche B Loans or Tranche C Loans
otherwise required under Section 2.3(c) or 2.3(f) hereof shall be required
unless and until the sum of (1) Net Proceeds of any sale or lease of assets by
any of the Borrowers after the date hereof; and (2) contributions to the
capital of any of the Borrowers (other than contributions by another Borrower)
shall exceed $5,000,000, and the amount of such reductions and prepayments
shall be calculated based upon such excess.
2.4 Fees.
(a) The Borrowers shall pay to the Administrative Agent, for the
account of each Bank, for the period from and after the Closing Date to and
including the earlier of the date such Tranche A Loan Commitment is terminated
or the Tranche A Loan Commitment Termination Date, a commitment fee (payable on
the Quarterly Dates and on the earlier of the date the Tranche A Loan
Commitments are terminated and the Tranche A Loan Commitment Termination Date)
on the daily average unused amount of such Bank's Tranche A Loan Commitment, if
any, as in effect from time to time, at a rate equal to 3/8 of 1% per annum.
(b) From and after the date hereof, all references in the
outstanding letter agreements between the Borrowers and the Agents with respect
to fees payable by the Borrowers for services rendered by the Agents pursuant
to the Prior Credit Agreement shall be deemed references to this Agreement and
such letter agreements shall continue in full force and effect.
2.5 Several Obligations. The failure of any Bank to make any Loan
to be made by it on the date specified therefor shall not relieve any other
Bank of its obligation to make its Loan on such date, but no Bank shall be
responsible for the failure of any other Bank to make a Loan to be made by such
other Bank.
2.6 Pro Forma Restrictions on Indebtedness. Each notice of a
borrowing pursuant to Section 2.2 hereof which increases the aggregate
principal amount of the Loans outstanding shall be accompanied by a certificate
of a Senior Officer on behalf of each of the Borrowers (which shall include
reasonably detailed computations of the matters so certified) to the effect
that, after giving effect to the Loans requested in such notice, on the date of
the proposed
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<PAGE> 30
borrowing, the covenants set forth in Sections 8.12 and 8.13 hereof shall not
have been breached (assuming for the purposes of such certification and
computation that all Loans made after the last day of the immediately preceding
full calendar quarter, and the Loan which is the subject of the notice of
Borrowing, if not made on the last day of a calendar quarter, were made on and
as of the last day of the immediately preceding full calendar quarter).
2.7 Use of Proceeds. The proceeds of the Loans made prior to the
date hereof were used in accordance with the Prior Credit Agreement and the
proceeds of the Loans made from and after the date hereof hereunder shall be
used by the Borrowers solely for (a) the repayment or refinancing on the
Closing Date of Loans under the Prior Credit Agreement; (b) payment of the
purchase price for the Systems acquired pursuant to the Purchase Agreements;
(c) Investments and Capital Expenditures by the Borrowers to the extent
permitted by this Agreement; (d) acquisitions of assets by the Borrowers to the
extent permitted by this Agreement; (e) prepayments of principal of the Tranche
B Loans and Tranche C Loans in accordance with Section 2.9(a) hereof; and (f)
working capital and other general purposes of the Borrowers including, without
limitation, the payment of interest, fees and expenses relating to (1) this
Agreement and the Loans hereunder; (2) the negotiation, execution and delivery
of the Purchase Agreements; and (3) the payment to Charter Communications, Inc.
and Charterhouse Group International, Inc. of Search and Acquisition Fees with
respect to the Purchase Agreements in an amount not to exceed $1,750,000 in the
aggregate.
2.8 Notes and Loan Accounts.
(a) Each Loan of a particular Class made by a Bank shall be
evidenced by a single promissory note of the Borrowers (each a "Note"), which
shall be a Tranche A Note, a Tranche B Note, or a Tranche C Note, as
appropriate, payable to the order of such Bank in a principal amount equal to
the amount of its Tranche A Loan Commitment, Tranche B Loan Commitment, or
Tranche C Loan Commitment, as the case may be, as originally in effect.
Tranche A Notes shall be substantially in the form of Exhibit 2.8-1 hereto,
Tranche B Notes shall be substantially in the form of Exhibit 2.8-2 hereto and
Tranche C Notes shall be substantially in the form of Exhibit 2.8-3 hereto.
Each Note shall be dated the date of the initial borrowing of the relevant
Class of Loans under this Agreement, and shall be otherwise duly completed.
The amount, Class, Type, date and maturity date of each Loan made by each Bank,
and all payments made on account of the principal thereof, shall be recorded by
each Bank on its books and, prior to any transfer of any Note held by it,
endorsed by each Bank on the schedule attached to the Note or any continuation
thereof as to the amount and Type of Loans then outstanding.
(b) Each Bank may open and maintain on its books in the name of
the Borrowers a loan account with respect to its Loans and interest thereon.
Each Bank which opens such loan account shall debit such loan account for the
principal amount of each Loan made by it and accrued interest thereon, and
shall credit such loan account for each payment on account of principal of or
interest on its Loans. The records of a Bank with respect to the loan account
maintained by it shall be prima facie evidence of the Loans and accrued
interest thereon.
2.9 Prepayments.
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<PAGE> 31
(a) The Borrowers may prepay (without premium or penalty) Tranche
A Base Rate Loans upon not less than five Business Days' prior written notice
to the Administrative Agent, which notice shall specify the prepayment date
(which shall be a Business Day) and the amount of the prepayment (which shall
be not less than $500,000 and shall be in an integral multiple of $100,000) and
shall be irrevocable and effective only upon receipt by the Administrative
Agent, provided that interest on the principal prepaid, accrued to the
prepayment date, shall be paid on the prepayment date. The Borrowers may only
prepay Tranche B Base Rate Loans or Tranche C Base Rate Loans concurrently with
reductions of the Tranche A Loan Commitments in accordance with Section 2.3(b)
hereof, provided that interest on the principal prepaid, accrued to the
prepayment date, shall be paid on the prepayment date. Fixed Rate Loans may
not be prepaid unless all payments required under Section 5.5 hereof are made
concurrently with such prepayment, but there shall be no other premium or
penalty in connection with such prepayment.
(b) If, after giving effect to any termination or reduction of the
Tranche A Loan Commitments pursuant to Section 2.3 hereof, the outstanding
aggregate principal amount of the Tranche A Loans exceeds the aggregate amount
of the Tranche A Loan Commitments, the Borrowers shall pay or prepay the
Tranche A Loans on the date of such termination or reduction in an aggregate
principal amount equal to the excess, together with interest thereon and
commitment fees accrued to the date of such payment or prepayment and any
amounts payable (in the case of Fixed Rate Loans) pursuant to Section 5.5
hereof in connection therewith. Each prepayment pursuant to this Section
2.9(b) shall be applied first to any outstanding Tranche A Base Rate Loans and
thereafter to such outstanding Tranche A Fixed Rate Loans as the Borrowers
shall designate (or, if the Borrowers shall fail to so designate, to such
outstanding Tranche A Fixed Rate Loans as the Arranging Agents shall determine
in their sole discretion).
2.10 Borrowers' Obligations. The liabilities, obligations,
representations, warranties, covenants and agreements of the Borrowers
hereunder are joint and several, and (as between the Borrowers, on the one
hand, and the Banks and the Agents, on the other hand) shall not be subject to
any allocation or apportionment. The Banks and the Agents shall be entitled to
enforce their rights and remedies hereunder against any one or all of the
Borrowers without it being necessary for any other Borrower to be joined as an
additional party in any proceedings instituted by any Bank or Agent with
respect thereto.
Article 3. Payments of Principal and Interest.
3.1 Repayments of Principal. The Borrowers will pay to the
Administrative Agent, for the account of each Bank:
(a) the principal of each Fixed-Rate Loan on the last day of
the Interest Period therefor (subject to the provisions of Section 2.2
hereof with respect to conversions of Fixed-Rate Loans into Base Rate
Loans);
(b) the principal of each outstanding Tranche A Loan on the
Tranche A Loan Commitment Termination Date and as required pursuant to
Section 2.9(b) hereof; and
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<PAGE> 32
(c) the principal of each Tranche B Loan and each Tranche C
Loan as required pursuant to Section 2.3(a) hereof.
3.2 Interest.
(a) The Borrowers will pay to the Administrative Agent, for the
account of each Bank, interest on the unpaid principal amount of each Loan, for
the period commencing on the date of such Loan to but excluding the date such
Loan shall be paid in full, at the following rates per annum:
(1) if such Loan is a Base Rate Loan, the Base Rate (as in
effect from time to time) plus the Applicable Margin, and
(2) if such Loan is a Fixed Rate Loan, the Fixed Rate for
such Loan for the Interest Period therefor plus the Applicable Margin.
Notwithstanding the foregoing, the Borrowers will pay to the Administrative
Agent, for the account of each Bank, interest at the applicable Post-Default
Rate on the principal of all Loans made by such Bank, and (to the fullest
extent permitted by law) on any other amount payable by the Borrowers hereunder
or under the Notes held by such Bank to or for the account of such Bank, upon
the occurrence and during the continuance of an Event of Default until such
Event of Default is no longer continuing or the Loans and other sums due such
Bank hereunder are paid in full. Accrued interest on each Base Rate Loan shall
be payable on each Quarterly Date. Accrued interest on each Fixed Rate Loan
shall be payable on the last day of the Interest Period therefor and, if such
Interest Period is longer than 90 days (in the case of a CD Loan) or three
months (in the case of a LIBOR Loan) on each quarterly anniversary of the first
day of such Interest Period; interest payable at the Post- Default Rate shall
be payable from time to time on demand of the Administrative Agent. Promptly
after the determination of any interest rate provided for herein or any change
therein, the Administrative Agent shall notify the Banks to which such interest
is payable and the Borrowers thereof.
(b) At no time shall the amount of interest due or payable hereunder
or under the Notes exceed the maximum rate of interest allowed by applicable
law, and if any such payment is inadvertently made by the Borrowers or
inadvertently received by any Bank, then such excess sum shall be credited as a
payment of principal, unless the Borrowers notify such Bank in writing that it
elects to have such excess sum returned forthwith. It is the express intent of
this Agreement that the Borrowers not pay and the Banks not receive, directly
or indirectly, in any manner whatsoever, interest in excess of that which may
legally be paid by any borrower under applicable law.
Article 4. Payments; Computations; Etc.
4.1 Payments. Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Borrowers
under this Agreement and the Notes shall be made in Dollars, in immediately
available funds, without set-off or counterclaim, to the Administrative Agent
at the Administrative Agent's Office, not later than 1:00 P.M. Houston, Texas
time, on the date on which such payment shall become due (each
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<PAGE> 33
such payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day and interest thereon shall accrue and
be payable at the rate applicable thereto in accordance with the provisions of
this Agreement). After the occurrence and during the continuance of an Event
of Default under Section 9.B or 9.C hereof, the Administrative Agent, or any
Bank for whose account any such payment is required to be made, may (but shall
not be obligated to) debit the amount of any such payment which is not made by
such time to any ordinary deposit account of the Borrowers with the
Administrative Agent or such Bank, as the case may be (with subsequent notice
to the Borrowers which shall not be a condition precedent to such debit). The
Borrowers shall, at the time of making each payment under this Agreement or any
Note, specify to the Administrative Agent the Loans or other amounts payable by
the Borrowers hereunder to which such payment is to be applied (and in the
event that it fails to so specify, or if an Event of Default has occurred and
is continuing, the Administrative Agent may distribute such payment to the
Banks in such manner as the Arranging Agents may determine to be appropriate,
subject to Section 4.2 hereof). Each payment received by the Administrative
Agent under this Agreement or any Note for the account of a Bank shall be paid
promptly to such Bank, in immediately available funds, for the account of such
Bank. If the due date of any payment under this Agreement or any Note would
otherwise fall on a day which is not a Business Day, such date shall be
extended to the next succeeding Business Day and interest shall be payable for
any principal so extended for the period of such extension; provided, however,
that if the due date of any payment of principal of, or interest on, a LIBOR
Loan is not a Business Day and the next succeeding Business Day is not in the
same calendar month as the due date of such payment, such payment shall be made
on the Business Day immediately preceding the due date thereof.
4.2 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each borrowing from the Banks under Section 2.1 hereof shall be
made from the Banks, and each payment of commitment fees under Section 2.4(a)
hereof shall be made for the account of the Banks, pro rata in accordance with
the amounts of their respective Commitments for the applicable Class of Loans;
(b) each termination or reduction of the amount of the Tranche A Loan
Commitments under Section 2.3 hereof shall be applied to the Tranche A Loan
Commitments of the Banks pro rata in accordance with the amounts of their
respective Tranche A Loan Commitments; (c) each payment of principal of Loans
by the Borrowers shall be made for the account of the Banks pro rata in
accordance with the respective unpaid principal amounts of the applicable Class
of Loans held by the Banks; and (d) each payment of interest on a Class of
Loans by the Borrowers shall be made for the account of the Banks pro rata in
accordance with the amounts of interest due and payable to the respective Banks
in respect of that Class of Loans.
4.3 Computations. Interest on Fixed Rate Loans shall be computed on
the basis of a year of 360 days and actual days elapsed (including the first
day, but excluding the last day) occurring in the period for which payable, and
interest on Base Rate Loans and commitment fees shall be computed on the basis
of a year of 365 or 366 days, as the case may be, and the actual days elapsed
(including the first day, but excluding the last day) occurring in the period
for which payable.
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<PAGE> 34
4.4 Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Bank or the Borrowers prior
to the date on which such Person is scheduled to make the payment to the
Administrative Agent of (in the case of a Bank) the proceeds of a Loan to be
made by it hereunder or (in the case of the Borrowers) a payment to the
Administrative Agent for the account of one or more of the Banks hereunder
(each such payment being herein called a "Required Payment"), which notice
shall be effective upon receipt, that it does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date and, if such Bank or the Borrowers (as the
case may be) have not in fact made the Required Payment to the Administrative
Agent, the recipient(s) of such payment shall, within five days after demand,
repay to the Administrative Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Administrative Agent until the
date the Administrative Agent recovers such amount at a rate per annum equal to
(a) the Federal Funds Rate (in the case of amounts payable by a Bank) or (b)
the applicable rate of interest hereunder (in the case of amounts payable by
the Borrowers). In the event that, at any time when the Borrowers are not in
Default, a Bank for any reason fails or refuses to fund its portion of any
borrowing, until such time as such Bank has funded its portion of such
borrowing (which late funding shall not absolve such Bank from any liability it
may have to the Borrowers), or all other Banks have received payment in full
from the Borrowers (whether by repayment or prepayment) or otherwise of the
principal and interest due in respect of such borrowing, such non-funding Bank
shall not have the right (A) to vote regarding any issue on which voting is
required or advisable under this Agreement or any other Loan Document, and the
amount of the Loans of such Bank shall not be counted as outstanding for
purposes of determining "Majority Banks" hereunder, and (B) to receive payments
of principal, interest or fees from the Borrowers, the Administrative Agent or
the other Banks in respect of its Loans.
4.5 Sharing of Payments, Etc. In addition to (and without
limitation of) any right of set-off, bankers' lien or counterclaim a Bank may
otherwise have, each Bank shall be entitled, at its option, to offset balances
held by it for the account of any Borrower at any of its offices, in Dollars or
in any other currency, against any principal of or interest on any of such
Bank's Loans hereunder which is not paid when due (regardless of whether such
balances are then due to the applicable Borrower), in which case it shall
promptly notify the Borrowers and the Administrative Agent thereof, provided
that such Bank's failure to give such notice shall not affect the validity
thereof. If a Bank shall obtain payment of any principal of or interest on any
Loan made by it to the Borrowers under this Agreement through the exercise of
any right of set-off, bankers' lien or counterclaim or similar right, it shall
promptly purchase from the other Banks participations in (or, if and to the
extent specified by such Bank, direct interests in) the Class of Loans made by
the other Banks to which such payment relates in such amount, and make such
other adjustments from time to time as shall be equitable, to the end that all
the Banks making Loans of the affected Class shall share the benefit of such
payment (net of any reasonable expenses which may be incurred by such Bank in
obtaining or preserving such benefit) pro rata in accordance with the unpaid
principal of and interest on
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<PAGE> 35
the Loans of the applicable Class held by each of them immediately prior to
such payment. To such end all the Banks shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored. The Borrowers agree that
any Bank so purchasing a participation (or direct interest) in the Loans made
by other Banks may exercise all rights of set-off, bankers' lien, counterclaim
or similar rights with respect to such participation as fully as if such Bank
were a direct holder of Loans in the amount of such participation. Nothing
contained herein shall require any Bank to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness or
obligations of the Borrowers.
Article 5. Yield Protection and Illegality.
5.1 Additional Costs.
(a) The Borrowers shall pay directly to each Bank from time to
time such amounts as such Bank may reasonably determine to be necessary to
compensate it for any costs (not otherwise included in the Assessment Rate or
Reserve Requirement) which such Bank determines are attributable to its making
or maintaining of any Fixed Rate Loans, or its obligation to make any Loans
hereunder, or any reduction in any amount receivable by such Bank hereunder in
respect of any of such Loans or such obligation (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"),
resulting from any Regulatory Change which:
(1) changes the basis of taxation of any amounts payable to
such Bank under this Agreement or the Notes held by such Bank in
respect of any of such Loans (other than taxes imposed on the overall
net income of such Bank for any of such Loans);
(2) imposes or modifies any reserve, special deposit or
similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of such Bank
(including any of such Loans, such obligations or any deposits
referred to in the definition of "Fixed Base Rate" in Section 1.1
hereof); or
(3) imposes any other condition affecting this Agreement or
the Notes held by such Bank (or any of such extensions of credit or
liabilities).
Additional Costs shall not include, with respect to Base Rate Loans, any
amounts which the Administrative Agent certifies are reflected in an increase
of the Base Rate for the period in which such increase is in effect. Each Bank
will notify the Borrowers and the Administrative Agent of any event occurring
after the date of this Agreement which will entitle such Bank to compensation
pursuant to this Section 5.1(a) as promptly as practicable after it obtains
knowledge thereof and determines to request such compensation and will furnish
the Borrowers with a certificate setting forth in reasonable detail the basis
and the calculation of the amount of each request for compensation under this
Section 5.1(a). If a Bank requests compensation from the Borrowers under this
Section 5.1(a), the Borrowers may, by notice to such Bank, suspend the
obligation of such Bank to make additional Loans of the Type with respect to
which such compensation is requested until the earlier of (i) such Bank's
waiver of its request for compensation or (ii) the date on which the Regulatory
Change giving rise to
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such request ceases to be in effect (in which case the provisions of Section
5.4 hereof shall be applicable).
(b) Without limiting the effect of the provisions of Section
5.1(a) hereof, in the event that, by reason of any Regulatory Change, a Bank
either (1) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
such Bank which includes deposits by reference to which the interest rate on
LIBOR Loans or CD Loans is determined as provided in this Agreement or a
category of extensions of credit or other assets of such Bank which includes
LIBOR Loans or CD Loans or (2) becomes subject to restrictions on the amount of
such a category of liabilities or assets which it may hold, then, if such Bank
so elects by notice to the Borrowers, the obligation of such Bank to make
additional Loans of such Type hereunder shall be suspended until such
Regulatory Change ceases to be in effect (in which case the provisions of
Section 5.4 hereof shall be applicable).
(c) Determinations and allocations by any Bank for purposes of
this Section 5.1 of the effect of any Regulatory Change on its costs of making
or maintaining Loans or on amounts receivable by it in respect of Loans or its
costs of maintaining its obligations to make Loans, and of the additional
amounts required to compensate such Bank in respect of any Additional Costs,
shall be conclusive, absent manifest error, provided that such determinations
and allocations are made on a reasonable basis.
5.2 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if
(a) the Administrative Agent reasonably determines (which
determination shall be conclusive) that quotations of interest rates for the
relevant deposits referred to in the definition of "Fixed Base Rate" in Section
1.1 hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for any Type of Fixed
Rate Loans as provided herein; or
(b) the Majority Banks reasonably determine after the date hereof
(which determination shall be conclusive) and notify the Administrative Agent
that as a result of circumstances arising after the date hereof the relevant
rates of interest referred to in the definition of "Fixed Base Rate" in Section
1.1 hereof upon the basis of which the rate of interest for any Type of Fixed
Rate Loans is to be determined no longer adequately cover the cost to the
Majority Banks of making or maintaining such Type of Loans;
then the Administrative Agent shall give the Borrowers prompt notice thereof
and, so long as such condition remains in effect, the Banks shall be under no
obligation to make additional Loans of such Type.
5.3 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its Applicable
Lending Office to honor its obligation to make or maintain LIBOR Loans
hereunder, then such Bank shall promptly notify the Borrowers thereof (with a
copy to the Administrative Agent) and such Bank's obligation to make LIBOR
Loans shall be suspended until such time as such Bank may again make and
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maintain LIBOR Loans (in which case the provisions of Section 5.4 hereof shall
be applicable).
5.4 Base Rate Loans pursuant to Sections 5.1 and 5.3. If the
obligation of any Bank to make any Type of Fixed Rate Loans shall be suspended
pursuant to Section 5.1 or 5.3 hereof (Loans of such Type being herein called
"Affected Loans" and such Type being herein called the "Affected Type"), all
Loans which would otherwise be made by such Bank as Loans of the Affected Type
shall be made instead as Base Rate Loans (and, if the event referred to in
Section 5.1(b) or 5.3 hereof has occurred and such Bank so requests by notice
to the Borrowers, all Affected Loans of such Bank then outstanding to the
extent required by the applicable Regulatory Change shall be automatically
converted, on the date specified by such Bank, in such notice, into Base Rate
Loans) and, to the extent that Affected Loans are so made as (or converted
into) Base Rate Loans, all payments of principal which would otherwise be
applied to the Affected Loans shall be applied instead to Base Rate Loans.
5.5 Compensation. The Borrowers shall pay to the Administrative
Agent for the account of each Bank, upon the request of such Bank through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Bank) to compensate it for any loss, cost or expense
which such Bank determines are attributable to:
(a) any payment or conversion of a Fixed Rate Loan for any reason
(including, without limitation, the acceleration of the Loans pursuant to
Article 9 hereof) made by such Bank on a date other than the last day of the
Interest Period for such Loan; or
(b) any failure by the Borrowers to borrow a Fixed Rate Loan from
such Bank or to convert any Loan into a Fixed Rate Loan for any reason
(including, without limitation, the acceleration of the Loans pursuant to
Article 9 hereof) from such Bank on the date for such borrowing or conversion
specified in the relevant notice of borrowing or conversion given pursuant to
Section 2.2 hereof. Without limiting the effect of the preceding sentence
hereof, such compensation shall include, with respect to the Fixed Rate Loan of
any Bank so paid, converted or not borrowed, an amount equal to the excess, if
any, of the amount of interest which would have accrued on the principal
amount of such Loan for the period from the date of such payment, conversion or
failure to borrow to the scheduled maturity date of such Loan at the applicable
Fixed Rate over (1) if such Loan is a LIBOR Loan, the interest component (as
reasonably determined by such Bank) of the amount (as reasonably determined by
such Bank) such Bank would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
maturities comparable to such period, or (2) if such Loan is a CD Loan, the
interest component (as reasonably determined by such Bank) such Bank would have
bid in the United States certificate of deposit market for Dollar deposits of
leading banks in amounts comparable to such principal amount and maturities
comparable to such period. A statement of a Bank setting forth the formula
applied to determine any amount necessary to compensate such Bank under this
Section 5.5 shall be delivered to the Borrowers through the Administrative
Agent and shall be conclusive, except in the case of manifest error, as to such
determination and such amount. Each Bank shall, upon the occurrence of any
event giving rise to the operation of this Section with respect to such Bank,
use reasonable efforts to designate another Applicable Lending Office for any
Loans affected by such event,
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provided that such Bank and its Applicable Lending Office shall not as a result
thereof suffer economic, legal or regulatory disadvantage.
5.6 Capital Adequacy.
(a) In the event that at any time after the date of this Agreement
any Regulatory Change shall, in the reasonable opinion of any Bank, require
that its Commitment (or any portion thereof) be treated as an asset or
otherwise be included for purposes of calculating the appropriate amount of
capital or equity to be maintained by such Bank or any corporation controlling
such Bank and such Regulatory Change shall have the effect of reducing the rate
of return on such Bank's or such corporation's capital or equity, as the case
may be, as a consequence of such Bank's obligations hereunder to a level below
that which such Bank or such corporation, as the case may be, could have
achieved but for such Regulatory Change (taking into account such Bank's or
such corporation's policies, as the case may be, with respect to capital
adequacy and any payments made to such Bank pursuant to Section 5.1 which
relate to capital adequacy and assuming that such Bank's capital was fully
utilized prior to such Regulatory Change) by an amount deemed in good faith by
such Bank to be material, then from time to time following written notice by
such Bank to the Borrowers through the Administrative Agent of such Regulatory
Change as provided in Section 5.6(b), within five (5) days after demand by such
Bank through the Administrative Agent, the Borrowers shall pay to the
Administrative Agent, for the account of such Bank, such additional amount or
amounts as will compensate such Bank or such corporation, as the case may be,
for such reduction.
(b) If any Bank becomes entitled to claim any additional amounts
pursuant to this Section 5.6, it shall promptly notify the Borrowers through
the Administrative Agent of the event by reason of which it has become so
entitled, but in any event within forty-five (45) days, after such Bank obtains
actual knowledge thereof; provided that if such Bank fails to give such notice
within forty-five (45) days after it obtains actual knowledge of such an event,
such Bank shall, with respect to such compensation in respect of any costs
resulting from such event, only be entitled to payment for costs incurred from
and after the date forty-five (45) days prior to the date that such Bank does
give such notice. A certificate setting forth in reasonable detail the
computation of any additional amounts payable pursuant to this Section 5.6,
submitted by such Bank to the Borrowers through the Administrative Agent, shall
be delivered to the Borrowers promptly after the initial incurrence of such
additional amounts and shall be conclusive in the absence of manifest error and
at the Borrowers' request, such Bank shall set forth the basis for such
determination. The covenants contained in this Section 5.6, shall survive the
termination of this Agreement and the payment of the Notes.
Article 6. Conditions Precedent.
6.1 Effectiveness. This Agreement and the obligations of the Agents
and the Banks hereunder are subject to the receipt by the Documentation Agent,
the Administrative Agent or the Banks, as appropriate, of the following
documents, each of which shall be satisfactory to the Documentation Agent and
each Bank in form and substance:
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(a) General Partner Matters. (1) A copy of CC II General
Partner's certificate of incorporation certified by the Secretary of State of
Delaware together with a certificate from a Senior Officer of CC II General
Partner certifying (A) its by-laws and (to the extent relating to the
Partnership Documents, this Agreement, the Notes, and the Security Documents
and the transactions contemplated hereby and thereby) its directors'
resolutions or other authorizations and (B) the name and authorized signature
of each of its officers authorized to sign the Partnership Documents and this
Agreement, the Notes and the Security Documents, as the case may be, and who
will, until replaced by another officer duly authorized for that purpose, act
as its representative for purposes of signing documents and giving notices and
other communications in connection with the Partnership Documents and the
transactions contemplated hereby and thereby. (2) A copy of CC III General
Partner's certificate of incorporation certified by the Secretary of State of
Delaware together with a certificate from a Senior Officer of CC III General
Partner certifying (A) its by-laws and (to the extent relating to the
Partnership Documents, this Agreement, the Notes, and the Security Documents
and the transactions contemplated hereby and thereby) its directors'
resolutions or other authorizations and (B) the name and authorized signature
of each of its officers authorized to sign the Partnership Documents, this
Agreement, the Notes and the Security Documents, as the case may be, and who
will, until replaced by another officer duly authorized for that purpose, act
as its representative for purposes of signing documents in connection with the
Partnership Documents and the transactions contemplated hereby and thereby.
The Administrative Agent and each Bank may conclusively rely on the
certificates delivered pursuant to this Section 6.1(a) until they receive
notice to the contrary in writing from CC II General Partner or CC III General
Partner, as applicable.
(b) Borrower Matters. (1) A copy of the CC II Certificate of
Limited Partnership certified by the Secretary of State of Delaware together
with a certificate from a Senior Officer certifying the Partnership Agreement
and the action of CC II, L.P. relating to this Agreement, the Notes, and the
Security Documents and the transactions contemplated hereby and thereby. (2) A
copy of the CC III Certificate of Limited Partnership certified by the
Secretary of State of Delaware together with a certificate from a Senior
Officer certifying the CC III Partnership Agreement and the action of CC III,
L.P. relating to this Agreement, the Notes, and the Security Documents and the
transactions contemplated hereby and thereby. (3) A copy of Peachtree's
certificate of incorporation certified by the Secretary of State of Delaware
together with a certificate from a Senior Officer of Peachtree certifying (A)
its by-laws and (to the extent relating to this Agreement, the Notes, and the
Security Documents and the transactions contemplated hereby and thereby) its
directors' resolutions or other authorizations and (B) the name and authorized
signature of each of its officers authorized to sign this Agreement, the Notes
and the Security Documents, as the case may be, and who will, until replaced by
another officer duly authorized for that purpose, act as its representative for
purposes of signing documents and giving notices and other communications in
connection with the transactions contemplated hereby. The Administrative Agent
and each Bank may conclusively rely on such certificate until they receive
notice in writing from Peachtree to the contrary.
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(c) No Default Certificate. A certificate of a Senior Officer of
each Borrower to the effect set forth in clauses (a), (b) and (c) of the first
sentence of Section 6.3 hereof.
(d) Opinions of Counsel to the Borrowers. An opinion of (1) Paul,
Hastings, Janofsky & Walker and (2) Cole Raywid & Braverman in form and
substance reasonably satisfactory to counsel to the Documentation Agent. The
Borrowers hereby expressly instruct each such counsel to prepare its opinion
and deliver it to the Documentation Agent, each Arranging Agent, each Managing
Agent, the Administrative Agent and the Banks for their respective benefits and
each such opinion shall contain a statement to that effect.
(e) Notes. The Notes duly completed and executed.
(f) Hickory Purchase Agreement. Evidence that the transactions
contemplated by the Hickory Purchase Agreement and the Partnership Documents
have been duly consummated in a manner satisfactory to each of the Banks
together with a true, correct and complete copy of the Hickory Purchase
Agreement (together with Exhibits and Schedules thereto) and each agreement,
certificate, opinion or other writing delivered by any party to the Hickory
Purchase Agreement or the Partnership Documents in connection with the
conveyance to CC II, L.P. of the assets to be conveyed to the Borrowers
pursuant to the Hickory Purchase Agreement (and the Borrowers shall use
reasonable efforts to cause each such opinion to be accompanied by a letter
from the Person delivering such opinion authorizing reliance thereon by the
Banks).
(g) UCC Financing Statements. Additional UCC-1 financing
statements naming the applicable Borrower as debtor and the Administrative
Agent as the secured party in proper form for filing in such offices, if any,
as the Documentation Agent may reasonably request.
(h) Insurance. Evidence of insurance on the Collateral conveyed
to CC II, L.P. pursuant to the Hickory Purchase Agreement and an endorsement on
each Borrower's liability insurance policies, naming the Administrative Agent
as loss payee and an additional insured as required by the Security Agreement.
(i) Approvals. Copies of each approval or consent of, or filings
or registrations with, any state or federal commission or other federal, state
or local regulatory authority, which is required in connection with the
execution, delivery and performance by the general and limited partners of CC
II, L.P. and CC III, L.P. of the Partnership Documents and the Borrowers of
this Agreement, the Loan Documents, the Notes and the Hickory Purchase
Agreement and the transactions contemplated hereby and thereby and copies of
all of the consents, approvals and waivers with respect thereto referred to in
Exhibit 7.10.
(j) Good Standing. Certificates issued as of a recent date by the
Secretaries of the States of (1) Delaware, Georgia, North Carolina, South
Carolina, Tennessee and Kentucky with respect to CC II, L.P.; (2) Delaware and
Alabama with respect to CC III, L.P.; (3) Nevada and Georgia with respect to
Peachtree; and (4) North Carolina, South Carolina, Delaware, Georgia and
Missouri with respect to the CC II General Partner and the CC III General
Partner, all such certificates showing such Borrower or General Partner, as the
case may be, to be duly qualified to do business and in good standing in such
States.
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(k) Confirmations of Security Documents. All parties under any of
the Security Documents shall have confirmed in writing, in form and substance
satisfactory to the Documentation Agent and its counsel and each Bank, that the
security interests created thereunder and each such party's obligations under
the Security Documents remain in full force and effect.
(l) Pro Forma Balance Sheet and Projections. (1) A Pro Forma
Balance Sheet and (2) a certificate of a Senior Officer of each Borrower
certifying compliance with all covenants set forth herein after giving effect
to the Loans to be made on the Closing Date and the application of the proceeds
thereof (including, without limitation, consummation of the transactions
contemplated by the Hickory Purchase Agreement) and attaching thereto pro forma
projections demonstrating such compliance both before and after giving effect
to said Loans and applications of proceeds.
(m) Fee Subordination Agreement. The Fee Subordination Agreement,
duly executed and delivered by the Borrowers and the Manager.
(n) Other Documents. Such other documents as the Documentation
Agent, the Administrative Agent or counsel to the Documentation Agent may
reasonably request.
6.2 Cencom. Loans. The obligation of the Banks to make any Loans
the proceeds of which shall be used to consummate the transactions contemplated
by the Cencom Purchase Agreements is subject to the receipt by the
Documentation Agent, the Administrative Agent or the Banks, as appropriate, (on
the date of the making of such Loans (the "Cencom Loan Date") of the following
documents, each of which shall be satisfactory to the Documentation Agent and
each Bank in form and substance:
(a) General Partner Matters. (1) A certificate, dated the Cencom
Loan Date, from a Senior Officer of CC II General Partner certifying that the
certificate of incorporation, by-laws and directors' resolutions delivered
pursuant to clause (1) of Section 6.1(a) have not been amended or modified and
remain in full force and effect. (2) A certificate, dated the Closing Date from
a Senior Officer of CC III General Partner certifying that the certificate of
incorporation, by-laws and directors' resolutions delivered pursuant to clause
(2) of Section 6.1(a) have not been amended or modified and remain in full
force and effect. The Administrative Agent and each Bank may conclusively rely
on the certificates delivered pursuant to this Section 6.2(a) until they
receive notice to the contrary in writing from CC II General Partner or CC III
General Partner, as applicable.
(b) Borrower Matters. (1) A certificate, dated the Cencom Loan
Date from a Senior Officer of CC II, L.P. certifying that the Certificate of
Limited Partnership, the Partnership Agreement and the action of CC II, L.P.
delivered pursuant to clause (1) of Section 6.1(b) have not been amended or
modified and remain in full force and effect. (2) A certificate, dated the
Cencom Loan Date from a Senior
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Officer of CC III, L.P. certifying that the Certificate of Limited Partnership,
the Partnership Agreement and the action of CC III, L.P. delivered pursuant to
clause (2) of Section 6.1(b) have not been amended or modified and remain in
full force and effect. (3) A certificate, dated the Cencom Loan Date from a
Senior Officer of Peachtree certifying that the certificate of incorporation,
by-laws and directors' resolutions delivered pursuant to clause (3) of Section
6.1(b) have not been amended or modified and remain in full force and effect.
The Administrative Agent and each Bank may conclusively rely on such
certificate until they receive notice in writing from Peachtree to the
contrary.
(c) No Default Certificates. A certificate of a Senior Officer of
each Borrower to the effect set forth in clauses (a), (b) and (c) of the first
sentence of Section 6.3 hereof.
(d) Opinions of Counsel to the Borrowers. An opinion of (1) Paul,
Hastings, Janofsky & Walker, and (2) Cole, Raywid & Braverman, L.L.P., each in
form and substance reasonably satisfactory to counsel to the Documentation
Agent. The Borrowers hereby expressly instruct each such counsel to prepare
its opinion and deliver it to the Documentation Agent, each Arranging Agent,
each Managing Agent, the Administrative Agent and the Banks for their
respective benefits and each such opinion shall contain a statement to that
effect.
(e) Pro Forma Balance Sheet and Projections. (1) A Pro Forma
Balance Sheet and (2) a certificate of a Senior Officer of each Borrower
certifying compliance with all covenants set forth herein after giving effect
to the Loans to be made in connection with the consummation of the transactions
contemplated by the Cencom Purchase Agreements and the application of the
proceeds thereof and attaching thereto pro forma projections demonstrating such
compliance both before and after giving effect to said Loans and applications
of proceeds.
(f) Cencom Purchase Agreements. Evidence that the transactions
contemplated by the Cencom Purchase Agreements and the Partnership Documents
have been duly consummated in a manner satisfactory to each of the Banks
together with a true, correct and complete copy of each of the Cencom Purchase
Agreements (together with Exhibits and Schedules thereto) and each agreement,
certificate, opinion or other writing delivered by any party to the Cencom
Purchase Agreements or the Partnership Documents in connection with the
conveyance to CC II, L.P. of the assets to be conveyed to the Borrowers
pursuant to the Cencom Purchase Agreements (and the Borrowers shall use
reasonable efforts to cause each such opinion to be accompanied by a letter
from the Person delivering such opinion authorizing reliance thereon by the
Banks).
(g) UCC Financing Statements. Additional UCC-1 financing
statements naming the applicable Borrower as debtor and the Administrative
Agent as the secured party in proper form for filing in such offices, if any,
as the Documentation Agent may reasonably request.
(h) Insurance. Evidence of insurance on the Collateral conveyed
to CC II, L.P. pursuant to the Cencom Purchase Agreements and an endorsement on
each Borrower's liability insurance policies, naming the Administrative Agent
as loss payee and an additional insured as required by the Security Agreement.
(i) Approvals. Copies of each approval or consent of, or filings
or registrations with, any state or federal commission or other federal, state
or local regulatory authority, which is required in connection with the
execution, delivery and performance by the general and limited partners of CC
II, L.P. and CC III, L.P. of the Cencom Purchase Agreements and
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the transactions contemplated thereby and copies of all of the consents,
approvals and waivers with respect thereto referred to in Exhibit 7.10.
(j) Good Standing. Certificates issued as of a recent date by the
Secretaries of the States of (i) Delaware, Georgia, North Carolina, South
Carolina, Tennessee and Kentucky with respect to CC II, L.P.; (ii) Delaware and
Alabama with respect to CC III, L.P.; (iii) Nevada and Georgia with respect to
Peachtree; and (iv) North Carolina, South Carolina, Delaware, Georgia and
Missouri with respect to the CC II General Partner and the CC III General
Partner, all such certificates showing such Borrower or General Partner, as the
case may be, to be duly qualified to do business and in good standing in such
States.
(k) Partnership Equity. Evidence that CC II, L.P. has received
aggregate partnership cash equity contributions of at least $25,000,000 over
and above the equity contributed to CC II, L.P. through March 28, 1996.
(l) Other Documents. Such other documents as the Documentation
Agent, the Administrative Agent or counsel to the Documentation Agent may
reasonably request.
6.3 Loans. The obligation of the Banks to make Loans to the
Borrowers upon the occasion of each borrowing hereunder (including the
borrowings made on the Closing Date and those referred to in Section 6.2
hereof) is subject to the further conditions precedent that, the Administrative
Agent shall have received the certificate called for in Section 2.6 hereof and
that, as of the date of such Loans and after giving effect thereto: (a) no
Default shall have occurred and be continuing; (b) the representations and
warranties made by the Borrowers in Article 7 hereof and in the Security
Documents shall be true in all material respects on and as of the date of the
making of such Loans with the same force and effect as if made on and as of
such date (except to the extent such representations expressly relate to the
date hereof, any specified earlier date or the Closing Date; provided, that,
for purposes of this Section 6.3, all references to the Closing Date in Article
7 hereof shall, from and after the Cencom Loan Date, be deemed references to
the Cencom Loan Date); and (c) after giving effect to such borrowing, the
covenants set forth in Sections 8.12 and 8.13 shall not have been breached.
Article 7. Representations and Warranties.
The Borrowers represent and warrant to the Agents and the Banks (which
representations and warranties, other than as provided in Section 6.2 hereof,
shall be restated as of the date of each Loan hereunder except to the extent
such representations and warranties expressly relate to the date hereof, any
specified earlier date or the Closing Date) that:
7.1 Existence. Each of CC II, L.P. and CC III, L.P. is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of CC II General Partner and CC III
General Partner is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Peachtree is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada. Each of the Borrowers, CC II General Partner and CC III
General Partner: (a) has all requisite partnership or corporate power, as the
case may be, necessary to own its assets and carry on its business as now being
or as proposed to be conducted; and (b) is qualified to do business and in good
standing in all jurisdictions in which the nature of the business
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conducted by it makes such qualification necessary and where failure to do so
would have a Material Adverse Effect. Except where the absence of same would
not have a Material Adverse Effect, each of the Borrowers, CC II General
Partner and CC III General Partner has or will have on and as of the Closing
Date all material governmental licenses, authorizations, consents and
approvals, necessary to own its assets and carry on its business as now being
or as proposed to be conducted.
7.2 Capital Structure.
(a) Except as set forth on Exhibit 7.2 hereto, as at the date
hereof and the Closing Date, none of the Borrowers have any Subsidiaries. As
of the date hereof and the Closing Date, Exhibit 7.2 accurately and completely
lists the names and addresses of each general and limited partner of CC II,
L.P. and CC III, L.P. All equity contributions to CC II, L.P. and CC III, L.P.
required to be made by any general or limited partner to CC II, L.P. or CC III,
L.P. in accordance with the terms of the CC II Partnership Agreement or the CC
III Partnership Agreement, as applicable, have been made and each partnership
interest in the Borrowers is, and as of the Closing Date will be, owned by the
Persons referred to on Exhibit 7.2, free and clear of any Lien except for Liens
provided for herein. Except as set forth on Exhibit 7.2, there are not
outstanding any warrants, options, contracts or commitments of any kind
entitling any Person to purchase or otherwise acquire any general or limited
partnership interest in the Borrowers, nor are there outstanding any securities
which are convertible into or exchangeable for any general or limited
partnership interest in the Borrowers.
(b) The authorized capital stock of Peachtree consists of 40,000
shares of Class A Common stock, $1.00 par value and 20,000 shares of Class B
Common Stock, $1.00 par value (the "Peachtree Stock"), of which 6,943 shares of
Class A Common Stock and 3,207 shares of Class B Common Stock are issued and
outstanding. All of the issued and outstanding shares of Peachtree Stock are
validly issued, fully paid and nonassessable and not subject to preemptive
rights. There are not any outstanding subscriptions, options, warrants,
rights, convertible or exchangeable securities or other agreements or
commitments of any character relating to issued or unissued capital stock or
other securities of Peachtree obligating Peachtree to issue, deliver or sell,
or cause to be issued, delivered or sold, any securities or obligating
Peachtree to grant, extend or enter into any subscription, option, warrant,
right, convertible securities or similar agreement or commitment with respect
thereto. Except for the Peachtree Pledge Agreement there are no voting trusts
or other agreements or understandings to which Peachtree or any other Loan
Party is a party with respect to the voting of the capital stock of Peachtree.
CC III, L.P. is the record and beneficial owner of all of the issued and
outstanding Peachtree Stock.
7.3 Authority. The making and performance by the Borrowers of this
Agreement, the Loan Documents, the Notes and (as of the Closing Date) the
borrowing hereunder, and the granting to the Administrative Agent of the
security interests in the Collateral under the Security Documents, have been
duly authorized by all necessary corporate or partnership action and do not and
will not violate any provision of law, rules, regulations or orders; or result
in the breach of, or constitute a default or require any consent under, any
material indenture or other agreement or instrument by which any of the
Borrowers or any of their
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respective properties may be bound or affected; or result in, or require, the
creation or imposition of any Lien upon or with respect to any properties of
any of the Borrowers (other than Permitted Liens and the Liens on the
Collateral created by the Security Documents).
7.4 Financial Condition and Outstanding Agreements.
(a) The Pro Forma Balance Sheet will be based on estimates
believed by the Borrowers to be reasonable and will be presented in conformity
with GAAP (except for the absence of footnotes). On the date of the Pro Forma
Balance Sheet, the Borrowers will have no contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments which are substantial in
amount in relation to the pro forma financial condition of the Borrowers as at
said date, except as referred to or reflected or provided for in the Pro Forma
Balance Sheet.
(b) The Projections have been prepared on the basis of the
assumptions accompanying them and reflect the Borrowers' good faith estimates,
as of the date hereof, after reasonable analysis of the matters set forth
therein based upon such assumptions. Except as set forth on Exhibit 7.4(b),
the Borrowers are not aware, as of the date hereof and as of the Closing Date,
of any facts which would indicate that such assumptions are materially
incorrect.
(c) Exhibit 7.4(c) hereto sets forth all agreements to which any
of the Borrowers or any of their respective Subsidiaries on the date hereof is,
or on the Closing Date will be, a party or by which it on the date hereof is,
or on the Closing Date will be, bound (other than the Partnership Documents or
the Franchises) which relate to any Investment by any of the Borrowers or any
such Subsidiary in another Person or by another person in any Borrower or any
such Subsidiary and all other material agreements to which any of the Borrowers
or any of their respective Subsidiaries is (or on the Closing Date will be) a
party or by which any of them is (or on the Closing Date will be) bound which
are not terminable by the applicable Borrower or the applicable Subsidiary on
not more than 30 days' notice which (i) directly or indirectly commit (or on
the Closing Date will commit) such Borrower or such Subsidiary to make any
Investment or Capital Expenditure or to issue any Guarantees or (ii) which are
(or on the Closing Date will be) with any Affiliate. True, correct and
complete copies of all agreements listed on Exhibit 7.4(c) have heretofore been
delivered to the Agents and the Banks.
(d) The principal business which the Borrowers are currently
conducting is the ownership and operation of cable television systems, which
business is and will continue to be under common management and is and will
continue to be conducted as a common enterprise.
7.5 Litigation. Except as otherwise described in Exhibit 7.5 hereto,
there are no lawsuits or other proceedings (including, without limitation,
lawsuits or proceedings of the sort described in Section 8.1(9) hereof) pending
or, to the knowledge of the Borrowers threatened against or affecting any of
the Borrowers or any of their respective Subsidiaries or their respective
properties or assets, before any court or arbitrator or by or before any
governmental commission, bureau or other regulatory authority which, if
adversely
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determined, would, individually or in the aggregate, have a Material Adverse
Effect (except for proceedings generally affecting the cable television
industry). None of the Borrowers or any of their respective Subsidiaries, nor
any general partner nor to the best knowledge of the Borrowers any limited
partner of CC II, L.P. or CC III, L.P. is in default under or in violation of
or with respect to any law, rule, regulation, order, writ, injunction or decree
of any court, arbitrator, governmental commission, bureau or other regulatory
authority (including, without limitation, Environmental Laws) which default or
violation singly or in the aggregate could have a Material Adverse Effect.
7.6 Assets and Properties. Except as set forth on Exhibit 7.6, each
of the Borrowers has good and indefeasible title to its properties and assets
free and clear of all Liens, except those permitted by Section 8.9 hereof.
None of the Borrowers owns any real property the loss of which could have a
Material Adverse Effect.
7.7 Margin Stock. None of the Borrowers is engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose of buying or carrying margin stock (within the meaning of Regulations
G, T, U and X of the Board of Governors of the Federal Reserve System) and no
part of the proceeds of the Loans hereunder will be used to buy or carry any
margin stock or to extend credit to others for the purpose of buying or
carrying any margin stock.
7.8 Taxes. Each of the Borrowers has filed all returns with respect
to taxes which are material in amount which are required to be filed under any
law applicable thereto on or before the date such filing is required (taking
into account any extensions with respect thereto), and has paid, or made
provisions for the payment of, all taxes shown to be due pursuant to said
returns or pursuant to any assessment received by such Borrower, except such
taxes, if any, as are being contested in good faith and by proper proceedings
and as to which adequate reserves have been provided or such taxes which are
not material in amount and the non-payment of which could not have a Material
Adverse Effect.
7.9 No Default or Burdensome Obligations.
(a) Except as otherwise described in Exhibit 7.9 hereto, none of
the Borrowers is in default in the payment or performance or observance of any
contract, agreement or other instrument to which it is a party or by which it
or its properties or assets may be bound, which individually or together with
all other such defaults could have a Material Adverse Effect.
(b) None of the Borrowers nor any of their respective Subsidiaries
is a party to or bound by any Franchise, agreement, deed, lease or other
instrument, or subject to any provision of its certificate of incorporation,
by-laws or Partnership Documents or other corporate or partnership restriction
which, in the opinion of such Borrower's management, is so unusual or
burdensome as in the foreseeable future materially and adversely to affect or
impair the business or assets or financial condition of such Borrower on an
individual basis or the Borrowers and their respective Subsidiaries on a
consolidated basis. The Borrowers do not currently anticipate that future
expenditures needed to meet the provisions of any federal or state statutes,
orders, rules or regulations will be so burdensome as to affect or impair in a
materially adverse manner the business or assets or financial conditions of any
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<PAGE> 47
Borrower on an individual basis or the Borrowers and their respective
Subsidiaries on a consolidated basis.
7.10 Approval of Regulatory Authorities. Except as set forth on
Exhibit 7.10 hereto and except for any approvals or consents the absence of
which would not give rise to a Material Adverse Effect, no approval or consent
of, or filing or registration with, any state or federal commission (including,
without limitation, the Federal Communications Commission or the grantors of
the Franchises) or other federal, state or local regulatory authority is
required in connection with the execution, delivery and performance by the
Borrowers of this Agreement, the Loan Documents or the Notes, except the filing
of UCC financing statements, if any, referred to in Section 6.1(f) or 6.2(g)
hereof and any approval, consent, filing or registration referred to in Section
6.1(h) or 6.2(i) hereof, true, correct and complete copies of which have
previously been provided to the Documentation Agent by the Borrowers or, to the
extent the same relate to the Systems to be conveyed to CC II, L.P. under the
Cencom Purchase Agreements shall be provided to the Documentation Agent on or
before the consummation of the transactions contemplated by the Cencom Purchase
Agreements.
7.11 Binding Agreements. This Agreement constitutes, and the Notes and
the Loan Documents (to which it is a party) when executed and delivered by the
Borrowers will constitute, the legal, valid and binding obligations of the
Borrowers enforceable in accordance with their respective terms, except insofar
as the enforceability hereof and thereof may be limited by applicable
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
7.12 Partnership Documents. The Borrowers have heretofore delivered to
each Bank a true and complete copy of each Partnership Document, as modified
and supplemented and in effect on the date hereof, and each such Partnership
Document is in full force and effect and no default by any party thereto of any
of the provisions thereof is in existence on the date hereof and no such
default will be in existence on the Closing Date.
7.13 Franchise and Licenses.
(a) Complete copies of the Franchises have heretofore been
provided to the Documentation Agent and the Administrative Agent (and to each
of the Banks which has requested the same) and, except as set forth on Exhibit
7.13 hereto, each Franchise is in full force and effect. Except as set forth
on Exhibit 7.13, one of the Borrowers is (or will be on the Closing Date) the
franchisee under each Franchise and holds (or will hold) the rights thereunder
free and clear of all Liens other than Permitted Liens. No default has
occurred which is continuing under or in respect of any of the provisions of
any of the Franchises which would be likely to have a Material Adverse Effect.
No approval, application, filing, registration, consent or other action of any
local, state or federal authority is required to enable the applicable Borrower
to operate under the Franchises with respect to which it is the franchisee or
with respect to which it will be the franchisee from and after the Closing Date
except for those referred to in Section 7.10 hereof. Except as set forth on
Exhibit 7.13, as of the date hereof and as of the Closing Date the Borrowers
have received no notice from the granting body or any other governmental
authority with respect to any breach of any covenant under, or any default with
respect to, any of the Franchises.
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<PAGE> 48
(b) Except as set forth on Exhibit 7.13, as of the date hereof, as
of the Closing Date and upon the consummation of the transactions contemplated
by the Cencom Purchase Agreements, none of the Franchises nor any other
licenses held by any of the Borrowers require that any present partner, officer
or employee of any of the Borrowers remain a partner, officer or employee of
such Borrower, or that any transfer of control of any Borrower or the Franchise
must be approved by any public or governmental body other than the Federal
Communications Commission and the grantors of the Franchises.
(c) Except as described in Exhibit 7.13, the Borrowers have no
reason to believe (although there can be no legal assurance thereof) that the
Franchises and other licenses, permits and authorizations currently held by the
Borrowers will not be renewed in the ordinary course. The Borrowers have filed
all material reports, applications, documents, instruments and information
required to be filed by it pursuant to applicable rules and regulations or
requests of every regulatory body having jurisdiction over any of the
Franchises or other licenses, permits and authorizations currently held by any
of the Borrowers or the activities of the Borrowers with respect thereto.
(d) Except where the failure to do so would not create a Material
Adverse Effect, (1) there have been duly and timely filed all cable television
registration statements and other filings which are required to be filed with
respect to the Systems under the Communications Act of 1934, as amended, and
the Borrowers and the Systems are in all respects in compliance with such Act,
including, without limitation, the rules and regulations of the Federal
Communications Commission relating to the carriage of television signals; (2)
all necessary clearances from the Federal Communications Commission have been
obtained for all cable channels of the Systems in aeronautical frequency bands;
and (3) there have been recorded or deposited with and paid to the United
States Copyright Office, the Register of Copyrights and the Copyright Royalty
Tribunal all notices, statements of account, royalty fees and other documents
and instruments required with respect to each of the Systems under the
Copyright Act of 1976, as amended. None of the Borrowers is liable to any
Person for copyright infringement under the Copyright Act as a result of its
business operations except where such liability would not have a Material
Adverse Effect.
7.14 ERISA. None of the Borrowers nor any ERISA affiliate maintains or
contributes to, or has maintained or contributed to, any Plan or Multiemployer
Plan. None of the Borrowers nor any of their respective Subsidiaries has made
any promise of retirement benefits to employees, except as set forth in written
instruments, copies of which have heretofore been made available to the
Documentation Agent, the Administrative Agent and the Banks.
7.15 Name Changes; Purchases; Acquisitions. Except as previously
disclosed, set forth on Exhibit 7.15 hereto, none of CC II, L.P., CC III, L.P.
or, to the best of the Borrowers' knowledge, Peachtree has within the six year
period immediately preceding the date of this Agreement changed its name or has
been the surviving entity of a merger, purchase or consolidation, or acquired
all or substantially all of the assets of any Person.
7.16 Environmental Laws. Except as consistent with applicable
Environmental Laws, no Hazardous Substances are present on or below the surface
of the real property or to the
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Borrowers' knowledge leased premises included in the Collateral which could
have a Material Adverse Effect. None of the soil, ground water, or surface
water of such real property, or to the best of the Borrowers' knowledge such
leased premises, is contaminated in any material respect by any Hazardous
Substance which could have a Material Adverse Effect. To the best of the
Borrowers' knowledge, there are no incinerators, septic tanks, or cesspools
located on such real property or on such leased premises, all sewage is
discharged into a public sanitary sewer system, and no Hazardous Substances are
emitted, discharged or released in any material respect from such real property
or leased premises, directly or indirectly, into the atmosphere or any body of
water. To the best of the Borrowers' knowledge, none of the Borrowers nor any
present or former owner or operator of such real property or such leased
premises, has been identified as a potentially responsible party for clean-up
liability with respect to the emission, discharge, or release of any Hazardous
Substance. As of the date hereof, no permits, licenses, or other
authorizations issued pursuant to the Environmental Laws are required for the
applicable Borrower's ownership of the Collateral, present use or occupancy of
the real property or leased premises included in the Collateral, or the present
operation of the Systems the absence of which would have a Material Adverse
Effect.
7.17 Full Disclosure. None of the Financial Statements, nor any
certificate, opinion, or any other statement made or furnished to the
Documentation Agent, the Administrative Agent or the Banks by or on behalf of
any of the Borrowers in connection with this Agreement or the transactions
contemplated hereby, contains any untrue statement of a material fact, or omits
to state a material fact necessary in order to make the statements contained
therein or herein not misleading, as of the date such statement was made.
Except for matters affecting the cable television industry generally, there is
no fact now known to the Borrowers which could have a Material Adverse Effect,
which fact has not been set forth herein, in the Financial Statements, or any
certificate, opinion, or other written statement so made or furnished to the
Documentation Agent, the Administrative Agent or the Banks.
7.18 Foreign Trade Regulations and Government Regulation.
(a) None of the Borrowers nor any of their respective Subsidiaries
is (1) a Person included within the definition of "designated foreign country"
or "national" of a "designated foreign country" in Executive Order No. 9193, as
amended, in the Foreign Assets Control Regulations (31 C.F.R., Chapter V, Part
500, as amended), in the Cuban Assets Control Regulations (31 C.F.R., Chapter
V, Part 515, as amended) or within the meanings of any of such orders or
regulations, or of any regulations, interpretations or rulings issued
thereunder, or in violation of such orders or regulations or of any
regulations, interpretations or rulings issued thereunder; or (2) an entity
listed in Sections 520.101, 545.306 or 550.304 of the Foreign Funds Control
Regulations (31 C.F.R., Chapter V, Parts 520, 545 and 555, each as amended).
(b) None of the Borrowers nor any of their respective Subsidiaries
nor any Person controlling any of the Borrowers or any of their respective
Subsidiaries or under common control with any of the Borrowers or any of their
respective Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935, the Investment Company
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<PAGE> 50
Act of 1940, the Interstate Commerce Act or any statute or regulation which
regulates the incurring by any Borrower of Indebtedness for borrowed money.
7.19 Purchase Agreements. The Purchase Agreements have been duly
executed and delivered by all of the parties thereto and are each in full force
and effect without waiver or modification of any provision thereof. Since the
execution of the Purchase Agreements, nothing has come to the attention of the
Borrowers which would indicate that any of the representations and warranties
of any of the sellers contained therein or in any instrument, document or
certificate delivered pursuant thereto or in connection therewith, as such
representations and warranties relate to the Systems to be conveyed to CC II,
L.P. thereunder, is incorrect in any material respect.
Article 8. Covenants.
So long as the Borrowers have any obligations hereunder for the
repayment of principal of and interest on the Loans and the payment of fees
hereunder:
8.1 Financial Statements and Other Information. The Borrowers shall
deliver to the Administrative Agent (which will promptly deliver a copy of the
same to each Bank):
(1) Commencing with the fiscal quarter ending March 31, 1997, as
soon as available and in any event within 45 days after the end of
each fiscal quarter of each fiscal year of the Borrowers (exclusive of
the fiscal quarter ending December 31): (a) consolidated statements
of income of the Borrowers and their respective Subsidiaries for the
period from the beginning of such fiscal year, and (b) the related
consolidated balance sheets of the Borrowers and their respective
Subsidiaries as at the end of such fiscal quarter, all in reasonable
detail, and (c) a certificate signed by a Senior Officer on behalf of
the Borrowers stating that said financial statements are correct and
complete in all material respects and, subject to year-end audit
adjustments, fairly present the financial condition and results of
operation of the Borrowers as at the end of the fiscal period covered
thereby.
(2) As soon as available and in any event within 120 days after
the end of each fiscal year of the Borrowers: (a) consolidated
statements of income and reconciliation of capital accounts and
sources and application of funds of the Borrowers and their respective
Subsidiaries, (b) the statement of income of the Borrowers for each
grouping of the Systems then utilized by the Borrowers and (c) the
related consolidated balance sheets of the Borrowers and their
respective Subsidiaries as at the end of such fiscal year, all in
reasonable detail and accompanied by (A) an opinion (without material
qualification) of independent public accountants of recognized
standing selected by the Borrowers and reasonably acceptable to the
Majority Banks as to said financial statements and a certificate of
said accountants stating that, in making the examination necessary for
said opinion, they obtained no knowledge, except as specifically
stated, of any failure by the Borrowers to perform or observe any of
their agreements contained in Section 8.11, 8.12, 8.13, 8.18 or 8.24
of this Agreement, and (B) a certificate signed by a Senior Officer on
behalf of the Borrowers stating that said financial statements are
correct and complete in all material respects
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and fairly present the financial condition and results of operations
of the Borrowers as at the end of and for such fiscal year.
(3) Promptly upon receipt thereof, copies of all other material
reports, including management letters, submitted to the Borrowers by
their independent certified public accountants in connection with any
annual, interim or special audit of the books of the Borrowers made by
such accountants.
(4) If the Debt Ratio for the then most recently reported full
fiscal quarter exceeded 3.5:1, an operating report in the form of
Exhibit 8.1 hereto, as soon as available and in any event within 45
days after the end of each month.
(5) As soon as possible, and in any event by April 30 of each year
a copy of each Borrower's annual budget for such fiscal year.
(6) Promptly after their becoming available, copies of financial
statements and proxy statements which CC II, L.P. or CC III, L.P.
shall have sent to their respective limited partners generally.
(7) Together with each financial statement delivered pursuant to
clause (1) or (2) above, a certificate, setting forth (i) a
calculation of the Debt Ratio as at the end of the fiscal period
covered by said statements, (ii) computations or other information
necessary to demonstrate compliance with Sections 8.8, 8.10, 8.11,
8.12, 8.13, 8.19 and 8.20 hereof and (iii) a statement to the effect
that the Borrowers are in compliance with Section 8.17 hereof, in each
case as at the end of, and for, the respective fiscal quarter.
(8) From time to time, with reasonable promptness, such further
information regarding the business, affairs and financial condition of
the Borrowers (including, without limitation, any Plan or
Multiemployer Plan and any reports or other information required to be
filed under ERISA) as the Administrative Agent or any Bank may
reasonably request.
(9) As soon as possible, and in any event within 15 days after any
of the Borrowers know that any of the events or conditions set forth
below have occurred or exist, a statement signed by a Senior Officer
setting forth details respecting such event or condition and the
action which the applicable Borrower (CC II General Partner, CC III
General Partner or the applicable Affiliate) proposes to take with
respect thereto (and a copy of any notices or other communications
received or given by the applicable Borrower, CC II General Partner,
CC III General Partner or the applicable Affiliate, with respect
thereto):
(A) any judgment, action, proceeding or investigation pending
before any court or governmental authority, bureau or agency,
including, without limitation, any environmental regulatory body,
with respect to or threatened against or affecting any Borrower, CC
II General Partner, CC III General Partner or any of their
respective Affiliates or relating to the assets or liabilities of
any of them (including, without limitation, in respect of any
"facility" owned, leased or
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operated by any of them under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or
under any state, local or municipal statute, ordinance or
regulation in respect thereof, in connection with any release of
any toxic or hazardous waste or chemical substance, pollutant or
contaminant into the environment, or with the generation, storage
or disposal of any toxic or hazardous wastes or other chemical
substances), which could have a Material Adverse Effect or
materially impair the value of the Collateral;
(B) any liability or threatened liability of any Borrower, CC
II General Partner, CC III General Partner or their respective
Affiliates (a) under any applicable law for any release of a
hazardous substance caused by the seeping, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing of hazardous wastes or
other chemical substances, pollutants or contaminants into the
environment, or (b) for the costs of any clean-up or other remedial
action including, without limitation, costs arising out of security
fencing, alternative water supplies, temporary evacuation and
housing and other emergency assistance undertaken by any
environmental regulatory body having jurisdiction over any
Borrower, CC II General Partner, CC III General Partner or their
respective Affiliates to prevent or minimize any actual or
threatened release by any Borrower, CC II General Partner, CC III
General Partner or their respective Affiliates of any hazardous
wastes or other chemical substances, pollutants and contaminants
into the environment which would endanger the public health or the
environment which could in either case have a Material Adverse
Effect; and
(C) any change or proposed change in any law, rule,
regulation or order (including without limitation, Environmental
Laws) of any governmental body or regulatory authority, other than
proposed changes of general applicability, which could have a
Material Adverse Effect.
(10) Promptly after any Borrower has knowledge of the occurrence
of any Default or any Material Adverse Effect (other than those
resulting solely from events or conditions affecting the cable
television industry generally), a statement of a Senior Officer
describing such Default or Material Adverse Effect, as the case may
be, and the action which the applicable Borrower proposes to take with
respect thereto.
8.2 Taxes and Claims. Each Borrower will pay and discharge all of
its obligations and liabilities, including, without limitation, all material
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits, or upon any property belonging to it, prior to the date
on which penalties attach thereto, and all lawful claims which, if unpaid,
might become a Lien upon the property of such Borrower, provided that such
Borrower shall not be required to pay any such tax, assessment, charge, levy or
claim the payment of which is being contested in good faith and by proper
proceedings if adequate reserves are maintained with respect thereto or such
taxes are not material in amount and the non-payment thereof could not have a
Material Adverse Effect.
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8.3 Insurance. Each Borrower will maintain insurance with
responsible companies in such amounts and against such risks as is usually
carried by owners of similar businesses and properties in the same general
areas in which such Borrower operates. The Borrowers will furnish to the
Banks, upon the written request of any Bank from time to time, such information
as may be reasonably requested as to the insurance maintained by the Borrowers.
8.4 Maintenance of Existence; Conduct of Business. Each Borrower
will preserve and maintain its legal existence and all of its rights,
privileges and franchises (other than the Franchises, but without limiting the
effect of Section 9.M hereof) material to its operation in the normal conduct
of its business.
8.5 Maintenance of and Access to Properties. Each Borrower will
maintain all of its properties material to its business, and will permit
representatives of the Arranging Agents, the Administrative Agent or any Bank
to inspect such properties, and to examine and make extracts from the books and
records of such Borrower and to discuss the business, operations and financial
condition of such Borrower with employees, accountants and other
representatives of such Borrower during reasonable hours and upon reasonable
notice.
8.6 Compliance with Applicable Laws.
(a) Each Borrower will comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental body or
regulatory authority, a breach of which could have a Material Adverse Effect,
except where contested in good faith and by proper proceedings if adequate
reserves are maintained with respect to any liability (contingent or otherwise)
which might arise in connection therewith.
(b) Each Borrower will operate all property owned or leased by it
such that no material obligation, including a clean-up obligation, shall arise
under any Environmental Law and Regulation, which obligation would constitute a
Lien (other than a Permitted Lien) or charge (prior to that in favor of the
Administrative Agent under the Security Documents) on any property of the
Borrowers or any other Loan Party.
8.7 Litigation. The Borrowers will promptly give to each Bank
notice in writing of all litigation and of all proceedings before any courts,
arbitrators or governmental or regulatory agencies which if adversely
determined could have a Material Adverse Effect (other than proceedings
affecting the cable television industry generally). Following the initial
notice of each such litigation or proceeding, supplementary notices of all
material developments in respect thereof shall be given from time to time in
like manner.
8.8 Indebtedness. Except as set forth on Exhibit 8.8 hereto, the
Borrowers and their respective Subsidiaries will not create, incur or suffer to
exist on a consolidated basis any Indebtedness except: (a) Indebtedness under
this Agreement; (b) Capital Lease Obligations (provided that the aggregate
amount of Capital Lease Obligations shall not at any one time exceed $3,000,000
in the aggregate); (c) obligations under Interest Rate Protection Arrangements
entered into in accordance with Section 8.14 hereof to the extent such
Indebtedness is owed to a Bank; (d) Indebtedness with respect to performance
bonds, letters of credit and similar instruments securing the contractual
obligations of the Borrowers which Indebtedness shall not at any time exceed
$4,000,000 in the aggregate; and (e) Indebtedness
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secured by purchase money security interests which shall not at any time exceed
$5,000,000 in the aggregate.
8.9 Liens. None of the Borrowers will create or suffer to exist any
Lien upon any of its assets, now owned or hereafter acquired, securing any
Indebtedness or other obligation except: (i) Liens in favor of the
Administrative Agent under the Security Documents; (ii) Permitted Liens; and
(iii) Liens to which the Majority Banks have consented in writing.
8.10 Investments. No Borrower will make or permit to remain
outstanding any Investment in any Person except: (a) Investments in short-term
obligations issued by the U.S. Government, certificates of deposit and other
time deposits of, and other bank accounts with, banks having capital and
surplus of at least $100,000,000, and commercial paper rated A1 by Standard &
Poor's Ratings Group or P1 by Moody's Investors Service issued by a domestic
issuer; (b) Investments consisting of repurchase obligations in respect of U.S.
Government securities with banks having capital and surplus of at least
$100,000,000; (c) Investments in the form of loans to employees of the
Borrowers not to exceed in the aggregate $350,000 at any one time; (d)
Investments listed on Exhibit 8.10 hereto; and (e) acquisitions of cable
television systems pursuant to Section 8.16(a) hereof.
8.11 Fixed Charge Coverage Ratio. Commencing on April 1, 1999, the
Borrowers will not permit the Fixed Charge Coverage Ratio, calculated in
accordance with the Borrowers' financial statements delivered pursuant to
Section 8.1 hereof, as at the conclusion of any full calendar quarter to be
less than 1.00:1.
8.12 Debt Ratio. The Borrowers will not permit the Debt Ratio,
calculated in accordance with the Borrowers' financial statements delivered
pursuant to Section 8.1 hereof, as at the conclusion of any full calendar
quarter during the time period set forth in Column (a) below to exceed the
ratio set forth in Column (b) below:
<TABLE>
<CAPTION>
(a) (b)
Maximum
Period Debt Ratio
------ ----------
<S> <C>
Closing Date through June 30, 1998 5.25:1
July 1, 1998, through March 31, 1999 5.00:1
April 1, 1999, through December 31, 1999 4.50:1
January 1, 2000, through December 31, 2000 4.00:1
January 1, 2001, through December 31, 2001 3.50:1
January 1, 2002, and thereafter 3.00:1
</TABLE>
8.13 Pro Forma Debt Service. The Borrowers will cause Pro Forma Debt
Service Coverage, calculated in accordance with the Borrowers' financial
statements delivered pursuant to Section 8.1 hereof, (i) as at the conclusion of
any full calendar quarter during the
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period commencing on the Closing Date and concluding on December 31, 1998 to be
equal to or greater than 125% and (ii) as at the conclusion of any full
calendar quarter during the period commencing on January 1, 1999 and thereafter
to be equal to or greater than 110%.
8.14 Interest Rate Protection Arrangements.
(a) The Borrowers may enter into Interest Protection Rate
Arrangements at any time or from time to time. All Interest Swap Agreements to
which any Borrower is a party shall contain so-called "full two-way payment
clauses" and shall not provide for any forfeiture or premium to be payable by
the Borrowers in the event of termination thereof. The aggregate principal
amount of Indebtedness of the Borrowers to which Interest Rate Insurance
Agreements then in effect relate shall not exceed the principal amount of the
Loans then outstanding hereunder. The Borrowers shall promptly advise the
Administrative Agent in writing when any of them enters into any Interest Swap
Agreements or Interest Rate Insurance Agreements.
(b) The Borrowers shall maintain, at all times, Interest Rate
Protection Arrangements which (together with all Interest Rate Protection
Arrangements) shall have the effect of fixing the interest rate payable by the
Borrowers (for a weighted average term of not less than 18 months at all dates
of determination) at a level not to exceed by more than 2% the rate per annum
determined by the Administrative Agent (such determination to be conclusive
absent manifest error) to be, on the effective date of such Interest Rate
Protection Arrangement, the yield (expressed as a rate) in the secondary market
on United States Treasury securities having substantially the same term to
maturity as such Interest Rate Protection Arrangement (such determination to be
based upon quotes obtained by the Administrative Agent from established dealers
in such market), with respect to a notional principal amount of Indebtedness of
the Borrowers of the sort described in clauses (a), (b) and (c) of the
definition of Indebtedness in Section 1.1 hereof equal to:
(1) on the Closing Date, at least 50% of the aggregate
principal amount of all Loans under the Prior Credit Agreement
outstanding immediately prior to the making of the Tranche B and
Tranche C Loans hereunder.
(2) from and after the 90th day after the Closing Date, at
least 50% of the Borrowers' then outstanding Indebtedness to the Banks
hereunder.
8.15 Type of Business. The Borrowers will not without the prior
written consent of the Banks engage in any business other than the ownership
and operation of cable television systems and related communications
businesses.
8.16 Acquisitions and Dispositions.
(a) The Borrowers shall not (1) merge or consolidate with any
Person (whether or not a Borrower is the surviving entity), except that the
Borrowers may merge with each other and with Subsidiaries of the Borrowers if a
Borrower is the surviving entity or (2) acquire all or substantially all of the
assets of any Person other than pursuant to the Purchase Agreements or
Permitted Asset Swaps; provided, however, that (A) the Borrowers may acquire so
long as no Default shall have occurred and be continuing additional cable
television systems so
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<PAGE> 56
long as the aggregate purchase price therefor does not exceed the sum of (i)
$15,000,000; plus (ii) an amount equal to the aggregate amounts which CC II,
L.P. and CC III, L.P. could have distributed to their constituent partners
under Section 8.18 hereof, but which were not so distributed; and (B) any
Borrower may acquire the assets of any other Borrower so long as the
Administrative Agent's security interest in such assets is not thereby
impaired.
(b) The Borrowers shall not enter into any sale and leaseback
transactions with respect to, or sell or otherwise dispose of (other than
pursuant to Permitted Asset Swaps) any assets other than (1) assets having a
value of less than $10,000,000 in the aggregate or (2) tangible personal
property which through normal usage becomes unusable and (if not obsolete) is
replaced in the ordinary course of business.
(c) The Borrowers will not organize any Subsidiaries (other than
so-called "shell" companies which do not conduct any material portion of the
business of the Borrowers) unless such Subsidiaries become obligors under this
Agreement and the other Loan Documents in a manner reasonably satisfactory to
the Majority Banks.
8.17 Transactions with Affiliates. Except as permitted by this
Agreement, the Borrowers will not directly or indirectly: (a) make any
Investment in an Affiliate; (b) transfer, sell, lease, assign or otherwise
dispose of any assets to an Affiliate; (c) merge into or consolidate with or
purchase or acquire assets from an Affiliate other than as provided for in
Section 8.16 hereof; or (d) enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate (including, without
limitation, Guarantees and assumptions of obligations of an Affiliate) other
than those transactions listed on Exhibit 8.17 hereto; provided that the
Borrowers may enter into any transaction with an Affiliate if the monetary or
business consideration arising therefrom would be substantially as advantageous
to the Borrowers as the monetary or business consideration which would obtain
in a comparable arm's-length transaction with a Person not an Affiliate.
8.18 Restricted Payments. The Borrowers will not make any Restricted
Payments at any time. If, at the time thereof, the Borrowers have paid to the
Banks all sums due to the Banks under Section 2.3(d) hereof, CC II, L.P. may,
after April 30, 2000, make cash distributions to its constituent partners in
addition to any Qualified Distribution during the relevant period, in an amount
not to exceed 50% of Excess Cash Flow for the immediately preceding fiscal year
(reduced by an amount equal to the amounts in respect of such fiscal year, if
any, applied to the purchase of cable television systems under clause (2) of
the proviso contained in Section 8.16(a) hereof) so long as immediately prior
to such distribution and after giving effect thereto no Default shall have
occurred or be continuing. Nothing in this Section 8.18 shall serve to limit
distributions from CC III, L.P. to CC II, L.P. or CC III General Partner (it
being understood that this sentence shall not be applicable to CC III General
Partner if Charter Southeast becomes the General Partner of CC III, L.P.).
8.19 Leases. None of the Borrowers nor any of their respective
Subsidiaries will be or become obligated under any Lease except:
(a) Capital Lease Obligations permitted pursuant to Section 8.8
hereto.
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<PAGE> 57
(b) Leases, other than Capital Lease Obligations, provided that
the aggregate fixed rental obligations for any period of 12 consecutive months
under all such Leases (including payments required to be made by the Lessee in
respect of taxes and insurance, whether or not denominated as rent, but
excluding rental payments made by the Borrowers and their respective
Subsidiaries under Pole Rental Leases, Leases of microwave services and
maintenance contracts) shall not exceed $1,000,000 in any fiscal year and
$9,000,000 in the aggregate.
8.20 Management Fees. The Borrowers will not incur, assume or have
outstanding or otherwise be or become directly or indirectly liable in respect
of any fees for managing or supervising the assets or business of the Borrowers
other than Management Fees which are subject to the Fee Subordination
Agreement.
8.21 Management. The Borrowers will obtain and maintain management
services for the operation of the system from Charter Communications, Inc. as
an indirect subcontractor of the Manager under the terms of the Management
Agreement.
8.22 Partnership Interests. CC II General Partner shall remain the
general partner of CC II, L.P. provided, however, that Charter Southeast may be
substituted for CC II General Partner as the general partner of CC II, L.P. on
not less than ten days notice to the Agents, if concurrently with such
substitution Charter Southeast pledges its general partnership interest in CC
II, L.P. to the Administrative Agent pursuant to a pledge agreement of like
tenor to the Partnership Pledge Agreement. CC II, L.P. shall not admit any
additional general partner into CC II, L.P. unless the Majority Banks give
their prior consent thereto in writing (which consent shall not be unreasonably
withheld) and the partnership interests of such additional general partner are
pledged to the Administrative Agent pursuant to the Partnership Pledge
Agreement. CC III General Partner shall remain the general partner of CC III,
L.P. provided, however, that Charter Southeast may be substituted for CC III
General Partner as the general partner of CC III, L.P. on not less than ten
days notice to the Agents, if concurrently with such substitution Charter
Southeast pledges its general partnership interest in CC III, L.P. to the
Administrative Agent pursuant to a pledge agreement of like tenor to the
Partnership Pledge Agreement. CC III, L.P. shall not admit any additional
general partner into CC III, L.P. unless the Majority Banks give their prior
consent thereto in writing (which consent shall not be unreasonably withheld)
and the partnership interests of such additional general partner are pledged to
the Administrative Agent pursuant to the Partnership Pledge Agreement.
8.23 Amendment of Purchase Agreements. After the closing of the
transactions contemplated by the Purchase Agreements, the Borrowers (i) shall
not, without the prior written consent of the Majority Banks, make any material
amendments or modifications to any provision of the Purchase Agreements and
(ii) shall as promptly as practicable provide the Documentation Agent and the
Administrative Agent (who shall promptly provide copies to each Bank on
request) with true, correct and complete copies of all amendments or
modifications to the Purchase Agreements.
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<PAGE> 58
8.24 Capital Expenditures. The Borrowers shall not permit the
aggregate amount of their Capital Expenditures (other than Capital Lease
obligations) in any period set forth below to exceed as of the end of such
period the sum of (a) the limit for such period, as set forth below, plus (b)
any unexpended portion of the Capital Expenditures limit set forth below for
the immediately preceding period.
<TABLE>
<CAPTION>
Capital
Period Expenditures Limit
------ ------------------
<S> <C>
From January 1, 1996, through December 31, 1996 $33,000,000
From January 1, 1997, through December 31, 1997 $54,000,000
From January 1, 1998, through December 31, 1998 $38,000,000
From January 1, 1999, through March 31, 1999 $ 6,250,000
</TABLE>
There shall be no limitations on Capital Expenditures (other than those
required to ensure compliance with Sections 8.8, 8.11 and 8.12 hereof) after
March 31, 1999.
8.25 ERISA. The Borrowers shall not establish, maintain or contribute
to any Plan or Multiemployer Plan.
8.26 Qualified Distributions. CC II, L.P. may, in any period set forth
below, make cash distributions to its constituent partners to enable its
constituent partners or their respective parent companies to make scheduled debt
service payments (but not payments or prepayments of principal) on the
Indebtedness issued pursuant to the Indentures not to exceed the limit for such
period as set forth below so long as immediately prior to such distribution and
after giving effect thereto no Default shall have occurred and be continuing.
<TABLE>
<CAPTION>
Qualified
Period Distribution Limit
------ ------------------
<S> <C>
From the Closing Date through December 31, 1996 $ 5,100,000
From January 1, 1997, through December 31, 2000 $ 9,600,000
From January 1, 2001, through December 31, 2001 $19,000,000
From January 1, 2002, through December 31, 2002 $29,000,000
From January 1, 2003, through December 31, 2003 $26,500,000
From January 1, 2004, through December 31, 2004 $25,500,000
From January 1, 2005, through December 31, 2005 $23,500,000
</TABLE>
; provided that after April 30, 2000 CC II L.P. may make additional cash
distributions in each fiscal year period included in the above table in an
amount not to exceed 50% of Excess Cash
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<PAGE> 59
Flow for the immediately preceding fiscal year, if (a) the April 15 prepayment
required for such year (in which the distribution is to be made) pursuant to
Section 2.3(d) hereof shall already have been made and (b) immediately prior to
such distribution and after giving effect thereto no Default shall have
occurred and be continuing.
Article 9. Events of Default.
If any of the following "Events of Default" shall occur and be
continuing, namely:
A. Any representation or warranty in this Agreement, in the Security
Documents or in any certificate, statement or other document made or furnished
to the Documentation Agent, the Administrative Agent or the Banks hereunder or
under the Loan Documents shall prove to have been untrue or incorrect in any
material respect when made; or
B. Default in the payment when due of any principal of any Note or any
Loan; or
C. Default for three or more Business Days in the payment of any
interest on any Note or any Loan or (other than as provided in Section 9.B) any
other amount payable to the Banks or the Administrative Agent hereunder or
under the Security Documents; or
D. Default by any of the Borrowers in the performance or observance
of any of their agreements in Section 8 hereof (other than in Sections 8.1,
8.2, 8.3, 8.7, 8.8 and 8.9) or in the Loan Documents; or
E. Default by any of the Borrowers in the performance or observance
of any of their other agreements herein (including but not limited to the
agreements in Article 8 hereof expressly excluded by Section 9.D hereof) which
remain unremedied for 30 or more days; or
F. Any bonds, debentures, notes or other evidence of Indebtedness of
any of the Borrowers in an aggregate amount exceeding $3,000,000 shall (i)
become due before stated maturity by the acceleration of the maturity thereof
by reason of default or (ii) become due by their terms and shall not be
promptly paid; or
G. Any event of default or other event under any indenture, credit or
loan agreement, note or other agreement or instrument under which Indebtedness
of the Borrowers or any of their respective Subsidiaries in an aggregate amount
exceeding $3,000,000 is outstanding, or by which any such Indebtedness is
evidenced, shall have occurred which, with notice or lapse of time or both,
would permit the holder or holders of any such Indebtedness (or a trustee or
agent on its or their behalf) to accelerate the maturity thereof or to enforce
any Lien provided for by any such indenture, agreement or instrument, as the
case may be; or any event of default or other event under any Interest Swap
Agreement with respect to an aggregate amount exceeding $7,000,000 shall have
occurred which, with notice or lapse of time or both, would permit the
termination thereof by any party other than the applicable Borrower; or
H. Any of the Borrowers shall be dissolved or liquidated (as a matter
of law or otherwise) or proceedings shall be commenced by any Person (including
any of the Borrowers or the constituent partners of CC II, L.P. or CC III,
L.P.) seeking the dissolution or liquidation
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of any Borrower (and, in the case of proceedings commenced by Persons other
than any of the Borrowers or the constituent partners of CC II, L.P. or CC III,
L.P., shall continue unstayed for a period of 60 days); or
I. Any Borrower shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
J. Any Borrower shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the Bankruptcy Code (as now or hereafter in effect), (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the Bankruptcy Code, or
(vi) take any action (partnership or otherwise) for the purpose of effecting
any of the foregoing; or
K. A proceeding or case shall be commenced, without the application
or consent of the applicable Borrower, in any court of competent jurisdiction
seeking (i) its liquidation, reorganization, dissolution or winding-up, or the
composition or readjustment of any Borrower's debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of any Borrower or of all
or any substantial part of its assets, or (iii) similar relief in respect of
any Borrower under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving or
ordering any of the foregoing shall be entered and continue unstayed and in
effect, for a period of 90 days; or an order for relief against any Borrower
shall be entered in an involuntary case under the Bankruptcy Code; or
L. A final judgment or judgments for the payment of money in excess
of $3,000,000 in the aggregate shall be rendered by a court of record against
any Borrower and such Borrower shall not (i) be adequately bonded or insured
against such judgment or judgments, or (ii) discharge the same or provide for
its discharge in accordance with its terms, or procure a stay of execution
thereof within 60 days from the date of entry thereof and within said period of
60 days, or such longer period during which execution of such judgment shall
have been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
M. Any Franchise (or group of Franchises) accounting for 5% or more
of the Borrowers' Basic Subscribers shall be suspended, terminated or revoked
such that the Borrowers are no longer able to operate such Franchise and retain
the revenue received therefrom or the applicable Borrower or the grantors of
any Franchise shall fail to renew such Franchise at the stated expiration
thereof (unless such Franchise is temporarily renewed or extended at such time)
such that the Borrowers are no longer able to operate such Franchise and retain
the revenue received therefrom; or
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N. Unless the Majority Banks shall have otherwise agreed in writing:
(i) (1) each of Jerald L. Kent, Howard L. Wood and Barry L. Babcock (or any
substitute general partner which is not rejected by the Majority Banks, as
provided below) shall cease for any reason to be a general partner of Charter
Group, or (2) Charter Group shall for any reason fail to be controlled,
directly or indirectly, by at least one of such individuals, or (3) a majority
of the voting equity of and economic interests in Charter Group shall for any
reason fail to be owned by at least one of such individuals; provided, however,
that if any of the events described in clause (1), (2) or (3) above occurs
solely as a result of the death, disability or legal incapacity of any such
individual (or any substitute general partner which is not rejected by the
Majority Banks, as provided below), such event shall not constitute an Event of
Default unless (w) 90 days after the occurrence of such event, the Borrowers
shall have failed to provide the Agents and the Banks with a written proposal
as to the identity of one or more willing substitute general partners of
Charter Group, together with a list of the names of the individuals proposed to
be engaged in senior management of Charter Group, or (x) the Majority Banks
shall have rejected, in writing, any such proposal given (within such 90-day
period by the Borrowers) or (y) any such substitute general partner shall fail
to become a general partner of Charter Group within a reasonable time
thereafter or (z) the senior management proposed by the Borrowers as set forth
in clause (w) above, or any combination thereof, shall for any reason fail to
engage in senior management of Charter Group; or (ii) Charter Group shall for
any reason fail to control Charter Communications, Inc., directly or
indirectly, or Charter Group shall fail for any reason to own a majority of the
voting equity of and economic interests in Charter Communications, Inc. (for
purposes of this Section 9.N, "control" shall mean possession of the power to
direct or cause the direction of management or policies, whether through
ownership of securities or partnership or other ownership interests, by
contract or otherwise); or
O. An event shall occur which has a Material Adverse Effect; or
P. The occurrence of an event of default under either Indenture or any
securities or evidence of Indebtedness issued pursuant thereto; or
Q. If the terms of either Indenture or any securities or evidence of
Indebtedness issued pursuant thereto provide for an event of default thereunder
upon the occurrence of any Event of Default hereunder (other than (i) an Event
of Default described in Section 9.P hereof; (ii) an Event of Default resulting
from the failure to pay $7,500,000 or more in the aggregate of the outstanding
principal of the Tranche A Loans, Tranche B Loans and Tranche C Loans (x) with
respect to the Tranche A Loans, on the Tranche A Commitment Termination Date or
on the date on which the Tranche A Loan Commitments are terminated in
accordance with this Agreement; (y) with respect to the Tranche B Loans, on
June 30, 2005, or the date on which the Tranche B Loans are required to be paid
in full in accordance with this Agreement; or (z) with respect to the Tranche C
Loans on December 31, 2005, or the date on which the Tranche C Loans are
required to be paid in full in accordance with this Agreement; or (iii) an
Event of Default resulting in the acceleration of the maturity of $7,500,000 or
more in principal amount of the Indebtedness to the Banks hereunder).
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<PAGE> 62
THEREUPON, the Administrative Agent may (and at the request of the Majority
Banks shall) by notice to the Borrowers specifying the particular Event or
Events of Default which have occurred, terminate the Commitments hereunder
and/or declare the principal of and interest on the Loans and the Notes (if
then outstanding), and all other amounts owing hereunder, to be forthwith due
and payable, whereupon the same will be and become forthwith due and payable,
without presentment or demand for payment, notice of non-payment, protest or
further notice or demand of any kind, all of which are expressly waived by the
Borrowers, provided that, in the case of any Event of Default specified in
Section 9.H, Section 9.I, Section 9.J or Section 9.K hereof, the Commitments
hereunder shall immediately and automatically terminate and the principal of
and interest on the Loans and the Notes (if then outstanding), and such other
amounts, shall be and become immediately due and payable, without presentment
or demand for payment, notice of non-payment, protest or notice or demand of
any kind, all of which are expressly waived by the Borrowers (it being
understood and agreed that the joint obligations of each Borrower in respect of
the obligations of the other Borrowers shall not be deemed to be released or
adversely affected by the exercise or the refraining from exercising of any
rights or remedies against the other Borrowers or any Collateral).
Article 10. The Agents.
10.1 Appointment, Etc. Each Bank hereby irrevocably appoints and
authorizes each of the Administrative Agent and the Documentation Agent to act
as such Bank's agent hereunder and under the Loan Documents with such powers as
are specifically delegated to the Administrative Agent or the Documentation
Agent, as the case may be, by the terms of this Agreement and the Loan
Documents, together with such other powers as are reasonably incidental
thereto. None of the Agents (which term as used in this sentence and in
Section 10.5 and the first sentence of Section 10.6 hereof shall include
reference to its affiliates and its own and its affiliates' officers,
directors, employees and agents): (a) shall have any duties or
responsibilities except those expressly set forth in this Agreement and the
Loan Documents, and shall not by reason of this Agreement be a trustee for or
any other Agent or any Bank; (b) shall be responsible to the other Agents or
the Banks for any recitals, statements, representations or warranties contained
in this Agreement or the Loan Documents, or in any certificate or other
document referred to or provided for in, or received by any of them under, this
Agreement or the Loan Documents, or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, the Loan
Documents, any Note or any other document referred to or provided for herein or
for any failure by any Borrower or any other Person; (c) shall be required to
initiate or conduct any litigation or collection proceedings hereunder or
thereunder except to the extent requested by the Banks; and (d) shall be
responsible for any action taken or omitted to be taken by it hereunder or
thereunder or under any other document or instrument referred to or provided
for herein or therein or in connection herewith or therewith, except for its
own gross negligence or willful misconduct. The Agents may each employ agents
and attorneys- in-fact and shall not be responsible for the
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negligence or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care.
10.2 Reliance by Agents. The Agents shall each be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telex, telecopy, telegram or cable) reasonably believed by it to be
genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the applicable Agent. As
to any matters not expressly provided for by this Agreement or the Loan
Documents, the Agents shall in all cases be fully protected in acting, or in
refraining from acting, hereunder or thereunder in accordance with any
instruction signed by the other Agents or the Banks, and such instructions of
the Agents or Banks and any action taken or failure to act pursuant thereto
shall be binding on the Agent or Bank signing such instructions.
10.3 Defaults. None of the Agents shall be deemed to have knowledge of
the occurrence of a Default (other than, in the case of the Administrative
Agent, the non-payment of principal of or interest on Loans) unless it has
received notice from another Agent, a Bank or the Borrowers specifying such
Default and stating that such notice is a "Notice of Default." In the event
that an Agent receives such a notice of the occurrence of a Default, such Agent
shall give prompt notice thereof to the other Agents and the Banks (and the
Administrative Agent shall give each other Agent and each Bank prompt notice of
each such non-payment). The Administrative Agent shall (subject to Section
10.7 hereof) take such action with respect to such Default as shall be directed
by the Majority Banks, provided that, unless and until the Administrative Agent
shall have received such directions, the Administrative Agent may (but shall
not be obligated to) take such action, or refrain from taking such action, with
respect to such Default as it shall deem advisable in the best interest of the
Banks.
10.4 Rights as a Bank. With respect to its Commitment and the Loans
made by it, each Agent in its capacity as a Bank hereunder shall have the same
rights and powers hereunder as any other Bank and may exercise the same as
though it were not acting as an Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include each Agent in its individual
capacity. Each of the Agents and their respective affiliates may (without
having to account therefor to any Bank) accept deposits from, lend money to and
generally engage in any kind of banking, trust or other business with the
Borrowers (and any of their respective affiliates) as if it were not acting as
an Agent, and each Agent may accept fees and other consideration from the
Borrowers for services in connection with this Agreement or otherwise without
having to account for the same to the Banks.
10.5 Indemnification. The Banks agree to indemnify each Agent (to the
extent not reimbursed under Section 11.3 hereof, but without limiting the
obligations of the Borrowers under said Section 11.3), ratably in accordance
with the aggregate principal amount of the Loans made by the Banks (or, if no
Loans are at the time outstanding, ratably in accordance with their respective
Commitments), for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature
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whatsoever which may be imposed on, incurred by or asserted against such Agent,
in any way relating to or arising out of this Agreement, the Notes or the Loan
Documents or any other documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby (including, without
limitation, the costs and expenses which the Borrowers are obligated to pay
under Section 11.3 hereof but excluding, unless a Default has occurred and is
continuing, normal administrative costs and expenses incident to the
performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents, provided that no Bank
shall be liable for any of the foregoing to the extent they arise from the
gross negligence or willful misconduct of the party to be indemnified.
10.6 Non-Reliance. Each Bank agrees that it has, independently and
without reliance on any of the Agents or any other Bank, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis of the Borrowers and decision to enter into this Agreement and that it
will, independently and without reliance upon any of the Agents, or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement and the Loan Documents. No Agent shall be
required to keep itself informed as to the performance or observance by the
Borrowers of this Agreement or the Loan Documents or any other document
referred to or provided for herein or therein or to inspect the properties or
books of the Borrowers. Except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the
Administrative Agent or the Documentation Agent, as the case may be, hereunder
and under the Loan Documents, no Agent shall have any duty or responsibility to
provide any other Agent or any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrowers (or
any of their Affiliates) which may come into the possession of the
Administrative Agent or the Documentation Agent or any of their respective
affiliates.
10.7 Failure to Act. Except for action expressly required hereunder,
and under the Loan Documents, of the Administrative Agent or the Documentation
Agent, as the case may be, the Administrative Agent and the Documentation Agent
shall in all cases be fully justified in failing or refusing to act hereunder
or thereunder, unless it shall be indemnified to its satisfaction by the Banks
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.
10.8 Resignation or Removal. Subject to the appointment and
acceptance, as provided below, of a successor Administrative Agent or
Documentation Agent, as applicable, each of the Administrative Agent and the
Documentation Agent may resign at any time by giving notice thereof to the
other and to the other Agents, the Banks and the Borrowers and each of the
Administrative Agent and the Documentation Agent may be removed at any time for
cause by the Majority Banks. Upon any such resignation or removal, the Banks
acting jointly shall have the right to appoint a successor Administrative Agent
or Documentation Agent, as appropriate. If no successor shall (in consultation
with the Borrowers) have been so appointed by the Banks and shall have accepted
such appointment within 30 days after the
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retiring Administrative Agent's or Documentation Agent's giving of notice of
resignation or the Banks' removal of the retiring Administrative Agent or
Documentation Agent, then the retiring Agent may (with, so long as no Event of
Default shall have occurred and be continuing the consent of the Borrowers,
which shall not be unreasonably withheld), on behalf of the Banks, appoint its
own successor, which shall be a Bank which has an office in New York, New York,
with a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment hereunder as a successor Administrative Agent or
Documentation Agent, such successor shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Administrative Agent or Documentation Agent, as the case may be, and the
retiring Administrative Agent or Documentation Agent, as the case may be,
shall be discharged from its duties and obligations hereunder. After any
retiring Administrative Agent's or Documentation Agent's resignation or removal
hereunder, the provisions of this Article 10 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as the Administrative Agent or Documentation Agent.
Article 11. Miscellaneous.
11.1 Waiver. No failure on the part of the Administrative Agent or any
Bank to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement, the Notes, or
the Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege under this Agreement, the
Notes or the Loan Documents preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. The remedies provided
herein and in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.
11.2 Notices. All notices and other communications provided for herein
shall be by telephone (except where written notice is expressly required
hereby), or in writing and telephoned, telecopied, mailed or delivered by
overnight courier or by hand to the intended recipient at the telephone number
or "Address for Notices" specified below its name on the signature pages
hereof; or, as to any party, at such other telephone number or address as shall
be designated by such party in a notice to each other party. Except as
otherwise provided in this Agreement, all notices and other communications
hereunder shall be deemed to have been duly given when transmitted by
telecopier or delivered to an overnight courier service, in each case addressed
as aforesaid or personally delivered or, in the case of a mailed notice, when
actually received by the intended recipient; provided, however, that the
notices to any Agent, shall not be effective as to such Agent until actually
received; and provided further, however, that no Agent shall be liable to any
party hereto in any way whatsoever as a result of actions or omissions
resulting from any telephonic communications with any Loan Party. Telephoned
notices shall be confirmed within three days by the sender by telecopy,
overnight courier or hand delivery, provided that failure to confirm any such
telephoned notice shall not affect its validity.
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<PAGE> 66
11.3 Indemnity and Expenses.
(a) The Borrowers will indemnify and hold harmless each Agent and
each Bank from any liability, loss or damage resulting from the violation by
any Borrower of Section 2.7 hereof. The Borrowers will also indemnify and hold
harmless each Agent, each Bank and each of their respective directors, officers
and employees and each Person, if any, who controls any Agent or any Bank from
and against any and all claims, damages, liabilities and expenses (including,
without limitation, reasonable attorneys' fees) which any of them may incur or
which may be asserted against any of them (other than those arising as a result
of the indemnified party's gross negligence or wilful misconduct) in connection
with any litigation (including, without limitation, litigation arising under or
pursuant to Environmental Laws) or other proceedings or investigation
(including, without limitation, compliance with or contenting of any subpoenas
or process issued against any of the indemnified parties) involving any
Borrower or any of their respective Subsidiaries, CC II General Partner, CC III
General Partner, or any officer, director or employee thereof other than
litigation commenced by the Borrowers against (and which is determined
adversely to) the indemnified party which seeks enforcement of the Borrowers'
rights hereunder or under any Loan Document.
(b) The Borrowers agree to pay: (1) the reasonable fees and
expenses of Rubin Baum Levin Constant & Friedman, special counsel to the
Documentation Agent, in connection with (A) the preparation, execution and
delivery of this Agreement, the Loan Documents and the Notes and the making of
the Loans hereunder regardless of whether any transaction contemplated hereby
is consummated, (B) any amendment, modification or waiver of any of the terms
of this Agreement, the Loan Documents or the Notes, and (C) filing and
recording fees, and taxes and other charges incurred in connection with
perfecting, maintaining and protecting the security interest of the
Administrative Agent in the Collateral; and (2) after the occurrence of any
Event of Default, all reasonable costs and expenses of the Administrative Agent
(including reasonable counsel's fees and expenses) and all reasonable fees and
expenses of counsel for the Banks collectively (which counsel shall be selected
by the Majority Banks) in connection with the enforcement of this Agreement,
the Loan Documents and the Notes.
11.4 Amendments, Etc. Any provision of this Agreement may be modified
or waived only by (and any agreement which changes the terms of subordination
of any obligation of the Borrowers which is junior to the Indebtedness of the
Borrowers to the Banks hereunder shall require) an instrument or instruments in
writing signed by the Borrowers and the Majority Banks; provided, however, that
(a) the consent of each Bank shall be required for any amendment, modification
or waiver which (1) increases such Bank's Commitment or the aggregate amount of
the Commitments hereunder; (2) releases a Borrower from any obligation
hereunder or changes the joint and several nature of the Borrowers' obligations
hereunder; (3) releases any collateral securing the repayment of the Loans; (4)
changes the definition(s) of "Applicable Margin," "Base Rate," "Fixed Base
Rate," "Fixed Rate" or "Majority Banks" set forth in Section 1.1 hereof; (5)
amends, modifies or waives any of the provisions of Section 2.3, 2.4, 4.2,
8.21 or this Section 11.4; and (6) the consent of the
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Administrative Agent and the Documentation Agent shall be required for any
amendment or modification of Article 10 hereof.
11.5 Withholding Taxes.
(a) Each Bank that is organized under the laws of any jurisdiction
other than the United States of America or any State thereof and which could
become completely exempt from withholding of taxes in respect of payment of any
obligations due to such Bank hereunder relating to any of its Loans if such
Loans were in registered form may request the Borrower (through the
Administrative Agent), and the Borrower agrees thereupon, to register such
Loans as hereinafter provided and to issue to such Bank Notes evidencing such
Loans as registered Notes or to exchange Notes evidencing such Loans for new
registered Notes, as Applicable. Registered Notes may not be exchanged for
Notes that are not in registered form.
(b) Each Bank and each Agent which is organized under the laws of
any jurisdiction other than the United States of America or any State thereof
(1) represents to the other Agents and the Borrowers that (A) assuming
compliance by the Borrower with the provisions of Section 11.5(a) hereof under
applicable laws and treaties no taxes will be required to be withheld by the
Administrative Agent or the Borrowers with respect to any payments to be made
to such Bank or such Agent in respect of the amounts payable under this
Agreement, the Note held by such Bank or any Security Document and (B) it has
furnished to the Administrative Agent and the Borrowers two duly completed
copies of U.S. Internal Revenue Service Form 4224, U.S. Internal Revenue
Service Form 1001 (wherein such Bank claims entitlement to complete exemption
from U.S. federal withholding tax on all interest payments hereunder) or U.S.
Internal Revenue Service Form W-8, and (b) covenants, upon the Borrowers' or
the Administrative Agent's request, to (1) provide the Administrative Agent and
the Borrowers a new Form 4224 or Form 1001 upon the obsolescence of any
previously delivered form in accordance with applicable U.S. laws and
regulations and amendments duly executed and completed by such Bank and (2)
comply from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption.
(c) Each holder of a registered Note (or, if such holder is not
the beneficial owner thereof, such beneficial owner) shall deliver to the
Borrower (with a copy to the Administrative Agent) prior to or at the time it
becomes the holder of a registered Note, the applicable form described in the
first sentence of Section 11.5(b) (or such successor and related forms as may
from time to time be adopted by the relevant taxing authorities of the United
States of America), together with an annual certificate stating that such
holder or beneficial owner, as the case may be, is not a "Bank" within the
meaning of Section 881(c)(3)(A) of the Code and is not otherwise described in
Section 881(c)(3) of the Code. Each such holder promptly notify the Borrower
(with a copy to the Administrative Agent) if at any time, such holder or
beneficial owner, as the case may be, determines that it is no longer in a
position to make the certification made in such certificate to the Borrower (or
any other form of certification adopted by the relevant taxing authorities of
the United States of America for such purposes).
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<PAGE> 68
(d) The Administrative Agent, acting, for this purpose only, as
agent of the Borrower shall maintain, at no extra charge to the Borrower, a
register at the address to the Borrower, a register at the address to which
notices to the Administrative Agent are to be sent under Section 11.2 hereof)
on which register the Administrative Agent shall enter the name, address and
taxpayer identification number (if provided) of the registered owner of the
Loans evidenced by a registered Note or, upon the request of the registered
owner, for which a registered Note has been requested. A registered Note and
the Loans evidenced thereby may be assigned or otherwise transferred in whole
or in part only be registration of such assignment or transfer of such
registered Note and the Loans evidenced thereby on the register. Any
assignment or transfer of all or part of such Loans and the registered Note
evidencing the same shall be registered on the register only upon compliance
with the provisions of Section 11.6 and surrender for registration of
assignment or transfer of the registered Note evidencing such Loans, duly
endorsed by (or accompanied by a written instrument of assignment or transfer
duly executed by) the holder thereof, and thereupon one or more new registered
Noted in the same aggregate principal amount shall be issued to the designated
assignee(s) or transferee(s) and, if less than the aggregate principal amount
of such registered Notes is thereby transferred, the assignor or transferor.
Prior to the due presentment for registration of transfer of any registered
Note, the Borrower and the Administrative Agent shall treat the Person in whose
name such Loans and the registered Note evidencing the same is registered as
the owner thereof for the purpose of receiving all payments thereon and for all
other purposes, notwithstanding any notice to the contrary.
(e) Unless the Borrowers and the Administrative Agent have
received forms or other documents satisfactory to them indicating that payments
hereunder or under any Note are not subject to United States withholding tax
(or there is a change in law preventing delivery thereof), the Borrowers or
Administrative Agent shall, in the case of payments to or for any Bank
organized under the law of a jurisdiction outside the United States, (1)
withhold taxes from such payments at the applicable statutory rate, or at a
rate reduced by an applicable tax treaty (provided that the Borrowers and the
Administrative Agent have received forms or other documents satisfactory to
them indicating that such reduced rate applies) and (2) pay such Bank such
payment net of any taxes withheld. To the extent that the Borrowers are
obligated hereunder, the Borrowers shall provide evidence that such taxes of
any nature whatsoever in respect of this Agreement, any Loan or any Note shall
have been paid to the appropriate taxing authorities by delivery to the Bank on
whose account such payment was made of the official tax receipts or notarized
copies of such receipts within thirty (30) days after payment of such tax. If
the Borrowers fail to make any such payment when due, the Borrowers shall
indemnify the Banks for any incremental taxes, interest or penalties that may
become payable by any Bank as a result of any such failure.
(f) Each Bank agrees that it will not assign any Loans or portions
thereof made by it hereunder to any Person if, at the time of such assignment,
any taxes would be required to be withheld by the Administrative Agent or the
Borrowers with respect to any payments to
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<PAGE> 69
be made to such Person under this Agreement, the Note or portion thereof
assigned to such Person or any Security Document. As promptly as practicable
following any assignment of any Loans or portions thereof to an entity
organized under the laws of any jurisdiction other than the United States of
America or any State thereof, the assignee shall furnish the Administrative
Agent and the Borrowers two duly completed copies of U.S. Internal Revenue
Service Form 4224, U.S. Internal Revenue Service Form 1001 or U.S. Internal
Revenue Form W-8.
11.6 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns except that
the Borrowers may not assign their respective rights or obligations hereunder,
under the Notes or under the Loan Documents without the prior written consent
of each of the Agents and each of the Banks.
(b) Each Bank may sell assignments of up to one hundred percent
(100%) of its interest hereunder to (1) one or more affiliates of such Bank
(subject, in the case of Tranche A Loan Commitments to the requirements set
forth in clause (v) of Section 11.6(c) hereof) or any other Bank, or (2) any
Federal Reserve Bank as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Bank (no assignment under this clause (2) shall
relieve such Bank from its obligations hereunder).
(c) Each of the Banks may at any time enter into assignment
agreements (but not participations) with one or more Persons pursuant to which
each Bank may assign its interest under this Agreement and the other Loan
Documents, including, its interest in any particular Loan or portion thereof,
provided, that (1) all assignments (other than assignments described in clause
(b) hereof) of Tranche A Loans shall be in minimum principal amounts of
$10,000,000 (unless after giving effect to all contemporaneous assignments to
such Person, such Person has a minimum Tranche A Loan Commitment of
$10,000,000), (2) all assignments (other than assignments described in clause
(b) hereof) of Tranche B Loans or Tranche C Loans which are not assignments of
100% of the assignor's interest in Tranche B or Tranche C Loans, as the case
may be. shall be in minimum principal amounts of $4,000,000 (unless after
giving effect to all contemporaneous assignments to such Person, such Person
holds Tranche B Loans or Tranche C Loans, as the case may be, in an aggregate
principal amount of $4,000,000), (3) without the consent of the Borrowers, no
Bank may assign more than forty nine percent (49%) of its interest in any Class
of Loan hereunder unless such assignment constitutes an assignment of 100% of
such Bank's interests in such Class of Loan, and (4) all assignments (other
than assignments described in clause (b) hereof) shall be subject to the
following additional terms and conditions:
(i) No assignment (except assignments permitted in Section
11.6(b) hereof) shall be sold without the prior consent of the
Administrative Agent and prior to the occurrence and continuation
of an Event of Default, the consent of the Borrowers, all of which
consents shall not be unreasonably withheld;
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<PAGE> 70
(ii) The Borrowers, the Administrative Agent, and the Banks
agree that assignments permitted hereunder (including the
assignment of any Advance or portion thereof) may be made with all
voting rights, and shall be made pursuant to an Assignment and
Assumption Agreement substantially in the form of Exhibit 11.6
attached hereto. An administrative fee of $3,500 shall be payable
to the Administrative Agent by the assigning Bank at the time of
any assignment hereunder;
(iii) Each Bank agrees to provide the Administrative Agent
and the Borrowers with prompt written notice of the making of any
assignments of its interests hereunder;
(iv) No assignment of any rights hereunder or under the Notes
shall be effected that would result in any interest requiring
registration under the Securities Act of 1933, as amended, or
qualification under any state securities law; and
(v) No such assignment of a Tranche A Loan Commitment may be
made to any Bank or other financial institution (A) that does not
have a minimum capital and surplus of $500,000,000, (B) with
respect to which a receiver or conservator (including, without
limitation, the Federal Deposit Insurance Corporation, the
Resolution Trust Company or the Office of Thrift Supervision) has
been appointed and (C) that is not "adequately capitalized" (as
such term is defined in Section 131(b)(1)(B) of the Federal Deposit
Insurance Corporation Improvement Act as in effect on the Agreement
Date).
(d) Nothing in this Agreement or the Notes, expressed or implied, is
intended to or shall confer on any Person other than the respective parties
hereto and thereto and their successors and assignees permitted hereunder and
thereunder any benefit or any legal or equitable right, remedy or other claim
under this Agreement or the Notes.
(e) The provisions of this Section 11.6 shall not apply to any
purchase of participations among the Banks pursuant to Section 4.5 hereof.
11.7 Survival. The obligations of the Borrowers under Article 5 and
Section 11.3 hereof shall survive the repayment of the Loans and the
termination of the Commitments.
11.8 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.9 Captions. Captions and section headings appearing herein are
included solely for convenience of reference only and are not intended to
affect the interpretation of any provision of this Agreement.
11.10 Independent Remedies. Anything in this Agreement to the contrary
notwithstanding, each Bank shall have the right to protect and enforce its
rights arising out of this Agreement in respect of amounts due to it hereunder
or under the Notes (whether at
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<PAGE> 71
maturity by acceleration or otherwise) without it being necessary for any other
Bank or any Agent to be joined as an additional party in any proceedings
instituted by such Bank with respect to such obligations or without it being
necessary for any other Bank or any Agent to authorize or consent to the
institution of any such proceedings.
11.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS EXECUTED AND TO BE WHOLLY PERFORMED WITHIN THAT STATE.
11.12 SERVICE OF PROCESS. EACH BORROWER BY ITS EXECUTION HEREOF (I)
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE
OF NEW YORK AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER
PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE NOTES, THE LOAN
DOCUMENTS OR THE SUBJECT MATTER HEREOF AND THEREOF AND (II) HEREBY WAIVES TO
THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY
OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH PROCEEDING, ANY CLAIM THAT IT
IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE NAMED COURTS, THAT
ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT ANY SUCH
PROCEEDING BROUGHT IN ONE OF THE ABOVE-NAMED COURTS IS BROUGHT IN AN
INCONVENIENT FORUM, THAT THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN ONE OF THE
ABOVE-NAMED COURTS IS IMPROPER, OR THAT THIS AGREEMENT, THE NOTES OR ANY LOAN
DOCUMENT, OR THE SUBJECT MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED IN OR BY
SUCH COURT. EACH BORROWER HEREBY CONSENTS TO SERVICE OF PROCESS IN ANY SUCH
PROCEEDING IN ANY MANNER PERMITTED BY THE CIVIL PRACTICE LAW AND RULES OF THE
STATE OF NEW YORK, AND AGREES THAT SERVICE OF PROCESS BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED IN OR
PURSUANT TO SECTION 11.2 HEREOF IS REASONABLY CALCULATED TO GIVE ACTUAL NOTICE.
11.13 Recourse to Partners. The Banks shall not have any recourse to
CC II General Partner, CC III General Partner or any of the limited partners of
CC II, L.P. or CC III, L.P. in connection with the enforcement of this
Agreement, the Notes or the Security Documents, except for the recourse
expressly set forth in the Security Documents. Except as set forth in the
preceding sentence, the Banks shall have recourse only to the Borrowers
themselves, and to the Banks' rights and remedies under this Agreement, the
Note, and the Security Documents in connection with the enforcement of any of
the Banks' rights thereunder.
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<PAGE> 72
11.14 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms or provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
11.15 Waiver of Trial by Jury. Each of the parties hereto hereby
agrees to waive and hereby waives the right to trial by jury in any court and
in any action or proceeding of any type in which, any of the parties hereto, or
any of their respective successors and assigns is a party as to all matters and
things arising out of this Agreement, the Notes or the Loan Documents.
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<PAGE> 73
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written. CHARTER
COMMUNICATIONS II, L.P.
By: CCP II, Inc., General Partner
By:_______________________________
Title:
Address for Notices:
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131-3660
Telecopier No.:
Attention:
with copies to:
12444 Powerscourt Drive
Suite 400
St. Louis, Missouri 63131-3660
Telecopier No.:
Attention:
and
Paul, Hastings, Janofsky & Walker
600 Peachtree Street, N.E.
Suite 2400
Atlanta, Georgia 30308-2222
Telecopier No.: (404) 815-2424
Attention: Kevin Conboy, Esq.
CHARTER COMMUNICATIONS III, L.P.
By: CCP III, Inc., General Partner
By:______________________________
Title:
Address for Notices:
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131-3660
Telecopier No.:
<PAGE> 74
Attention:
with copies to:
12444 Powerscourt Drive
Suite 400
St. Louis, Missouri 63131-3660
Telecopier No.:
Attention:
and
Paul, Hastings, Janofsky & Walker
600 Peachtree Street, N.E.
Suite 2400
Atlanta, Georgia 30308-2222
Telecopier No.: (404) 815-2424
Attention: Kevin Conboy, Esq.
PEACHTREE CABLE TV, INC.
By:___________________________
Title:
Address for Notices:
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131-3660
Telecopier No.:
Attention:
with copies to:
12444 Powerscourt Drive
Suite 400
St. Louis, Missouri 63131-3660
Telecopier No.:
Attention:
and
Paul, Hastings, Janofsky & Walker
600 Peachtree Street, N.E.
Suite 2400
Atlanta, Georgia 30308-2222
Telecopier No.: (404) 815-2424
Attention: Kevin Conboy, Esq.
<PAGE> 75
TORONTO DOMINION (TEXAS), INC.,
as Arranging Agent, Administrative
Agent and as a Bank
By:______________________________
Title:
Address for Notices:
Toronto Dominion (Texas), Inc.
909 Fannin, Suite 1700
Houston, Texas 77010
Telecopier No.: (713) 653-8234
Attention: Manager, Agency
with copies to:
The Toronto Dominion Bank
31 West 52nd Street
New York, New York 10019-6101
Telecopier No.: (212) 468-0732
Attention: Melissa Glass
<PAGE> 76
NATIONSBANK OF TEXAS, N.A.,
as Managing Agent
By:__________________________________
Title:
Address for Notices:
901 Main Street, 64th Floor
Dallas, Texas 75202
Telecopier No.: (214) 508-9390
Attention: Mr. Hutch McClendon
Ms. Jennifer Zydney
with copies to:
Ms. Kay Maleiny
Banking Officer
901 Main Street, 14th Floor
Dallas, Texas 75202
Telecopier No.: (214) 508-2020
CIBC INC.,
as Managing Agent
By:____________________________
Title:
Address for Notices:
425 Lexington Avenue
New York, New York 10017
Telecopier No.: (212) 856-3558
Attention: Matthew B. Jones
Vice President
with copies to:
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Telecopier No.: (404) 319-4950
Attention: Ms. Layne Carson
<PAGE> 77
<TABLE>
<CAPTION>
Schedule 1
Commitments
-----------
Tranche A Tranche B Tranche C
Bank Loan Commitment Loan Commitment Loan Commitment
- ---- --------------- --------------- ---------------
<S> <C> <C> <C>
</TABLE>
<PAGE> 1
EXHIBIT 10.12(a)
FIRST AMENDMENT TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
CHARTER COMMUNICATIONS, L.P.
This First Amendment ("First Amendment") to that certain
Amended and Restated Agreement of Limited Partnership of Charter
Communications, L.P., a Delaware limited partnership (the "Partnership"), dated
as of March 28, 1996 (the "Partnership Agreement") by and between CCP One,
Inc., a Delaware corporation ("CCP I"), and Charter Communications Southeast,
L.P., a Delaware limited partnership ("Charter Southeast"), is made as of the
28th day of February, 1997, by and between CCP I and Charter Southeast.
RECITALS
WHEREAS, pursuant to that certain Contribution Agreement (the
"Contribution Agreement"), dated as of February 28, 1997, by and among Charter
Communications, Inc., CharterComm II, Inc., CharterComm II, L.L.C., CharterComm
Holdings, L.P., Charter Communications Southeast Holdings, L.P., Charter
Southeast, Charter Communications II, L.P. and the Partnership, Charter
Southeast contributed $5,000,000 to the Partnership; and
WHEREAS, the parties hereto desire to amend the Partnership
Agreement to provide for the foregoing transaction.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto, intending legally to be bound, do hereby agree
as follows:
1. Amendment of Partnership Agreement.
A. Schedule A to the Partnership Agreement is hereby deleted and
replaced in its entirety with Schedule A 1 attached hereto. For such purpose,
the parties hereto waive compliance with Section 4.03(D) of the Partnership
Agreement.
<PAGE> 2
B. Section 4.01(C) of the Partnership Agreement is hereby deleted
in its entirety.
2. General.
A. Ratification. Except as amended by this First Amendment, all
the terms and provisions of the Partnership Agreement are hereby ratified and
reaffirmed in all respects.
B. Successors. This First Amendment shall be binding on the
parties hereto and their successors and assigns.
C. Counterparts. This First Amendment may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument."
[Remainder of page intentionally left blank.]
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Agreement has been executed as
of the day and year first above written.
GENERAL PARTNER:
CCP ONE, INC.
By:
--------------------------------
Name:
Title:
LIMITED PARTNER:
Charter Communications
Southeast, L.P.
By: Charter Communications Southeast
Properties, Inc.,
its General Partner
By:
--------------------------------
Name:
Title:
-3-
<PAGE> 4
Schedule A-1
LIMITED PARTNERS' CAPITAL CONTRIBUTIONS
AND PARTNERSHIP UNITS
Capital Contributions
<TABLE>
<CAPTION>
Initial Number of 2/28/97 Number of LP Total Number
Capital LP Units Capital Units Acquired of LP Units
Name of Limited Partner Contributions Acquired Contribution on 2/29/97 Acquired
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charter Southeast $53,666,293 536.66293 $5,000,000 50.00000 586.66293
Address:
c/o Charter Communications, Inc.
12444 Powerscourt Drive Suite 400
St. Louis, Missouri 63131
</TABLE>
-4-
<PAGE> 1
EXHIBIT 10.14(a)
FIRST AMENDMENT TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP OF
CHARTER COMMUNICATIONS II, L.P.
This First Amendment ("First Amendment") to that certain
Amended and Restated Agreement of Limited Partnership of Charter Communications
II, L.P., a Delaware limited partnership (the "Partnership"), dated as of March
28, 1996 (the "Partnership Agreement") by and between CCP II, Inc., a Delaware
corporation ("CCP II"), and Charter Communications Southeast, L.P., a Delaware
limited partnership ("Charter Southeast"), is made as of the 28th day of
February, 1997, by and between CCP II and Charter Southeast.
RECITALS
WHEREAS, pursuant to that certain Contribution Agreement (the
"Contribution Agreement"), dated as of February 28, 1997, by and among Charter
Communications, Inc., CharterComm II, Inc., CharterComm II, L.L.C., CharterComm
Holdings, L.P., Charter Communications Southeast Holdings, L.P., Charter
Southeast, the Partnership, and Charter Communications, L.P., Charter Southeast
contributed $25,000,000, certain cable television systems which serve areas in
and around Stockbridge, Georgia (the "BiJo System") and certain promissory
notes in the aggregate principal amount of $3.08 million held by BiJo
Cablevision, Inc. (the "BiJo Notes") to the Partnership; and
WHEREAS, the parties hereto desire to amend the Partnership
Agreement to provide for the foregoing transaction.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto, intending legally to be bound, do hereby agree
as follows:
1. Amendment of Partnership Agreement.
A. Schedule A to the Partnership Agreement is hereby deleted and
replaced in its entirety with Schedule A 1 attached hereto. For such purpose,
the parties hereto waive compliance with Section 4.03(D) of the Partnership
Agreement.
<PAGE> 2
B. Section 4.01(C) of the Partnership Agreement is hereby deleted
in its entirety.
2. General.
A. Ratification. Except as amended by this First Amendment, all
the terms and provisions of the Partnership Agreement are hereby ratified and
reaffirmed in all respects.
B. Successors. This First Amendment shall be binding on the
parties hereto and their successors and assigns.
C. Counterparts. This First Amendment may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument."
[Remainder of page intentionally left blank.]
-2-
<PAGE> 3
IN WITNESS WHEREOF, this Agreement has been executed as of the day and
year first above written.
GENERAL PARTNER:
CCP II, Inc.
By:
----------------------------------
Name:
Title:
LIMITED PARTNER:
CHARTER COMMUNICATIONS SOUTHEAST, L.P.
By: Charter Communications Southeast
Properties, Inc.,
its General Partner
By:
----------------------------------
Name:
Title:
-3-
<PAGE> 4
Schedule A-1
LIMITED PARTNERS' CAPITAL CONTRIBUTIONS
AND PARTNERSHIP UNITS
Capital Contributions
<TABLE>
<CAPTION>
Initial Number of 2/28/97 Number of LP Total Number
Capital LP Units Capital Units Acquired of LP Units
Name of Limited Partner Contributions Acquired Contribution on 2/29/97 Acquired
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charter Southeast $97,669,252 976.69252 $28,670,000 286.70000 1263.39252
Address:
c/o Charter Communications, Inc.
12444 Powerscourt Drive Suite 400
St. Louis, Missouri 63131
</TABLE>
THIS PAGE MUST BE KEPT AS THE LAST PAGE OF THE DOCUMENT.
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ASSET SALE AGREEMENT
BY AND BETWEEN
PRIME CABLE OF HICKORY, L.P., AS SELLER,
AND
CHARTER COMMUNICATIONS II, L.P., AS BUYER
DATED AUGUST 6, 1996
<PAGE> 2
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TABLE OF CONTENTS
ARTICLE ONE
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO
PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.1 Transfer of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2.2 Purchase Price; Earnest Money Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Earnest Money Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3 Adjustments to Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Adjustment at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Adjustment after Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Nonsubscriber Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.4 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.5 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.6 Catawba Upgrade Extension; Upgrade Design and Construction . . . . . . . . . . . . . . . 8
(a) Upgrade Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Upgrade Design and Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.2 Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.3 No Conflicts or Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.5 Material Adverse Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3.6 Information Regarding System and Business . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Status of Franchises, System Contracts and System Rights . . . . . . . . . . . . . . . . . . . . 13
Section 3.7 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.9 Labor Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.10 Finders and Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.11 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Rate Regulation Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.12 Tax Returns; Other Tax Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.13 Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.14 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(a) Real Property Owned/Leased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(b) Notice of Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
(c) Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(d)Hazardous Substances18
Section 3.15 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.16 Sufficiency of Purchased Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.17 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.18 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.19 Competitors and Overbuilds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.2 Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.3 No Conflicts or Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.5 Finders and Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE FIVE
COVENANTS AND CONDUCT OF BUSINESS ANDTRANSACTIONS PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . 22
Section 5.1 Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Buyer's Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Receipt of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.2 Covenants of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(a) Sellers' Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(b) Seller's Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(c) Receipt of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.3 Compliance with HSR Act and Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.4 Surveys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 5.5 Inspection Period and Termination Right . . . . . . . . . . . . . . . . . . . . . . . . . 27
(a) Buyer's Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(b) Termination Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 5.6 As-Is/Where-Is . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 5.7 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.8 Employees; Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Buyer's List of employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(b) Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(c) Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(d) Welfare Plans and COBRA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.9 Use of Names and Logos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.10 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.11 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.12 Franchise Consents Not Obtained . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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ARTICLE SIX
CONDITIONS OF BUYER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.2 Receipt of Schedule 3.3 Material Consents . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.3 Performance by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 6.4 Truth of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.5 Absence of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.6 Status of Cable Plant and Equipment of the System . . . . . . . . . . . . . . . . . . . . 33
Section 6.7 Opinion of FCC Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.8 Opinion of Seller's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.9 Cable Plant; Homes Passes, Pay Units . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.10 Basic Subscribers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.11 No Legal Impediment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 6.12 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE SEVEN
CONDITIONS OF SELLER'S OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.1 In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.2 Receipt of Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.3 Performance by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.4 Truth Of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.5 Absence of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.6 Opinion of Buyer's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 7.7 No Legal Impediment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE EIGHT
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 8.2 Deliveries by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.3 Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 8.4 Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE NINE
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(a) In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(b) Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
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ARTICLE TEN
CONFIDENTIALITY AND PUBLIC STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 10.1 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 10.2 Public Statement and Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 10.3 Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 10.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE ELEVEN
SURVIVAL OF REPRESENTATIONSAND WARRANTIES; INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 42
Section 11.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 42
Section 11.2 Indemnity by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11.3 Indemnity by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 11.4 Conditions of Indemnifications for Third Party Claims . . . . . . . . . . . . . . . . . 44
Section 11.5 Threshold; Maximum Indemnification Obligation . . . . . . . . . . . . . . . . . . . . . 45
Section 11.6 Exclusive Nature of Indemnification Remedy . . . . . . . . . . . . . . . . . . . . . . . 46
Section 11.7 Security for Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE TWELVE
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 12.1 Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 12.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 12.3 Binding Effect: Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 12.4 Construction: Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 12.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 12.6 Expenses of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 12.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 12.8 Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 12.9 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
</TABLE>
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ASSET SALE AGREEMENT
This Asset Sale Agreement (" Agreement") is entered into effective as
of August 6, 1996 (the "Effective Date") by and between Charter Communications
II, L.P., a Delaware limited partnership ("Buyer"), and Prime Cable of Hickory,
L.P., a Delaware limited partnership ("Seller").
Background. Seller owns and operates two cable television systems
located primarily in Hickory, North Carolina and its environs, and in Maiden,
North Carolina and certain unincorporated portions of Catawba County, North
Carolina (collectively, the "System"), and uses such System to engage in the
business of providing cable television services to residents of such areas who
subscribe to the System's services (the "Business"). Seller desires to sell to
Buyer, and Buyer desires to purchase from Seller, the assets and properties
constituting the System, except for certain excluded assets. Accordingly,
Seller and Buyer have entered into this Agreement.
ARTICLE ONE
DEFINITIONS
Exhibit A to this Agreement sets forth the definitions of certain
capitalized terms used in this Agreement and an index to capitalized terms
defined elsewhere in this Agreement. All such capitalized terms shall have such
meanings as so defined when used in this Agreement.
ARTICLE TWO
PURCHASE AND SALE
Section 2.1 Transfer of Assets. At the Closing, upon the terms
and conditions set forth in this Agreement, Seller shall, and it shall cause
Prime Venture I, Inc., a Delaware corporation and a general partner of Seller
("PVI"), to sell, convey, transfer, assign and deliver to Buyer, and Buyer
shall purchase, accept and receive, all rights, title and interest in and to
the Purchased Assets, free and clear of all liens, security interests, adverse
claims and other encumbrances of any type whatsoever (collectively, "Liens"),
other than Permitted Liens. Seller shall cause all Liens (if any) to which the
Purchased Assets may be subject, other than Permitted Liens, to be terminated
and released prior to or upon the Closing. The "Purchased Assets" shall consist
of (i)
<PAGE> 7
all of Seller's properties, assets, privileges, rights, interests, claims and
good will, real and personal, tangible and intangible, of every type and
description, including Seller's leasehold interests in leased property (but
excepting the Excluded Assets and any assets disposed of by Seller prior to the
Closing in the ordinary course of business and not in violation of this
Agreement), which are used or held for use in connection with the operation of
the System and the Business, now in existence or hereafter acquired by Seller
prior to the Closing, including, without limitation, those assets described in
Schedule 3.4(b) and Section 3.6, and (ii) those specific assets held by PVI and
referenced in items (a)(ii)(a)(3), (4), (6), (7), (8) and (12) in Schedule 3.6.
The "Excluded Assets" shall consist of (i) all programming contracts of Seller,
Prime II Management, Inc., Prime II Management, L.P. and their Affiliates (and
accounts receivable arising thereunder), including, but not limited to, those
(if any) pursuant to which the programming of the System and Business are
provided to its subscribers, (ii) all cash, cash equivalents, bank deposits and
similar cash items other than those expressly included within the definition of
Adjustment Assets, (iii) except to the limited extent set forth in Section 5.9,
the name or trade names "Prime" and "Prime Cable" and any similar or related
trade names, trademarks, service marks and logos, and adaptations, variations
and derivations thereof, (iv) any insurance coverage and policies, bonds,
letters of credit and similar items including, but not limited to, those
described in Schedule 3.13 and 3.15, and except as provided in Section 5.7, all
cash surrender values, claims, refunds and other rights in regard thereto, (v)
the assets and properties described in Schedule 2.1, (vi) any of Seller's
pension, retirement, profit sharing, deferred compensation insurance and other
employee benefit plans and related trust accounts, funds, insurance policies,
deposits and investments, (vii) any other assets or properties which are not
included in Purchased Assets by reason of an express and specific exclusion
contained elsewhere in this Agreement or the Schedules hereto or a separate
written agreement executed by Seller and Buyer, (viii) that certain Management
Agreement dated as of December 17, 1986, as amended, between Seller and Prime
II Management, L.P., and
2
<PAGE> 8
Seller's records relating thereto (other than customer and account information
relating to the System), (ix) that certain Securities Purchase Agreement dated
as of December 17, 1986, as amended, among Seller, BancBoston Capital, Inc.,
Continental Cablevision Investments, Inc., and TCW Special Placements Fund I
and the agreements and instruments executed by Seller in connection therewith,
and Seller's records relating thereto, (x) that certain Loan Agreement dated
July 1, 1994, as amended, among Seller, Toronto-Dominion (Texas), Inc. and the
other banks named therein, the other loan documents related thereto, and
Seller's records relating thereto, (xi) that certain Programming Discount
Agreement dated December 17, 1986, as amended, between Seller and Continental
Cablevision Services, Inc., and Seller's records related thereto, and (xi)
Seller's partnership books and records (to the extent not referenced elsewhere
in items (i)-(x) above).
Section 2.2 Purchase Price; Earnest Money Escrow. (a) Purchase
Price. The purchase price for the Purchased Assets shall be Sixty- Eight
Million Dollars ($68,000,000) (the "Purchase Price"). The Purchase Price shall
be adjusted pursuant to Section 2.3(a) at the Closing on a preliminary basis
for the Capital Expenditures Amount, if any, and the amount of Adjustment
Assets and Adjustment Liabilities and Buyer shall pay the Purchase Price as so
adjusted (the "Preliminary Purchase Price") to Seller at the Closing in
immediately available funds collectible by Seller on the Closing Date by wire,
interbank or intrabank transfer at such financial institution(s) as Seller may
direct Buyer in writing. The Purchase Price shall be adjusted on a final basis
for the Capital Expenditures Amount, if any, and the amount of Adjustment
Assets and Adjustment Liabilities after the Closing Date in accordance with
Section 2.3(b) and the Purchase Price, as so adjusted, shall be the "Final
Purchase Price."
(b) Earnest Money Deposit. Contemporaneously with the execution
and delivery of this Agreement, Buyer, Seller and the Escrow Agent will enter
into an earnest money escrow agreement (the "Earnest Money Escrow Agreement")
in the form of Exhibit H attached hereto, and Buyer will, on or prior to the
last day of the Inspection Period if Buyer does not terminate this Agreement
pursuant to Section 5.5(b), deposit with the Escrow Agent $1,750,000 by wire
transfer of immediately available funds (the "Escrow Deposit"). The funds
constituting the Escrow Deposit will be held, invested and disbursed as
provided in this Agreement and the Earnest Money Escrow Agreement. Unless
otherwise specified elsewhere herein, all earnings on the Escrow Deposit will
be the property of Buyer. If the transactions contemplated by this Agreement
are consummated at the Closing, then in connection with the Closing Seller and
Buyer will jointly instruct the Escrow Agent in writing to disburse the Escrow
Deposit (and all earnings thereon) to Seller on the Closing Date by wire
transfer of immediately available funds, and such distribution of the Escrow
Deposit (and all earnings thereon) by the Escrow Agent to Seller will be
credited against, and constitute partial payment of, the Purchase Price by
Buyer to Seller. If the Closing of the transactions contemplated by this
Agreement is not consummated in accordance with this Agreement, Buyer's and
Seller's rights to the Escrow Deposit will be as provided in Section 9.1(b).
Section 2.3 Adjustments to Purchase Price. (a) Adjustment at
Closing. Seller shall prepare with the participation and consultation of Buyer
and deliver to Buyer not less than ten
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days prior to the Closing Date a schedule (the "Preliminary Schedule") setting
forth Seller's best estimates of the Capital Expenditures Amount, if any, and
of Adjustment Assets and Adjustment Liabilities as of the Determination Time.
"Adjustment Assets" shall mean the total, determined in accordance with
generally accepted accounting principles ("GAAP"), consistently applied, of (i)
subscriber and other accounts receivable for services rendered in connection
with the System and the Business through the Determination Time, (ii) prepaid
expenses relating to the System and the Business for utilities and other goods
and services the benefit of which will inure to Buyer subsequent to the
Closing, (iii) all deposits held by third parties for the account of Seller
relating to the System and the Business, and (iv) petty cash and change funds,
after eliminating as regards all the foregoing all inter-company items between
and among the System, Seller, PVI, Prime Venture I Holdings, L.P. ("PVIH")
(Seller's other general partner) and Seller's Affiliates and all items paid
under or with respect to Excluded Assets. For purposes of calculating the
amount of the Adjustment Assets, (i) Seller's subscriber accounts receivable as
of the Closing Date that are 62 days or less old shall be valued at 99% of the
face value thereof; (ii) Seller's subscriber accounts receivable that (A) are
more than 62 days old as of the Closing Date, or (B) relate to subscriber
accounts that are inactive as of the Closing Date, regardless of their aging,
shall be valued at zero. The calculation of the age of any such subscriber
receivables shall be made as of the Determination Time, determined from the
invoiced date thereof in accordance with Seller's customary billing practices.
For Seller's accounts receivable, other than subscriber accounts receivable
(the "Nonsubscriber Accounts Receivable"), Section 2.3(c) shall apply.
"Adjustment Liabilities" shall mean the total, determined in accordance with
GAAP, of the subscriber prepayments, subscriber credit balances (including, but
not limited to, subscriber converter deposits) and other prepaid revenues held
by Seller as of the Determination Time relating to System subscribers and for
services to be rendered in connection with the System and Business after the
Determination Time, and the following accrued liabilities of Seller as of the
Determination Time relating to the System and the Business: (i) franchise fees,
(ii) copyright fees, (iii) pole rentals, tower site lease rentals, office space
lease rentals and other amounts payable in connection with any other leasehold
interests comprising any part of the Purchased Assets, (iv) ad valorem and
property taxes, (v) accrued vacation pay for any employees of Seller hired by
Buyer on the Closing Date, (vi) accrued liabilities for utilities and other
goods and services furnished to the System through the Closing Date, (vii)
one-half of the filing fees paid to the FTC by Buyer in connection with the
filing of one HSR Report pursuant to Section 5.3, and (viii) one-half of all
sales, use, transfer, excise or license taxes, fees or charges required to be
paid by Buyer pursuant to Section 2.4(b), after eliminating all intercompany
items between and among the System, Seller, PVI, PVIH and Seller's Affiliates
and all items payable under or with respect to
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Excluded Assets (with Buyer having no liability whatsoever with respect to such
intercompany items and items relating to Excluded Assets). The Purchase Price
shall be increased by an amount equal to the Capital Expenditures Amount, if
any, as shown on the Preliminary Schedule. To the extent that Adjustment
Liabilities as shown on the Preliminary Schedule exceed Adjustment Assets as
shown on the Preliminary Schedule, the Purchase Price shall be decreased at the
Closing by an amount equal to such excess and the Purchase Price as so
adjusted, and as adjusted with respect to the Capital Expenditures Amount, if
any, shall be the Preliminary Purchase Price payable by Buyer to Seller at
Closing pursuant to Section 2.2. To the extent that Adjustment Assets as shown
on the Preliminary Schedule exceed Adjustment Liabilities as shown on the
Preliminary Schedule, the Purchase Price shall be increased by such excess and
the Purchase Price as so adjusted, and as adjusted with respect to the Capital
Expenditures Amount, if any, shall be the Preliminary Purchase Price payable by
Buyer to Seller at Closing pursuant to Section 2.2.
(b) Adjustment after Closing. As soon as practicable,
but in no event later than 90 days following the Closing Date, Seller shall
deliver to Buyer a schedule prepared by Seller (the "Final Schedule") setting
forth the Capital Expenditures Amount, if any, and the amount of Adjustment
Assets and Adjustment Liabilities as of Determination Time, as finally
determined by Seller. If Buyer and Seller cannot agree on the Capital
Expenditures Amount, if any, or the amount of the Adjustment Assets or
Adjustment Liabilities as of the Determination Time within 30 days of delivery
by Seller of the Final Schedule, the amounts thereof as of Determination Time
shall be determined by the Austin office of Price Waterhouse (the
"Accountants"), whose determination shall be final, conclusive and binding upon
Buyer and Seller. All reasonable costs and fees of such Accountants shall be
borne one-half by Buyer and one-half by Seller. The Final Purchase Price shall
be increased by an amount equal to the Capital Expenditures Amount, if any, as
shown on the Final Schedule or, if applicable, as determined by the
Accountants. To the extent that Adjustment Assets as shown on the Final
Schedule or, if applicable, as determined by the Accountants, exceed Adjustment
Liabilities as shown on the Final Schedule, or if applicable, as determined by
the Accountants, the Purchase Price shall be increased by such excess and the
Purchase Price as so adjusted, and as adjusted with respect to the Capital
Expenditures Amount, if any, shall be the Final Purchase Price. To the extent
that Adjustment Liabilities as shown on the Final Schedule, or if applicable,
as determined by the Accountants, exceed Adjustment Assets as shown on the
Final Schedule, or if applicable, as determined by the Accountants, the
Purchase Price shall be decreased by such excess and the Purchase Price as so
adjusted, and as adjusted with respect to the Capital Expenditures Amount, if
any, shall be the Final Purchase Price. On the 30th day (the "Final Adjustment
Payment Date") following receipt by Buyer of the Final
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Schedule, or, if applicable, such determination by the Accountants (i) if the
Preliminary Purchase Price exceeds the Final Purchase Price, Seller shall pay
to Buyer in immediately available funds the amount of such excess, or (ii) if
the Final Purchase Price exceeds the Preliminary Purchase Price, Buyer shall
pay to Seller in immediately available funds the amount of such excess. Any
amount due one party to the other pursuant to the immediately preceding
sentence which is not paid on or prior to the Final Adjustment Payment Date
shall bear interest until paid at a rate of eight percent (8%) per annum for
the period commencing on the day next succeeding the Final Adjustment Payment
Date and ending on the day on which such amount is actually paid (based upon a
365 day year and the actual number of days elapsed in such period).
(c) Nonsubscriber Accounts Receivable. With respect to
Nonsubscriber Accounts Receivable, the following will apply:
(i) For purposes of the Preliminary Schedule,
Nonsubscriber Accounts Receivable will be itemized by invoice number
and valued at 100% of face value.
(ii) Buyer will provide Seller with a schedule
specifying the actual dollar amount received by Buyer during the
90-day period following Closing with respect to each of the
Nonsubscriber Accounts Receivable itemized in the Preliminary
Schedule. If payment of less than 100% of such Nonsubscriber Accounts
Receivable has been received by Buyer during such period, then, as to
the unpaid Nonsubscriber Accounts Receivable, either (A) the
Adjustment Assets will be reduced by a mutually agreed upon amount for
purposes of calculating the Final Purchase Price, or (B) failing such
agreement within 30 days after delivery by Seller of the Final
Schedule, (x) the unpaid portion of the Nonsubscriber Accounts
Receivable will be reassigned to Seller (and deemed Excluded Assets)
and the Adjustment Assets will be reduced by 100% of the face value of
such reassigned Nonsubscriber Accounts Receivable for purposes of
calculating the Final Purchase Price and (y) Buyer will promptly remit
to Seller any amounts subsequently received by Buyer with respect to
such reassigned Nonsubscriber Accounts Receivables.
Section 2.4 Assumed Liabilities; Transfer Taxes. (a) Assumed
Liabilities. At the Closing, Buyer shall assume, and promise to pay and
perform in accordance with their terms, the liabilities and obligations of
Seller referenced below (collectively, the "Assumed Liabilities") in accordance
with an assumption agreement substantially in the form of Exhibit B attached
hereto (the "Assumption Agreement") to be executed and delivered by Buyer to
Seller at Closing:
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(i) all liabilities and obligations included in
the Adjustment Liabilities in accordance with Section 2.3;
(ii) all obligations of Seller to provide cable
television service to the System's subscribers arising after
the Determination Time;
(iii) all liabilities and obligations relating to
the period from and after the Determination Time in respect of
the Purchased Assets including, but not limited to those (A)
under the leases, contracts, agreements, Franchises, FCC
licenses, business licenses, easements, pole agreements,
permits and approvals described in Schedule 3.6, or any
amendment, modification or renewal of any of the foregoing
entered into after the Effective Date by Seller or PVI in the
ordinary course of business and in compliance with Section
5.2(a)(i), clause (A) or (B), (B) under any lease, contract,
agreement, easement or pole agreement relating to the System
and the Business entered into after the Effective Date by
Seller or PVI in the ordinary course of business and in
compliance with Section 5.2(a)(i), clause (A) or (B), and (C)
under any FCC license, business license, permit, approval or
similar right relating to the System and Business acquired or
received by Seller or PVI after the Effective Date the
ordinary course of business and in compliance with Section
5.2(a)(i), clause (A) or (B); and
(iv) all liabilities of Seller under purchase
orders and capital commitments made after the Effective Date
with respect to the System, in each case in the ordinary
course of business and not in violation of this Agreement, to
the extent that (A) the goods or services which are the
subject of such purchase orders have not been received by
Seller as of the Closing Date and (B) the Buyer is to receive
such goods or services after the Closing Date pursuant to such
purchase orders or capital commitments (provided, however,
that Buyer shall be required to assume such liabilities only
to the extent that Buyer actually receives such goods and
services after the Closing Date pursuant to such purchase
orders or capital commitments).
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This Agreement involves only the purchase by Buyer from Seller of the Purchased
Assets and, except for Buyer's assumption of the Assumed Liabilities as
specifically provided above in this Section 2.4, Buyer shall not assume, and
does not assume, any other liabilities or obligations of Seller of any kind or
nature, known, unknown, contingent or otherwise, including, but not limited to,
any liabilities or obligations of any kind (including those arising under any
Benefit Plans) to Seller's employees or former employees arising out of or
relating to their employment by Seller or any termination of their employment
with Seller. Such unassumed liabilities and obligations are referred to herein
as the "Excluded Liabilities."
(b) Transfer Taxes. Buyer agrees to pay and perform in
accordance with applicable law, all liabilities and obligations for state and
local sales, use, transfer, excise or license taxes, fees or charges arising
out of or relating to the sale and transfer of the Purchased Assets by Seller
and PVI to Buyer. Seller agrees to reimburse Buyer for one-half of all sales,
use, transfer, excise or license taxes, fees or charges required to be paid by
Buyer pursuant to the immediately preceding sentence, to the extent that the
same are not included as Adjustment Liabilities under Section 2.3.
Section 2.5 Allocation of Purchase Price. The aggregate amount
of the Purchase Price and the Assumed Liabilities shall be allocated among the
Purchased Assets in accordance with a schedule (the "Allocation Schedule") to
be prepared by Buyer and delivered to Seller for Seller's approval within 60
days after the Effective Date, which Allocation Schedule shall be attached to
and incorporated into this Agreement as Exhibit G. If prior to the Closing
Date, Buyer and Seller are unable to reach agreement as to such Allocation
Schedule (such agreement not to be unreasonably withheld), then each party
shall allocate the Purchase Price and the Assumed Liabilities as it deems
appropriate, and there shall be no such Exhibit G. The final allocations
agreed upon by the parties, if any, determined as described in this Section
2.5, will comply with the provisions of Treas. Reg. Section 1.1060-1T, and
Buyer and Seller shall, for purposes of all federal, state, and other income
tax returns (i) adopt the allocation as set forth on Exhibit G, (ii) execute
any forms required by Section 1060 of the Internal Revenue Code of 1986, as
amended, and (iii) not take any position inconsistent with the allocation in
Exhibit G upon examination of any tax return or refund claim, in any
litigation, or otherwise.
2.6 Catawba Upgrade Extension; Upgrade Design and Construction.
(a) Upgrade Extension. Buyer and Seller agree that promptly after the
Effective Date they will each use reasonable commercial efforts to seek and
obtain an extension of time in which to comply with the
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requirements (the "Catawba Franchise Requirement System Upgrade") of Article
IX, Section A of that certain Franchise Agreement dated as of February 20, 1995
between Prime Cable of Hickory, L.P. (d/b/a Catawba Valley Cable TV) and
Catawba County, North Carolina ("Catawba County").
(b) Upgrade Design and Construction. Seller agrees that after the
expiration or earlier termination of the Inspection Period, it will cooperate
with Buyer in connection with (i) Buyer's design of the plans and
specifications which Buyer intends to utilize in completing the Catawba
Franchise Requirement System Upgrade after Buyer's acquisition of the System
hereunder, and (ii) the construction of the Catawba Franchise Requirement
System Upgrade plant and facilities; provided, that: (A)(x) (1) Seller shall
not be required to expend any funds pursuant to clause (i) of this Section
2.6(b) unless Buyer specifically requests in writing that Seller make such
expenditures, and (2) if Catawba County grants an extension of time of at least
five months in which to complete the Catawba Franchise Requirement System
Upgrade (the "Catawba Extension"), then Seller shall not be required to expend
any funds pursuant to clause (ii) of this Section 2.6(b) unless Buyer
specifically authorizes Seller in writing to make such expenditures, and (y) if
Catawba County does not grant the Catawba Extension on or before January 1,
1997, then Seller will commence work on the Catawba Franchise Requirement
System Upgrade in accordance with Buyer's plans and specifications as presented
to Seller by Buyer; and (B) in the event of either (x) or (y) above, Buyer
agrees to reimburse Seller for Agreed System Upgrade Expenditures in accordance
with the remainder of this Section 2.6(b). Buyer agrees to reimburse Seller
from time to time, within 10 Business Days of Buyer's receipt of Seller's
written request for reimbursement (accompanied by supporting invoices or
documentation), for all Agreed System Upgrade Expenditures in excess of
$150,000 ("Excess Expenditures") which Seller makes (A) pursuant to clause (i)
of this Section 2.6(b), at Buyer's request, and (B) pursuant to clause (ii) of
this Section 2.6(b) which are in excess of the amount which Seller would have
expended in constructing the same portion of the Catawba Franchise Required
System Upgrade as constructed by Seller under clause (ii) of this Section
2.6(b) in accordance with Seller's plans and specifications to build a 450mhz
plant upgrade, rather than a 550mhz plant upgrade in accordance with Buyer's
plans and specifications as required pursuant to clause (ii) of this Section
2.6(b). In the event that Buyer and Seller cannot agree on the amount of any
such Excess Expenditures within five Business Days from the date of Buyer's
receipt of a request for reimbursement from Seller, the amount of such Excess
Expenditures shall be determined by a qualified, third party firm of engineers
which is not affiliated with Buyer, Seller or any of their respective
affiliates, which shall be jointly selected by Buyer and Seller within 10
Business Days of such date of such receipt. All reasonable costs and fees of
such third party firm of engineers shall be borne one-half by Buyer and
one-half by Seller. Buyer agrees to pay the amount of such Excess
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Expenditures, as finally determined, to Seller within five Business Days from
the determination thereof by Buyer and Seller or by such third party firm of
engineers, as the case may be.
(c) Final Reimbursement. The parties agree that if the Closing
shall occur under this Agreement, the Preliminary Schedule shall set forth the
amount of payments made by Seller prior to the Closing for all Agreed System
Upgrade Expenditures, which will be itemized in an attachment to such
Preliminary Schedule, and Seller will certify that such items are for work
performed for or goods received by Seller, are part of the Purchased Assets and
have been fully paid for by Seller prior to the Closing. Agreed System Upgrade
Expenditures accrued but not paid by Seller prior to the Closing, and otherwise
meeting all of the requirements of the preceding sentence, will be treated as
having been fully paid prior to Closing; provided, that Seller shall at all
times remain obligated to pay such accrued expenditures in full in accordance
with the terms thereof. The term "Capital Expenditures Amount," as used in
this Agreement, shall mean the aggregate amount of all Agreed System Upgrade
Expenditures for which Seller has not been reimbursed by Buyer prior to the
Closing. The parties agree that if the Closing does not occur under this
Agreement, Buyer shall reimburse Seller for an amount (the "Plant Reimbursement
Amount") equal to the sum of (A) all expenditures made by Seller at Buyer's
request pursuant to clause (i) of Section 2.6(b) and (B) the difference, as
determined in good faith by Seller and Buyer, between (x) the expenditures made
by Seller pursuant to clause (ii) of Section 2.6(b) and (y) the funds which
Seller would have expended in constructing the same portion of the Catawba
Franchise Required System Upgrade as constructed by Seller under clause (ii) of
Section 2.6(b) in accordance with Seller's plans and specifications to
construct a 450mhz plant upgrade, rather than a 550mhz plant upgrade in
accordance with Buyer's plans and specifications as required pursuant to said
clause (ii) of Section 2.6(b). In the event that Buyer and Seller cannot agree
on the Plant Reimbursement Amount within 30 days from the Termination Date,
such Plant Reimbursement Amount shall be determined by a qualified, third party
firm of engineers which is not affiliated with Buyer, Seller or any of their
respective affiliates, which shall be jointly selected by Buyer and Seller
within 45 days from the Termination Date. All reasonable costs and fees of
such third party firm of engineers shall be borne one-half by Buyer and
one-half by Seller. Buyer agrees to pay the Plant Reimbursement Amount to
Seller within five Business Days from the determination thereof by Buyer and
Seller, or by such third party firm of engineers, as the case may be.
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ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 In General. Seller makes the representations and
warranties set forth below in this Article Three to Buyer to induce Buyer to
enter into this Agreement.
Section 3.2 Organization and Authority. Seller is a limited
partnership duly formed, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to transact business in the
State of North Carolina as, and is in good standing under the laws of North
Carolina as, a foreign limited partnership, and has all requisite partnership
power and authority to execute and deliver this Agreement and perform its
obligations under this Agreement. This Agreement has been duly authorized,
executed and delivered by Seller and is a valid and binding agreement of
Seller, enforceable against Seller in accordance with its terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting generally the enforcement of creditor's
rights and remedies and general principles of equity, including limitations on
the availability of the remedy of specific performance or injunctive relief
regardless of whether performance or injunctive relief is sought in a
proceeding at law or in equity.
Section 3.3 No Conflicts or Breach. Provided the consents,
approvals and filings described in Schedule 3.3 are obtained and made at or
prior to the Closing, Seller's execution, delivery and performance of this
Agreement does not and will not (i) conflict in any material respect with, or
result in a material breach of, (ii) constitute a material default by Seller
under, (iii) give any third party the right to accelerate any obligation under,
(iv) result in the termination, suspension, modification, impairment or
violation of, or (v) result in the creation of any Lien upon:
(A) the certificate of limited partnership or partnership
agreement, as amended, of Seller;
(B) any Legal Requirement, judgment or order to which Seller,
the System, the Business or any of the Purchased Assets is subject;
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(C) any lease, contract, agreement, instrument,
Franchise, license or permit to which Seller is a party or by which,
or to which, Seller, the System, the Business or the Purchased Assets
are subject or bound; or
(D) the Purchased Assets.
The consents, approvals and filings described in Schedule 3.3 and identified
with an asterisk shall be deemed "Material Required Seller Consents" for
purposes of this Agreement.
Section 3.4 Financial Statements. Attached as Schedule 3.4(a)
are correct and complete copies of Seller's audited financial statements,
including its balance sheets, profit and loss statements, statements of
partners' equity and statements of cash flows, at December 31, 1994 and 1995
and for the fiscal years then ended (the "Audited Financial Statements"), and
its unaudited balance sheet (the "Unaudited Balance Sheet") and profit and loss
statement at and for the four month period ended April 30, 1996 (collectively,
as to all of the foregoing, the "Financial Statements"). The Audited Financial
Statements have been certified without qualification by Ernst & Young,
independent certified public accountants for Seller. The Financial Statements
have been prepared in accordance with the books and records of Seller and in
accordance with GAAP (except as noted therein) on a consistent basis throughout
the periods referenced above and with each other, except that the unaudited
Financial Statements may not contain footnotes required by GAAP. The Financial
Statements fairly present the financial condition and operating results and,
with respect to the Audited Financial Statements only, Seller's cash flows, as
of the dates and for the periods indicated therein of Seller, subject only with
respect to the unaudited Financial Statements, to normal year-end audit
adjustments, none of which, to Seller's knowledge, will be material. Attached
as Schedule 3.4(b) is a schedule of the material assets of the System and the
Business as of April 30, 1996.
Section 3.5 Material Adverse Changes. Except as disclosed in
Schedule 3.5 and except as contemplated or permitted by this Agreement, from
April 30, 1996 the Business has been operated in the ordinary course and there
has not occurred (i) any material adverse change in the assets or results of
operations or cash flows of the System or the Business, taken as a whole; (ii)
any salary or compensation increases to any employee of the System and the
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Business, except in the ordinary course of business consistent with past
practices; (iii) any theft, damage, destruction or casualty loss materially and
adversely affecting the System, the Business or any of the material Purchased
Assets, taken as a whole; (iv) any sale of material assets of the System and
the Business, except in the ordinary course of business; (v) any amendment or
termination of any Franchise, System Right or System Contract; (vi) any waiver
or release of any material right or claim of Seller relating to the System;
(vii) any other material transaction affecting or involving the System and the
Business, except in the ordinary course of business; or (viii) any agreement by
Seller to take any of the actions described in the foregoing or any event which
has occurred and which, to Seller's knowledge, is reasonably likely to result
in any of the foregoing.
Section 3.6 Information Regarding System and Business. (a) In
General. Schedule 3.6 to this Agreement sets forth:
(i) a listing of each lease, contract, agreement
or instrument to which Seller or PVI is a party, or to or by which
Seller or PVI is subject or bound, as of the Effective Date and which
relates to the System, the Business or the Purchased Assets (the
"System Contracts"), except for those which are Franchises or System
Rights (as defined in Section 3.6(a)(ii) below) and except for those
(A) which (x) can be canceled without penalty by Seller or PVI upon
not more than 30 days prior notice and (y) provide for aggregate
monthly payments by Seller or PVI of less than $25,000 or (B) under
which the aggregate remaining payment obligations of Seller or PVI as
of the Effective Date is less than $25,000;
(ii) a listing of all franchises, ordinances and
the like pursuant to which a Governmental Authority has granted Seller
permission to provide cable television services to subscribers within
a given area (" Franchises"), all FCC licenses and all business
licenses (except for those of a nature generally and routinely
required to be obtained and maintained by businesses operating in the
State of North Carolina), easements, pole agreements, permits or other
evidences of approval of third parties or any governmental or
administrative body (the "System Rights") held by Seller or PVI, to
which Seller or PVI is a party, or to or by which Seller or PVI is
subject or bound, as of the Effective Date and which relate to the
System, the Business or the Purchased Assets;
(iii) a brief description of all "employee benefit
plans" (within the meaning of Section 3(3) of ERISA) and any other
employee benefit or fringe benefit arrangements, contracts, or
policies (other than those merely involving the regular payment of
wages), established, maintained or contributed to by Seller or its
affiliates for the benefit of current and former employees of the
System and the Business (" Benefit Plans"), each of
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which Buyer acknowledges will be terminated by Seller as to such
employees as of the Closing;
(iv) a listing as of the Effective Date of all
employees of Seller and their respective dates of employment and
hourly wage or salary;
(v) a listing of all material patents,
copyrights, trademarks, trade names and assumed names owned by Seller
or PVI as of the Effective Date of this Agreement and which are used
in connection with the operation of the System and the Business;
(vi) the System's rate structure as of the
Effective Date;
(vii) a listing of all the programming (by tier)
currently offered to subscribers of the System; and
(viii) a brief description of all real property
owned by Seller.
True and complete copies of all the documents referenced in Schedule 3.6 have
been delivered by Seller to Buyer, except that in the case of standard form
agreements which are so identified as such on Schedule 3.6, Seller has
delivered to Buyer a true and correct copy of at least one copy of each such
standard form agreement and made available to Buyer at the System offices true
and correct copies of all the executed standard form agreements.
(b) Status of Franchises, System Contracts and System
Rights. Each of the Franchises, Seller Contracts and System Rights is valid,
in full force and effect and enforceable in accordance with its terms against
Seller or PVI, as the case may be, and, to the knowledge of Seller, against the
parties thereto other than Seller or PVI (except, in each such case, as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting generally the enforcement of creditor's rights and
remedies and general principles of equity, including limitations on the
availability of the remedy of specific performance or injunctive relief
regardless of whether performance or injunctive relief is sought in a
proceeding at law or in equity); and Seller or PVI has fulfilled when due, or
has taken all action necessary to enable it to fulfill when due, all of its
obligations thereunder. There has not occurred any material breach by Seller or
PVI, nor to the knowledge of Seller, by any party thereto other than Seller or
PVI, under any of the Franchises, Seller Contracts or System Rights. Neither
Seller or PVI nor, to the
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knowledge of Seller, any party thereto other than Seller or PVI, is in arrears
in the performance or satisfaction of its obligations under any of the
Franchises, System Rights or Seller Contracts and no waiver or indulgence has
been granted any of the parties thereto.
Section 3.7 Title to Assets. Except for Permitted Liens and
those Liens described in Schedule 3.7, Seller and PVI have good and marketable
title to all of the Purchased Assets, free and clear of all Liens. Except as
listed on Schedule 3.7, Seller has not signed any Uniform Commercial Code
financing statement or any security agreement or mortgage or similar agreement
authorizing any Person to file any financing statement (other than filings made
only for information purposes and not relating to any security interest) or
claim any security interest or lien with respect to any of the Purchased
Assets. Neither Seller nor PVI makes any warranties, express or implied,
including but not limited to, implied warranties of merchantability and fitness
for a particular purpose, with respect to the condition of the tangible
Purchased Assets.
Section 3.8 Litigation. Except as is disclosed in Schedule 3.8,
there are no lawsuits or legal proceedings or, to Seller's knowledge,
investigations, pending, or to Seller's knowledge threatened, (i) which seek or
could result in the modification, revocation, termination, suspension or other
limitation of any of the Franchises, System Contracts or System Rights, (ii)
which could adversely affect the ability of Seller to perform its obligations
under this Agreement, or the ability of Buyer to operate the System or the
Business after the Closing, or (iii) which otherwise relate to, involve or
affect the System, the Business or the Purchased Assets; nor are there any
judgments or orders outstanding (A) requiring Seller to take any action of any
kind with respect to the Purchased Assets, the Business or the System, or (B)
which otherwise relate to, involve or affect the System, the Business or the
Purchased Assets. Seller is not in material default under or material violation
of, and no event or condition exists which, with notice or lapse of time or
both, could become or result in a material default under or a material
violation of, any judgment or order of any court or other Governmental
Authority.
Section 3.9 Labor Contracts. There are no collective bargaining
agreements, and no contracts or agreements with labor unions, relating to,
involving or affecting the employees of the System and the Business to which
Seller is a party or by which it is bound, and Seller has no obligation to
bargain with any labor organization with respect to any such persons. There are
not pending any unfair labor practice charges against Seller, nor any demand
for recognition, nor any other request or demand from a labor organization for
representative status with respect to any persons employed by Seller.
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Section 3.10 Finders and Brokers. Except for an agreement (the
"Waller Agreement") between Seller and Waller Capital Corp. ("Waller")
pursuant to which Seller will pay a fee to Waller upon consummation of the
Closing hereunder, (i) Seller has not entered into any contract, arrangement or
understanding with any Person which may result in an obligation of Buyer to pay
any finder's fees, brokerage or agents commissions or other like payments in
connection with the negotiations leading up to this Agreement or the
consummation of the transactions contemplated by this Agreement, and (ii)
Seller is not aware of any claim or basis for any claim for payment of any
finder's fees, brokerage or agent's commissions or like payment in connection
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
Section 3.11 Compliance with Laws. (a) In General.
(i) Subject to Section 5.6, and except with respect to the regulatory status
of the System under, or Seller's compliance with, the FCC rules implementing
the rate regulation provisions of the Communications Act (as to which Seller
makes no representations and warranties in this Agreement other than in Section
3.11(b)), Seller has complied in all material respects with, and is in material
compliance with, and the System and the Business has complied in all material
respects with and is in material compliance with, and Seller has constructed,
maintained and operated, and is constructing, maintaining and operating, the
System and the Business in material compliance with, all applicable laws,
including the Communications Act, the Copyright Act of 1976, the rules and
regulations of the FCC, the U.S. Copyright Office, the Register of Copyrights
and the Copyright Tribunal (in each case as the same are currently in effect).
Except as set forth in Schedule 3.11(a), a request for renewal has been filed
timely under Section 626(a) of the Cable Communications Policy Act of 1984 with
the proper Governmental Authority with respect to all cable television
franchises of the Business expiring within 36 months after the Effective Date.
(ii) All reports, notices, forms and filings, and all fees
and payments, required to be given to, filed with, or paid to, any Governmental
Authority by Seller under all applicable laws have been timely and properly
given and made by Seller, and are complete and accurate in all material
respects, in each case as required by applicable law, including (A) all cable
television registration statements, periodic reports and aeronautical frequency
usage notices, (B) reports and filings required by the FAA, and (C) for each
relevant semiannual reporting period, with the United States Copyright Office,
all required Statements of Account in true and correct form and copyright
royalty fee payments in correct amounts relating to the System's carriage of
television broadcast signals and other programming.
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(iii) Seller has not received any notice (written or oral)
from any Governmental Authority or any other Person that it, the System or the
Business, or its ownership and operation of the System or the Business, is in
material violation of any applicable law, and Seller knows of no basis for the
allegation of any such violations.
(iv) All Benefit Plans are in material compliance with all
applicable requirements of ERISA, the Code and any other applicable Legal
Requirement. Each Benefit Plan which is intended to qualify or operate under a
specific statutory provision of the Code or any other applicable Legal
Requirement is qualified or operates properly in all material respects under
that statutory provision. Seller has performed all material obligations
required to be performed by it under ERISA, the Code and any other applicable
Legal Requirement and under the terms of each Benefit Plan. During the seven
year period immediately preceding the Closing Date, neither the Seller nor any
of its affiliates has established, maintained or contributed to a
"multiemployer plan" (within the meaning of Section 3(37) of ERISA) or a plan
subject to Title IV of ERISA for the benefit of current and former employees of
the System and the Business. Seller has complied in all material respects with
all applicable Legal Requirements relating to the employment of labor,
including ERISA, continuation coverage requirements with respect to group
health plans, and those relating to wages, hours, unemployment compensation,
worker's compensation, equal employment opportunity, age and disability
discrimination, immigration control and the payment and withholding of taxes.
No reportable event, within the meaning of Title IV of ERISA, has occurred and
is continuing with respect to any Benefit Plan. No prohibited transaction,
within the meaning of Title I of ERISA, has occurred with respect to any
Benefit Plan, and no material accumulated funding deficiency (as defined in
Title I of ERISA) or withdrawal liability (as defined in Title IV of ERISA)
exists with respect to any Benefit Plan.
(b) Rate Regulation Information. Included in Schedule 3.11(b) is
an accurate description of the regulatory status of the System under the FCC
rules implementing the rate regulation provisions of the Communications Act,
described by community unit, including (i) whether the local franchising
authority has been certified to regulate the rates for the basic tier and
equipment, (ii) whether any complaints have been filed subjecting the System's
rates for cable programing services to regulation by the FCC in such community
unit and, if so, the date of the first such complaint, (iii) the actions that
have been taken in anticipation of or response to regulation for each community
unit, including rate changes initiated and forms filed with the local
franchising authorities or the FCC, as the case may be, and (iv) the status of
the regulatory response. Seller has delivered to Buyer complete and correct
copies of all FCC Forms 383 and
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1200 filed with the local franchising authorities and/or the FCC with respect
to the System, copies of all material correspondence with any Governmental
Authority relating to rate regulation generally or specific rates charged to
subscribers to the System, and any documentation which Seller has used to
support an exemption from the rate regulation provisions of the Communications
Act claimed by Seller with respect to the System.
Section 3.12 Tax Returns. Seller has filed timely in true and
correct form all federal, state, local and foreign Tax Returns required to be
filed. All Tax Returns of Seller filed after the Effective Date and prior to
the Closing will be made in accordance with applicable law and will be
consistent with the past practices of Seller. Seller has timely paid all Taxes
which have become due and payable as shown on any such Tax Return. Seller has
received no notice of, nor does Seller have any knowledge of, any notice of
deficiency or assessment of proposed deficiency or assessment from any Taxing
governmental authority. Except as disclosed in Schedule 3.12, there are no
audits, examinations, requests for information or other administrative
proceedings pending with respect to Seller and there are no outstanding
agreements or waivers by or with respect to Seller that extend the statutory
period of limitations applicable to any federal, state, local or foreign Tax
Returns or Taxes for any period. To Seller's knowledge, there are no determined
Tax deficiencies or proposed Tax assessments against Seller. Seller has not
engaged in any sales or purchases of assets in the State of North Carolina
since January 1, 1995, other than (i) sales of obsolete equipment and inventory
in the ordinary cause of business, and (ii) purchases of inventory and
equipment in the ordinary course of business. Seller is not a "foreign person"
under Section 1445(f)(3) of the Code and Treasury Regulation Section
1.1445-2(b)(2)(i). Seller has not entered into any closing agreements or other
agreements with any Taxing authority relating to the payment of Taxes by Seller
which if not timely paid or discharged may result in the imposition of any Lien
on any of the Purchased Assets.
Section 3.13 Bonds. Except as set forth in Schedule 3.13, there
are no franchise, construction, fidelity, performance or other bonds posted or
required to be posted by Seller in connection with the System, the Business or
the Purchased Assets.
Section 3.14 Real Property. (a) Real Property Owned/Leased.
Seller does not own any real property relating to the System except as
described in Schedule 3.6(a)(viii) (the "Owned Real Property"), which briefly
describes
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the use of such real property by Seller in the operation of the System; and
Seller does not lease any real property relating to the System except for the
leased real property described in Schedule 3.6(a)(i) (the "Leased Real
Property"), which briefly describes the use of such real property by Seller in
the operation of the System. The Owned Real Property and the Leased Real
Property have access to such public roads, utilities and other services as are
currently used in the operation of the System by Seller thereon. Except as set
forth in Schedule 3.8, there are not pending or, to Seller's knowledge,
threatened in writing, any condemnation actions or special assessments or any
pending proceedings for changes in the zoning with respect to the Owned Real
Property or the Leased Real Property, and Seller has not received any written
notice from any Governmental Authority of its intention to take or use any of
the Owned Real Property or the Leased Real Property. All notices or orders to
Seller to correct violations of Legal Requirements issued by any Governmental
Authority having jurisdiction against or affecting any of the Real Property
have been complied with.
(b) Notice of Investigations. Seller has received no
notice that it is the subject of any "Superfund" evaluation or investigation
with respect to the Owned Real Property or the Leased Real Property, and has
received no notice that it is the subject of any investigation or proceeding of
any Governmental Authority evaluating whether any remedial action is necessary
to respond to any release of Hazardous Substances on or in connection with the
Owned Real Property or the Leased Real Property.
(c) Environmental Compliance. With respect to the Owned
Real Property and the Leased Real Property, Seller is in compliance in all
material respects with legal requirements applicable to Seller relating to
Seller's actual or threatened emissions, discharges or releases of Hazardous
Substances into ambient air, surface water, ground water, land or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances, and all other material
environmental, health or safety legal requirements applicable to Seller. Seller
has not received notice of, and has no knowledge of circumstances relating to,
any past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans, including, but not limited to, the
presence, use, generation, manufacture, disposal, release or threatened release
of any Hazardous Substances upon or from the Owned Real Property or the Leased
Real Property, which could interfere with or prevent continued material
compliance, or which are reasonably likely to give rise to any material
liability, based upon or related to the processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, of any Hazardous
Substance, from or attributable to the Owned Real Property or the Leased Real
Property.
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(d) Hazardous Substances. "Hazardous Substances" means
(i) any "hazardous waste" as defined by the Resource Conservation and Recovery
Act of 1976 (RCRA) (42 U.S.C.A. Section Section 6901 et seq.), as amended, and
rules and regulations promulgated thereunder; (ii) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C.A. Section Section 9601 et seq.) (CERCLA), as amended,
and rules and regulations promulgated thereunder; (iii) any substance regulated
by the Toxic Substances Control Act (TSCA) (42 U.S.C. Section 2601 et seq.),
as amended, and rules and regulations promulgated thereunder; (iv) asbestos
requiring abatement, removal or treatment pursuant to the requirements of any
environmental laws; (v) polychlorinated biphenyls; (vi) any substances
regulated under the provisions of Subtitle I of RCRA relating to underground
storage tanks; (vii) any substance the presence, use, treatment, storage or
disposal of which on the Leased Real Property is prohibited by any Legal
Requirements; and (viii) any other substance which by any Legal Requirement
requires special handling, reporting or notification of any governmental
authority in its collection, storage, use, treatment or disposal.
Section 3.15 Insurance. A description of all insurance policies
owned or maintained by Seller and relating to the System or the Purchased
Assets is set forth in Schedule 3.15.
Section 3.16 Sufficiency of Purchased Assets. The Purchased
Assets (including leasehold interests in assets leased from third parties),
along with (i) the Excluded Assets, and (ii) the assets described on Schedule
3.16 (the "Other Required Assets"), constitute all of the assets necessary to
operate the System as it is presently being operated. Seller has no properties
or assets used or held for use primarily in the Business which are not included
in the Purchased Assets, other than the Excluded Assets and the Other Required
Assets.
3.17 Accounts Receivable. Except as relates to the sale of
advertising for other cable television operators, the Accounts Receivable have
not been assigned to or for the benefit of any other Person. The Accounts
Receivable arose from bona fide transactions in the ordinary course of business
of Seller. Seller has established an adequate reserve for bad debts,
consistent with GAAP.
3.18 Inventory. Except for increases required in connection with
the Catawba Franchise Required System Upgrade, and subject to Section
5.2(a)(v), Seller has an inventory of spare parts, test and other equipment,
and other materials relating to the Systems, of the type and nature and
maintained at a level consistent with Seller's prior practice.
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3.19 Competitors and Overbuilds. To the knowledge of Seller,
except as set forth in Schedule 3.19 and except for authorizations of general
applicability in the industry (e.g., a blanket Section 214 authorization which
covers all local exchange carriers which want to build cable plant in any area
outside of their local telephone service area), no Person has been granted by
any Franchise Authority or any other governmental cable television licensing
agency, and no Person has submitted a proposal for the issuance by any
Franchising Authority or any other governmental cable television licensing
agency, of (i) any franchise, permit, license, authorization (including any
authorization under Section 214 of the Communications Act), contract or right,
or (ii) any pole attachment agreement or right to use utility easements,
pursuant to which such Person in either case is or may become entitled to
operate a cable television system, subscription television system, multi point
distribution system or private operational fixed microwave service, in all or
any portion of the areas presently served by the System. Except as set forth
in Schedule 3.19, there has not been any overbuilding of the System.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1 In General. Buyer makes the following
representations and warranties set forth below in this Article Four to Seller
to induce Seller to enter into this Agreement.
Section 4.2 Organization and Authority. Buyer is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified to transact business in the
State of North Carolina as, and is in good standing under the laws of the State
of North Carolina as, a foreign limited partnership, and has all requisite
partnership power and authority to execute and deliver this Agreement and
perform its obligations under this Agreement. This Agreement has been duly
authorized, executed and delivered by Buyer and is a valid and binding
agreement of Buyer enforceable against Buyer in accordance with its terms,
except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting generally the enforcement
of creditors' rights and remedies and general principles of equity, including,
but not limited to, any limitations on the availability of the remedy of
specific performance or injunctive relief regardless of whether performance or
injunctive relief is sought in a proceeding at law or in equity.
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Section 4.3 No Conflicts or Breach. Provided the consents,
approvals and filings described in Schedule 4.3 are obtained and made at or
prior to Closing, Buyer's execution, delivery and performance of this Agreement
do not and will not, without regard to requirements of notice, passage of time
or actions of other Persons, (i) conflict in a material respect with, or result
in a material breach of, (ii) constitute a material default by Buyer under,
(iii) give any third party the right to accelerate any obligation under, or
(iv) result in the termination, suspension, modification, impairment or
violation of, or result in the creation of any Lien (other than Liens required
to be granted by Buyer on some or all of its assets to one or more third party
lenders in connection with Buyer's financing of its purchase of the Purchased
Assets) upon:
(A) the certificate or agreement of limited
partnership, as amended of Buyer;
(B) any Legal Requirement, judgment or order to
which Buyer or any of its assets or business are subject;
(C) any lease, contract, agreement, instrument,
franchise, license or permit to which Buyer is a party or by which, or
to which Buyer, its assets or business are bound or subject; or
(D) Buyer's assets.
The consents, approvals and filings described in Schedule 4.3 and identified
with an asterisk shall be deemed "Material Required Buyer Consents" for
purposes of this Agreement.
Section 4.4 Litigation. Except as is disclosed in Schedule 4.4,
there are no lawsuits or legal proceedings pending, or to Buyer's knowledge
threatened, which could adversely affect the ability of Buyer to perform its
obligations under this Agreement, nor are there any judgments or orders
outstanding against Buyer that could have such affect.
Section 4.5 Finders and Brokers. Buyer has not entered into any
contract, arrangement or understanding with any Person which will result in the
obligation of Seller to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, and,
except for the Waller Agreement, Buyer is not aware of any claims or basis for
any claim for
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payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transaction hereby.
ARTICLE FIVE
COVENANTS AND CONDUCT OF BUSINESS AND
TRANSACTIONS PRIOR TO CLOSING
Section 5.1 Covenants of Buyer. (a) Buyer's Negative Covenants.
From the Effective Date through the Closing, without the prior written consent
of Seller, Buyer shall not take any action that would cause the representations
and warranties made by Buyer in this Agreement not to be true, correct and
accurate, in all material respects (determined as provided in Section 7.4), as
of the Closing.
(b) Receipt of Consents. From the end of the Inspection
Period (or the early termination thereof, if any) through the Closing, Buyer
shall use reasonable commercial efforts to seek, obtain and make all the
consents, approvals and filings described in Schedule 4.3, and shall use
reasonable commercial efforts to assist Seller to seek, obtain and file all
the consents, approvals and filings described in Schedule 3.3: provided,
however, that Buyer shall have no obligation to accept, agree or accede to any
modifications or amendments of, or conditions to the transfer to it of, any of
the Franchises, System Contracts or System Rights that are imposed upon Buyer
and that are not acceptable to it in its sole discretion, except for Permitted
Modifications. "Permitted Modifications" means modifications to any single
Franchise, System Contract or System Right having an aggregate adverse
financial effect on Buyer of not more than $5,000 or modifications to
Franchises, System Contracts and System Rights which in the aggregate as to all
Franchises, System Contracts and System Rights modified have an aggregate
adverse financial effect on Buyer of not more than $50,000. Buyer shall furnish
all non-confidential information regarding itself and its business as is
reasonably required by the approving Person, Franchising Authority or other
governmental authority from whom, or with whom, a consent, approval or filing
described in Schedule 3.3 is sought or must be made by Seller. If requested by
Seller, Buyer agrees to be represented, at Buyer's expense, at any such
meetings or hearings as may be scheduled to consider any application or request
for any of the consents, approvals and filings described in Schedule 3.3 to be
sought or made by Seller.
(c) Access to Information. Subsequent to the Closing,
Buyer shall, upon reasonable prior notice and without undue interruption to the
operation of the Business, permit
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the authorized representatives of Seller to have reasonable access during
normal business hours to those of the properties, records and documents of
Buyer relating to the System, the Purchased Assets and Business which are
necessary for the purposes of preparing the Final Schedule, preparing tax
returns required to be filed by or on behalf of Seller and any of its
Affiliates or partners, or defending claims asserted against any of them with
respect to the System, the Purchased Assets and the Business or this Agreement,
or as otherwise required by law; provided, however, that in no event shall
Buyer be obligated to comply with any of the foregoing if such compliance will
give Seller access to any information which Buyer, or any of its Affiliates, is
required by contract or otherwise to keep confidential. Buyer agrees that with
respect to such confidential information, Buyer shall, upon the specific
request of Seller, use reasonable commercial efforts to seek the consent of
such Persons as may be necessary to permit Seller access to such information
without violating the confidential nature thereof.
Section 5.2 Covenants of Seller. (a) Sellers' Negative
Covenants. From the Effective Date through the Closing, without the prior
written consent of Buyer, unless otherwise required or permitted by any other
provision of this Agreement, Seller shall not (i) take any action which would
cause the representations and warranties made by Seller in this Agreement not
to be true, correct and accurate, in all material respects (determined as
provided in Section 6.4), as of the Closing; provided, however, that Seller
shall be entitled to enter into or obtain new contracts, agreements,
commitments, understandings, licenses, franchises, certificates of public
convenience and necessity, permits, authorizations, ordinances or
registrations, or renew any such contract, agreement, commitment,
understanding, license, franchise, certificate of public convenience or
necessity, permit, authorization, ordinance or registration, that, in such
cases either (A) would be included in the Purchased Assets or the Assumed
Liabilities and involve payments by Buyer after the Closing not in excess of
$50,000 in the aggregate for all of the foregoing, or (B) (x) can be terminated
without liability to Buyer on not less than 30 days' notice after the Closing
and (y) involve monthly payments by Buyer after the Closing not in excess of
$50,000 in the aggregate for all of the foregoing; provided, further, that
Seller may incur obligations or liabilities for which it will remain
responsible after the Closing Date and which Buyer shall not have any
obligation to assume; (ii) modify, terminate, renew, suspend or abrogate any
Seller Contract, other than in the ordinary course of business; (iii) (A)
terminate any Franchise or System Right or (B) modify, renew, suspend or
abrogate any Franchise or System Right, other than in the ordinary course of
business; (iv) engage in any marketing, subscriber installation or collection
practices that are inconsistent with such practices of Seller for the periods
covered by the Financial Statements; (v) dispose of any assets of the System,
except for (A) the sale or transfer prior to the Closing of
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inventory in excess of that required in the ordinary cause of business of the
System which Seller ordered or acquired prior to the Effective Date in
connection with the Catawba Franchise Requirement System Upgrade and (B) sales
of non-material assets in the ordinary course of business and consistent with
past practices (including practices during the periods covered by the Financial
Statements); (vi) make or commit to make any capital expenditures or purchase
order with respect to the System or the Business, except (A) in connection with
the Catawba Franchise Required System Upgrade and (B) in the ordinary course of
business consistent with past practices (including practices during the periods
covered by the Financial Statements); (vii) grant or agree to grant any
increase in the rates of salaries or compensation payable to employees of the
System (other than as required by law and regularly scheduled bonuses and
increases in the ordinary course of business or one- time bonuses to induce
employees to remain employed with Seller through the Closing Date); or (viii)
provide for any new and material pension, retirement or other employment
benefits for employees of the System or any material increase in any existing
benefits (other than as required by law). Anything to the contrary in the
foregoing notwithstanding, Seller agrees that it will (i) consult with Buyer
prior to Seller's execution and delivery of any new retransmission consent
agreements or any material amendments to any of Seller's existing
retransmission consent agreements, and that it will promptly deliver to Buyer
copies of any must-carry notices or any other notices or written correspondence
received by Seller with respect to the carriage of broadcast signals on the
System prior to the Closing, and (ii) not renew any retransmission consent
agreement for a period longer than one year without the prior written consent
of Buyer, provided, that Seller shall be entitled to renew existing
retransmission consent agreements for periods in excess of one year on the same
or substantially similar terms to those in effect on the Effective Date.
(b) Seller's Affirmative Covenants. From the Effective
Date through the Closing, unless otherwise required or permitted by any other
provision of this Agreement, Seller shall (i) operate the Business and the
System in the ordinary course of business; (ii) use reasonable efforts to
preserve the goodwill and business of the subscribers, advertisers, employees,
suppliers and others having business relations with the System; (iii) continue
to construct franchise required line extensions and otherwise construct and
maintain cable plant in the ordinary course of business consistent with past
practices; Seller shall deliver to Buyer a copy of Seller's monthly capital
expenditures report; (iv) subject to matters, such as a casualty, over which
Seller has no control, maintain the Purchased Assets in good operating
condition (normal wear and tear excepted); (v) maintain or enhance all bonds
and casualty and liability insurance as in effect on the date of this
Agreement; (vi) keep all of its business books, records and files
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in the ordinary course of business in accordance with past practices, and pay,
in the ordinary course of business consistent with past practices, all of its
accounts payable and other debts, liabilities and obligations relating to the
Business and the System, other than amounts disputed in good faith; (vii)
continue to implement its procedures for disconnection and discontinuance of
service of subscribers whose accounts are delinquent in accordance with those
in effect on the date of this Agreement; (viii) maintain inventories of
equipment, cable and supplies at a level substantially consistent with the
level of inventory maintained by Seller during the 12 months preceding the
Effective Date, except for inventory in excess of that required in the ordinary
course of business of the System acquired in connection with the Catawba
Franchise Requirement System Upgrade, (ix) report and write off Accounts
Receivable in accordance with past practices; (x) withhold and pay when due
all taxes, and file on a timely basis all tax returns, relating to the
Purchased Assets, the Business and/or the System; (xi) subject to matters over
which it has no control, maintain service quality at a level at least
consistent with past practices; (xii) file with the FCC all material reports
required to be filed under applicable FCC rules and regulations, and otherwise
comply in all material respects with all Legal Requirements; (xiii) promptly
deliver to Buyer as they are available true and complete copies of Seller's
monthly unaudited operating statements and monthly subscriber reports; and
(xiv) promptly notify Buyer of any circumstance, event or action by Seller or
otherwise (A) which, if known as of the Effective Date, would have been
required to be disclosed in or pursuant to this Agreement, or (B) the
existence, occurrence or taking of which would result in any of the
representations and warranties of Seller in this Agreement not being true and
correct in all material respects when made or at the Closing, and, with respect
to clause (B), use reasonable commercial efforts to remedy the same.
(c) Receipt of Consents. (i) From the Effective Date
through the Closing, Seller shall use reasonable commercial efforts to seek,
obtain and make all the consents, approvals, and filings described in Schedule
3.3 and shall use reasonable commercial efforts to assist Buyer to seek, obtain
and make all the consents, approvals and filings described in Schedule 4.3;
provided, however, that (A) Seller shall not accept, agree or accede to any
modifications or amendments of, or conditions to the transfer to Buyer of, any
of the Franchises, System Contracts or System Rights that are imposed upon
Buyer and that are not acceptable to Buyer in its sole discretion, except for
Permitted Modifications, and (B) Seller shall have no obligation to accept,
agree or accede to any modifications or amendments of, or conditions to the
transfer to Buyer of, any of the Franchises, System Contracts or System Rights
that are imposed upon Seller and that are not acceptable to Seller in its sole
discretion, except for Permitted Modifications (substituting the word Seller
for Buyer in the definition of Permitted Modifications for purposes of this
clause
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(B)). Seller shall furnish all non-confidential information regarding itself
and its business as is reasonably required by the approving Person, Franchising
Authority or other governmental authority from whom, or with whom, a consent,
approval or filing described in Schedule 4.3 is sought or must be made by
Buyer. If requested by Buyer, Seller agrees to be represented, at Seller's
expense, at any such meetings or hearings as may be scheduled to consider any
application or request for any of the consents, approvals, and filings
described in Schedule 4.3 to be sought or made by Buyer.
(ii) If, with respect to any Seller Contract to be assigned to Buyer,
a required consent to its assignment is not obtained (and, accordingly,
pursuant to Section 2.1, that Seller Contract is excluded from the sale
hereunder to Buyer, Seller shall to the extent it may lawfully do so, and at
Buyer's sole cost and expense, keep such Seller Contract in effect and shall to
the extent it may lawfully do so, and at Buyer's sole cost and expense, cause
Buyer to receive the benefit of such Seller Contract to the same extent as if
it had been assigned to Buyer hereunder, and Buyer shall perform Seller's
obligation thereunder relating to the benefit obtained by Buyer. Nothing in
this Agreement shall be construed as an attempt to assign any agreement or
other instrument that is by its terms nonassignable without the consent of the
other party.
(d) Access to Information. From the Effective Date
through the Closing and for a period of one year following the Closing, Seller
shall, upon reasonable prior notice and without undue interruption to the
operation of the Business, permit the authorized representatives of Buyer and
persons designated by Buyer to have reasonable access to the properties,
records and documents of Seller and shall furnish to Buyer and persons
designated by Buyer such financial records and other documents with respect to
the System and Business as Buyer shall reasonably request; provided, however,
that in no event shall Seller be obligated to comply with any of the foregoing
if such compliance will give Buyer access to any information which Seller, or
any of its Affiliates, is required by contract or otherwise to keep
confidential. Seller agrees that with respect to such confidential
information, Seller shall, upon the specific request of Buyer, use reasonable
commercial efforts to seek the consent of such Persons as may be necessary to
permit Buyer access to such information without violating the confidential
nature thereof.
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Section 5.3 Compliance with HSR Act and Rules. Seller and Buyer
shall within 30 days after the expiration of the Inspection Period file or
cause to be filed the Notification and Report Form (the "HSR Report") mandated
by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as currently in
effect (the "HSR Act"), and the rules and regulations promulgated thereunder
(the "HSR Rules"), to be filed by them, or by any other Person that is part of
the same "person" (as defined in the HSR Act and the HSR Rules) and coordinate
the filing of such HSR Reports (and exchanging drafts thereof) so as to present
both HSR Reports to the FTC and the DOJ at the time selected by the mutual
agreement of Seller and Buyer, and to avoid substantial errors or
inconsistencies between the two in the description of the transaction. Buyer
shall pay all fees payable by the "acquiring person" in connection with the
filing of the HSR Reports.
Section 5.4 Surveys. Buyer may obtain at Buyer's expense during
the Inspection Period current boundary and improvement surveys of each parcel
of Owned Real Property and Leased Real Property and Seller agrees to cooperate
with Buyer and its surveyors so that Buyer may obtain such surveys during the
Inspection Period.
Section 5.5 Inspection Period and Termination Right. (a)
Buyer's Inspection. Buyer shall be entitled, for a period of 45 days after the
Effective Date (the "Inspection Period"), at its sole cost and expense, upon
reasonable prior notice to Seller, to enter upon and have access to the
premises and properties of Seller to conduct such studies, examinations,
inspections and reviews as it deems appropriate with respect to the nature and
condition of the tangible property included in the Purchased Assets, the status
of the Franchises, Seller Contracts and System Rights, and the compliance of
such tangible personal property, the System and the Business, with the
Franchises, System Rights, Seller Contracts and applicable legal requirements
(the "Buyer's Inspection"); provided, that such Buyer's Inspection does not
unreasonably damage such assets or properties and that any such damage is
promptly repaired to its pre-Buyer's Inspection condition by Buyer at Buyer's
expense to Seller's reasonable satisfaction and that such Buyer's Inspection
does not unreasonably interfere with Seller's business activities; and
provided, further, that Buyer shall indemnify and hold harmless Seller and its
Affiliates, officers, directors, owners, employees and agents from any damage,
loss and expense arising from the conduct of any such Buyer's Inspection,
including mechanic's liens filed by Persons employed by Buyer, reasonable
attorneys', consultants' and other professionals' fees and other litigation and
court costs. Without limiting the generality of the foregoing, Buyer shall be
entitled to conduct such assessments of the Owned Real Property and Leased Real
Property as it deems necessary to detect the presence thereon of Hazardous
Substances.
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(b) Termination Right. Buyer shall be entitled, at its
option, to terminate this Agreement by written notice to Seller on or before
the last day of the Inspection Period if any of the following shall occur:
(i) if in the course of Buyer's Inspection, Buyer
is in any way unsatisfied with the nature or condition of the tangible
personal property included in the Purchased Assets, the status of the
Franchises, Seller Contracts or System Rights, or the compliance of
such tangible personal property, the System or the Business with the
Franchises, Seller Contracts, System Rights or applicable legal
requirements; or
(ii) if any environmental assessments of the Owned
Real Property or the Leased Real Property conducted by or for Buyer
shall reveal the presence thereon, or any likelihood of the presence
thereon, of any Hazardous Substances in an amount or of a nature that
would require corrective action or remediation under applicable laws,
or as a result of which the owner of the Owned Real Property or a
tenant of the Leased Real Property could incur liability under
applicable legal requirements.
If this Agreement is not terminated by Buyer pursuant to this Section 5.5
within the Inspection Period, this Agreement shall continue in full force and
effect in accordance with its terms. If this Agreement is terminated by Buyer
pursuant to this Section 5.5 during the Inspection Period (i) the Escrow
Deposit (and all earnings thereon) shall be returned to Buyer, and the parties
will deliver written instructions to the Escrow Agent to such effect, and (ii)
neither party shall have any further liability or obligation to the other
hereunder, except for that arising from a breach or default hereunder and
except that Articles Ten and Twelve shall continue in full force and effect as
to Seller and Buyer.
Section 5.6 As-Is/Where-Is. Anything to the contrary in this
Agreement (including, without limitation, Seller's representations and
warranties in Article Three and Seller's covenants in Section 5.2 ), the
Exhibits and Schedules attached to this Agreement or any other agreement,
instrument or document delivered to Buyer in connection herewith or therewith
notwithstanding, Seller shall not (i) be deemed to have made any
representation, warranty, covenant or agreement hereunder or thereunder
regarding or with respect to, or (ii) have any obligation or liability to Buyer
or any other party hereunder (whether under Section 11.1 or otherwise) or
thereunder arising out of or related to the physical condition or engineering
capability of the cable plant (including, without limitation, all coaxial
cable, converters, cable, drops, etc.) and equipment
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constituting the System, including, without limitation, (A) such plant's and
equipment's compliance with utility pole and conduit make ready, grounding,
bonding, spacing, clearance, signal carriage capacity, signal leakage,
installation and repair, or engineering, electrical, aeronautical or other
technical capabilities, specifications or requirements, in each case, whether
arising under or relating to applicable federal, state or local laws, rules or
regulations (including, without limitation, the National Electrical Code, the
Communications Act, and those of the FCC or the Federal Aviation
Administration) or, (B) any noncompliance by virtue of the physical condition
or engineering capability of such cable plant and equipment under any
ordinance, franchise, license, permit, consent, pole attachment or conduit
agreement, order, authorization or other agreement or instrument to which
Seller, PVI, the System, the Business or the Purchased Assets are subject or
bound or otherwise; provided, that the foregoing is not intended to, and shall
not, relieve Seller from liability for falsity or inaccuracy of the certificate
required to be delivered to Buyer by Seller at the Closing pursuant to Section
8.2(x).
Section 5.7 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 Seller at all times prior to Closing. In the event
that in Buyer's and Seller's joint reasonable estimation any such loss or
damage shall occur but not exceed $500,000 in the aggregate as to all the
Purchased Assets so affected, and such affected Purchased Assets shall not have
been replaced with Purchased Assets of comparable quality and specification, or
replaced or restored to their condition preceding such loss or damage, all
insurance proceeds payable as a result of the occurrence of the event resulting
in such loss or damage shall be delivered by Seller to Buyer, or the rights
thereto shall be assigned by Seller to Buyer if not yet paid over to Seller,
and the Purchase Price shall be reduced by an amount equal to the difference
between the amount of such insurance proceeds actually received and Buyer's and
Seller's joint reasonable estimate of the full replacement cost of all the
damaged or lost Purchased Assets. In the event that, in Buyer's and Seller's
joint reasonable estimation, any such loss or damage shall occur and exceed
$500,000 in the aggregate as to all of the Purchased Assets affected by any
casualty, and prior to Closing such affected Purchased Assets shall not have
been replaced with assets of comparable quality and specification, or replaced
or restored to their condition preceding such loss or damage, then Buyer may,
at its option, elect either to: (i) terminate this Agreement effective upon
giving written notice thereof to Seller, in which case neither Seller nor Buyer
shall have any liability or obligation to the other, except for that arising
from a breach or default hereunder and except that Articles Ten and Twelve
shall continue in full force and effect as to Seller and Buyer; or (ii) waive
in writing any such event and any other rights Buyer may have hereunder with
respect thereto, in which
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event Seller shall assign to Buyer all insurance proceeds payable as a result
of such loss or damage to the extent such proceeds are not used by Seller prior
to the Closing to so replace or restore the affected Purchased Assets to their
condition preceding such loss or damage. In the event that Buyer and Seller
are unable to agree as to the amount of any such loss or damage or the full
replacement cost of any damaged or lost Purchased Assets (in any event, a "Loss
Determination") (whether for purposes of determining an adjustment to the
Purchase Price or for determining whether or not Buyer has the right to
terminate this Agreement) within 30 days after the initiation of discussions by
one of the parties regarding such Loss Determination, then Buyer and Seller
shall jointly engage the Austin office of Price Waterhouse (or such other
unaffiliated third party advisor which has experience in evaluating issues
related to the cable television business as Buyer and Seller shall mutually
select if Price Waterhouse is unwilling to accept such engagement) to make the
Loss Determination, which shall be final and conclusive and binding on Buyer
and Seller. The fees and expenses of Price Waterhouse (or such other third
party advisor) shall be borne one-half by Buyer and one-half by Seller.
Section 5.8 Employees; Employee Benefits. (a) Buyer's List of
Employees. Not later than 30 days after the expiration of the Inspection
Period, Buyer shall deliver to Seller a notice containing the names of
employees of the Business to whom Buyer intends to offer employment on the
Closing Date. Buyer shall take such actions as are necessary so that, for a
period of not less than 90 days after the Closing Date, employees of Seller who
continue their employment with the Buyer after the Closing Date and who are not
represented by a union immediately prior to the Closing Date (the "Affected
Employees") will be provided employee benefits and compensation which in the
aggregate are, in Buyer's sole discretion, either (i) generally comparable to
those provided to such employees as of the Closing Date or (ii) consistent with
those provided to similarly situated non-union employees of Buyer or any of the
Buyer's Affiliates' other cable systems. Seller shall provide to all Affected
Employees and other necessary persons any notice that may be required under the
WARN Act.
(b) Liability. Except as otherwise provided in
Section 2.4 or otherwise in this Agreement, Seller shall retain, and the Buyer
shall not assume, any liabilities or obligations of Seller or any of its
affiliates relating to Affected Employees or Benefit Plans.
(c) Buyer's Obligations. Except as provided in
Section 5.8(a), nothing in this Agreement shall (i) be construed to entitle any
Affected Employee to any benefits or service credit under any pension, profit
sharing, health, or welfare benefit plan sponsored by Buyer, (ii)
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obligate Buyer to offer any particular benefit at any particular level with
respect to any such Affected Employee, or (iii) entitle any Affected Employee
to any specific compensation.
(d) Welfare Plans and COBRA. Seller shall honor
or cause its insurance carriers to honor all legitimate claims for benefits
under the employee welfare benefit plans (as such term is defined in Section
3(1) of ERISA) maintained by Seller on behalf of the Affected Employees
incurred prior to and on the Closing Date, in accordance with the terms of such
welfare plans, without interruption as a result of the employment by Buyer of
any such employee on or after the Closing Date. In this regard, Seller shall
continue to be responsible after the Closing Date for "continuation coverage"
as defined in Section 4980B(f) of the Code with respect to "qualifying events"
as defined in Section 4980B(f) of the Code occurring prior to and including the
Closing Date.
(e) Severance. Except as otherwise provided in
Section 2.4, Seller shall pay any severance costs payable pursuant to its
severance policies that may be incurred with respect to any Affected Employee
as a result of the transaction contemplated by this Agreement.
(f) Workers' Compensation. Seller shall retain
liability for all workers' compensation claims made by Affected Employees filed
on or before the Closing Date.
(g) Vacation Pay. Accruals for vacation pay
attributable to the Affected Employees shall be accurately reflected as
liabilities in Seller's balance sheet as of the Closing Date.
(h) No Third Party Beneficiaries. Nothing in
this Section 5.8 or elsewhere in this Agreement is intended to confer upon any
employee of Seller or his or her legal representative or heirs any rights as a
third party beneficiary or otherwise or any remedies of any nature or kind
whatsoever under or by reason of this Agreement, or the transactions
contemplated hereby, including without limitation any rights of employment or
continued employment. All rights and obligations created by this Agreement are
solely between Buyer and Seller.
Section 5.9 Use of Names and Logos. For a period of 90 days
after the Closing, Buyer shall be entitled to use the trademarks, trade names,
service marks, service names, logos and similar proprietary rights of Seller to
the extent incorporated in or on the Purchased Assets; provided, that Buyer
shall exercise reasonable commercial efforts to remove all such names,
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marks, logos and similar proprietary rights from the Purchased Assets as soon
as reasonably practicable following the Closing.
Section 5.10 No Solicitation. Seller shall not, and shall use
reasonable efforts to cause its employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by Seller) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal with respect to any
Alterative Transaction, engage in any negotiations concerning, or provide any
other Person any information or data relating to the Business, the System or
the Purchased Assets for the purposes of, or have any discussions with any
Person relating to, or otherwise cooperate in any way with or assist or
participate in, facilitate or encourage, any inquiries or the making of any
proposal which constitutes, or may reasonably expected to lead to, any effort
or attempt by any other Person to seek or effect an Alternative Transaction.
Section 5.11 Title Insurance. Seller shall cooperate with Buyer if
Buyer elects to obtain title insurance policies on any of the Owned Real
Property or the Leased Real Property. Buyer shall have the sole responsibility
for obtaining and paying for such policies.
Section 5.12 Franchise Consents Not Obtained. If any required
approval or consent to the assignment of one or more Franchises is not obtained
prior to the Termination Date and such Franchises cover five percent (5%) or
more of all Basic Subscribers, then Buyer and Seller agree to negotiate in good
faith for a period not to exceed 90 days from the Termination Date to enter
into arrangements (reasonably acceptable to Seller, Buyer, the FCC and, to the
extent required, other applicable Governmental Authorities) which would permit
the Closing to occur hereunder within said 90 day period.
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ARTICLE SIX
CONDITIONS OF BUYER'S OBLIGATIONS
Section 6.1 In General. The obligations of Buyer to complete the
transactions provided for in this Agreement are subject to all of the
conditions set forth below in this Article Six, any of which may be waived in
writing by Buyer.
Section 6.2 Receipt of Schedule 3.3 Material Consents. All of
the Material Required Seller Consents and Material Required Buyer Consents
shall have been obtained, with only Permitted Modifications (as described in
Section 5.1(b)), and shall be in full force and effect as of the Closing. The
approvals and consents relating to the FCC licenses (other than CARs licenses)
identified in Schedule 3.3 shall be deemed to have been obtained as required
above in this Section 6.2 if the FCC, on or prior to the Closing Date, grants
"special temporary authority" to Buyer to use the same.
Section 6.3 Performance by Seller. Seller shall have performed
in all material respects all of its agreements and covenants under this
Agreement to the extent such are required to be performed at or prior to the
Closing.
Section 6.4 Truth of Representations and Warranties. Each of the
representations and warranties of Seller contained in this Agreement (i) if
specifically qualified by materiality, shall be true and complete as so
qualified, and (ii) if not qualified by materiality, shall be true and complete
in all material respects, in each such case, on and as of the Effective Date
and as of the Closing Date, with the same effect as if then made, except where
any such representation or warranty is as of a specific earlier date, in which
event it shall remain true and correct (as qualified) as of such earlier date
and except as any such representation or warranty may be affected by specific
transactions or occurrences contemplated in or permitted by this Agreement.
Section 6.5 Absence of Proceedings. All waiting periods required
under the HSR Act prior to the Closing shall have expired or otherwise
terminated, and no judgment or order shall have been issued, and no action or
proceeding shall have been instituted (by any Person other than Buyer or any of
its Affiliates, shareholders, officers, directors, agents or employees) on or
prior to the Closing, to set aside or modify any Material Required Seller
Consent or Material Required Buyer Consent or to enjoin or prevent the
consummation of the transactions contemplated by this Agreement in the manner
provided in this Agreement.
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Section 6.6 Status of Cable Plant and Equipment of the System.
The physical condition and engineering capability of the cable plant and
equipment constituting the System on the Closing Date shall be comparable in
all material respects to its condition and capability at the end of the
Inspection Period.
Section 6.7 Opinion of FCC Counsel. Buyer shall have received an
opinion of Cole, Raywid & Braverman, special FCC counsel to Seller, dated as of
the Closing Date, in the form of Exhibit C attached to this Agreement
("Seller's FCC Counsel's Opinion").
Section 6.8 Opinion of Seller's Counsel. Buyer shall have
received an opinion of Edens Snodgrass Nichols & Breeland, P.C., counsel for
Seller, dated as of Closing, in the form of Exhibit D attached to this
Agreement ("Seller's Counsel's Opinion").
Section 6.9 Cable Plant; Homes Passes, Pay Units. At the Closing,
the System will (i) consist of approximately 900 linear miles of cable plant,
(ii) have approximately 14,200 Pay TV Units, and (iii) have approximately
53,000 Homes Passed.
Section 6.10 Basic Subscribers. The number of Basic Subscribers
as of the end of the billing cycle cutoff and reporting date on or immediately
preceding the Closing Date shall be not less than 34,800.
Section 6.11 No Legal Impediment. No Legal Requirement shall have
been enacted, promulgated or issued or deemed applicable to any of the
transactions contemplated by this Agreement by any Governmental Authority that
would (a) prohibit the Buyer's ownership or operation of all or a material
portion of the System, the Business or the Purchased Assets, or (b) prevent or
make illegal the consummation of the transactions contemplated by this
Agreement.
Section 6.12 Affiliate Agreements. Seller shall have caused all
agreements with Affiliates of Seller relating to the Business, except for those
listed on Schedule 6.12, to have been terminated.
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ARTICLE SEVEN
CONDITIONS OF SELLER'S OBLIGATIONS
Section 7.1 In General. The obligations of Seller to complete
the transactions provided for in this Agreement are subject to all of the
conditions set forth below in this Article Seven, any of which may be waived in
writing by Seller.
Section 7.2 Receipt of Consents. All of the Material Required
Seller Consents and Material Required Buyer Consents shall have been obtained,
with only Permitted Modifications (as described in Section 5.2(c)), and shall
be in full force and effect as of the Closing. The approvals and consents
relating to the FCC licenses (other than CARs licenses) identified in Schedule
3.3 shall be deemed to have been obtained as required above in this Section 7.2
if the FCC, on or prior to the Closing Date, grants "special temporary
authority" to Buyer to use the same.
Section 7.3 Performance by Buyer. Buyer shall have performed in
all material respects all of its agreements and covenants under this Agreement
to the extent such are required to be performed at or prior to the Closing.
Section 7.4 Truth Of Representations and Warranties. Each of the
representations and warranties of Buyer contained in this Agreement (i) if
specifically qualified by materiality, shall be true and complete as so
qualified, and (ii) if not qualified by materiality, shall be true and complete
in all material respects, in each such case, on and as of the Effective Date
and as of the Closing Date, with the same effect as if then made, except where
any such representation or warranty is as of a specific earlier date in which
event it shall remain true and correct (as qualified) as of such earlier date
and except as any such representation or warranty may be affected by specific
transactions or occurrences contemplated in or permitted by this Agreement.
Section 7.5 Absence of Proceedings. All waiting periods required
under the HSR Act prior to the Closing shall have expired or otherwise
terminated, and no judgment or order shall have been issued, and no action or
proceeding shall have been instituted (by any Person other than Seller, or any
of its respective Affiliates, partners, shareholders, officers, directors,
employees or agents) on or prior to the Closing, to set aside or modify any
Material Required Seller Consent
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or Material Required Buyer Consent, or to enjoin or prevent the consummation of
the transactions contemplated by this Agreement in the manner provided in this
Agreement.
Section 7.6 Opinion of Buyer's Counsel. Buyer shall have
received an opinion of Paul, Hastings, Janofsky & Walker, counsel for Buyer,
dated as of the Closing, in the form of Exhibit E attached to this Agreement
("Buyer's Counsel's Opinion").
Section 7.7 No Legal Impediment. No Legal Requirement shall have
been enacted, promulgated or issued or deemed applicable to any of the
transactions contemplated by this Agreement by any Governmental Authority that
would (a) prohibit the Buyer's ownership or operation of all or a material
portion of the System, the Business or the Purchased Assets, or (b) prevent or
make illegal the consummation of the transactions contemplated by this
Agreement.
ARTICLE EIGHT
CLOSING
Section 8.1 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Paul, Hastings, Janofsky & Walker, 399 Park Avenue, New York, New York
10022, at 10:00 a.m., local time, on that date which is the end of Seller's
next regularly scheduled month end billing cycle cut-off date after the date on
which the conditions ("Closing Conditions") set forth in Article Six and Seven
(which have not been waived by the party or parties entitled to the benefit
thereof) have been satisfied or waived, but not less than ten days after such
Closing Conditions have been satisfied or waived (in any event, the "Closing
Date"), unless otherwise provided by the mutual agreement, in writing, of
Seller and Buyer, and in no event later than February 28, 1997 (the
"Termination Date"). If, as of the time designated for the Closing, the
Closing cannot be effected, then Seller and Buyer shall be released from all
obligations under this Agreement other than obligations arising from a breach
or default under this Agreement and except that Articles Ten and Twelve shall
continue in full force and effect as to Seller and Buyer.
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Section 8.2 Deliveries by Seller. Seller shall deliver to Buyer
at the Closing:
(i) a Bill of Sale and Assignment in the form of
Exhibit F attached to this Agreement (the "Bill of Sale") executed by
Seller and PVI; the Assumption Agreement executed by Seller; and a
general warranty deed executed by Seller conveying title to the Owned
Real Property from Seller to Buyer;
(ii) certificates of title to all motor vehicles
described on Schedule 3.4(b) owned by Seller and appropriate bills of
sale or assignments thereof executed by Seller; provided, however,
that delivery shall not be required with respect to the title to any
such motor vehicles disposed of in the ordinary course of business as
contemplated by Section 5.2(b);
(iii) all Material Required Seller Consents;
(iv) certificates of good standing with respect to
Seller and PVI dated within ten days of the Closing Date, issued by
the Secretary of State of Delaware and a certificate of authority with
respect to Seller and PVI dated within ten days of the Closing Date,
issued by the Secretary of State of North Carolina;
(v) an incumbency and signature specimen
certificate, dated the Closing Date and executed by an officer of PVI,
as Seller's general partner, with respect to the officers of PVI
executing this Agreement and any other document delivered hereunder by
or on behalf of the PVI as Seller's general partner in the name and on
behalf of Seller;
(vi) a copy of resolutions of the board of
directors of PVI, certified by an officer of PVI as being correct,
complete and in full force and effect on the Closing Date (though not
necessarily dated on the Closing Date), authorizing (A) the execution
and delivery of this Agreement, the Assumption Agreement, the Bill of
Sale and any other agreements or instruments executed and delivered
pursuant hereto on behalf of Seller, and (B) the performance of the
obligations of Seller, hereunder and;
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(vii) a certificate of PVI dated the Closing Date,
signed by an officer of PVI certifying (A) that except (1) as a result
of the taking by any Person of any action contemplated or permitted
hereby or (2) insofar as any representation or warranty relates only
to any specified earlier date, all of the representations and
warranties of Seller in this Agreement are true and correct in all
material respects (determined as more particularly provided in Section
6.4) on the Closing Date, with the same force and effect as if made on
and as of the Closing Date, and (B) that Seller, to the extent
applicable, has in all material respects performed and complied with
all of its covenants and agreements set forth in, and satisfied all
conditions required to be satisfied by it pursuant to, this Agreement
at or before the Closing Date;
(viii) evidence reasonably satisfactory to Buyer's
counsel that all Liens outstanding or asserted against or affecting
the Purchased Assets, other than the Permitted Liens, have been
released as of the Closing Date;
(ix) physical possession (or constructive
possession with respect to intangibles) of the Purchased Assets;
(x) a certificate certifying that the physical
condition and engineering capability of the cable plant and equipment
of the System on the Closing Date is comparable in all material
respects to its condition and capability at the end of the Inspection
Period (any of the certifications or other matters described in items
(iv), (v), (vi) and (vii) above and in this item (x) may be contained
in or attached to a single certificate);
(xi) Seller's FCC Counsel's Opinion;
(xii) Seller's Counsel's Opinion;
(xiii) a certificate issued by the State of North
Carolina certifying the absence of any sales tax liability applicable
to Seller, issued as of a date as close to the Closing Date as Seller
may reasonably obtain;
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(xiv) the Earnest Money Escrow Agreement and the
Indemnity Escrow Agreement executed by Seller; and
(xv) such further instruments and documents, in
form and content reasonably satisfactory to counsel for Buyer, as may
be necessary or appropriate more effectively to consummate the
transactions contemplated hereby.
Section 8.3 Deliveries by Buyer. Buyer shall deliver to Seller
at the Closing:
(i) the Preliminary Purchase Price in accordance
with Section 2.2;
(ii) a certificate of good standing with respect
to Buyer, dated within ten days of the Closing Date, issued by the
Secretary of State of the State of Delaware and a certificate of
authority with respect to Buyer, dated within ten days prior to the
Closing Date, issued by the Secretary of State of North Carolina;
(iii) an incumbency and specimen signature
certificate, dated the Closing Date, and executed by an officer of
Buyer, with respect to the officers of Buyer executing this Agreement
and any other document delivered hereunder by or on behalf of Buyer;
(iv) a copy of resolutions of the board of
directors of Buyer, certified by an officer of Buyer as being correct,
complete and in full force and effect on the Closing Date (though not
necessarily dated as of the Closing Date), authorizing (A) the
execution and delivery of this Agreement, the Bill of Sale, the
Assumption Agreement and any other agreements executed and delivered
pursuant hereto on behalf of Buyer, and (B) the performance of the
obligations of Buyer hereunder and thereunder;
(v) a certificate, dated the Closing Date, signed
by an officer of Buyer certifying (A) except (1) as a result of the
taking by any Person of any action contemplated or permitted hereby or
(2) insofar as any representation or warranty relates only to any
specified earlier date, all of the representations and warranties of
Buyer in this Agreement are true and correct in all material respects
(determined as more particularly provided in Section 7.4) on the
Closing Date, with the same force and effect as if made on and as of
the Closing Date, and (B) that Buyer, to the extent applicable, has in
all material respects performed and complied with all of its covenants
and agreements set forth in, and satisfied
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<PAGE> 46
all conditions required to be satisfied by it pursuant to, this
Agreement at or before the Closing Date;
(vi) the Assumption Agreement executed by Buyer;
(vii) Buyer's Counsel's Opinion;
(viii) the Bill of Sale executed by Buyer;
(ix) the Earnest Money Escrow Agreement and the
Indemnity Escrow Agreement executed by Buyer; and
(x) such further instruments and documents, in
form and content reasonably satisfactory to counsel for Seller, as may
be necessary or appropriate to more effectively to consummate the
transactions contemplated hereby.
Section 8.4 Waiver of Conditions. Any party may waive in writing
any or all of the conditions to its obligations under this Agreement, and the
written waiver of any such condition will constitute a waiver by such party of
all rights or remedies that such party may have or have had against the
non-waiving party regarding the specific subject matter of the condition so
waived, except that no such waiver of a condition will constitute a waiver by
the waiving party of any of its rights or remedies, at law or in equity, at the
time such condition is waived, as to the non-waiving party's breach of any
representation, warranty or covenant under this Agreement which has not been
waived by the waiving party.
ARTICLE NINE
TERMINATION
Section 9.1 Termination. (a) In General. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned:
(i) at any time, by the mutual agreement of Seller and
Buyer;
(ii) by Buyer as provided in Section 5.5(b);
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<PAGE> 47
(iii) in the event that any party is in material default in
the performance of its obligations under this Agreement or in material
breach of its respective representations or warranties herein, and
such breach is not cured or waived prior to the Closing, by whichever
of Buyer and Seller is not the breaching party (so long as such
terminating party is not then itself in material default in the
performance of its obligations under this Agreement or in material
breach of its representations or warranties herein); or
(iv) by Buyer, if any of the conditions to the obligations
of Buyer set forth in Article Six shall not have been satisfied or
waived as of 12:01 a.m. (Austin, Texas time) on February 28, 1997,
unless prior to such date and time, Seller certifies to Buyer in
writing that Seller will not, due to circumstances beyond Seller's
control, be able to fulfill one or more of the conditions to the
obligations of Buyer set forth in Article Six and Buyer does not waive
such condition or conditions in writing within 10 business days after
its receipt of such written certification; or
(iv) by Seller, if any of the conditions to the
obligations of Buyer set forth in Article Six shall not have been
satisfied or waived as of 12:01 a.m. (Austin, Texas time) on February
28, 1997, unless prior to such date and time, Buyer certifies to
Seller in writing that Buyer will not, due to circumstances beyond
Buyer's control, be able to fulfill one or more of the conditions to
the obligations of Seller set forth in Article Seven and Seller does
not waive such condition or conditions in writing within 10 business
days after its receipt of such written certification.
(b) Remedies. If Seller shall (i) fail to perform any of
its obligations hereunder required to be performed by it at or before Closing
under Section 2.3, or (ii) fail to perform in any material respects any of its
obligations under any other Section hereunder required to be performed by it at
or before the Closing, Buyer shall be entitled to (A) receive the Escrow
Deposit (and all earnings thereon), and (B) such other rights and remedies, in
addition to its termination rights stated in Section 9.1(a), as are available
to it at law or in equity and, if it terminates this Agreement pursuant to
Section 9.l(a) as a result of such breach, shall be entitled to recover from
Seller its actual and reasonable expenses incurred in negotiating this
Agreement and performing Buyer's obligations hereunder in anticipation of
Closing. If Buyer shall (i) fail to perform any of its obligations hereunder
required to be performed by it at or before Closing under Section 2.2-2.4, or
(ii) fail to perform in any material respect any of its obligations under any
other Section hereunder required to be performed by it at or before Closing,
Seller shall be entitled to (A)
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<PAGE> 48
terminate this Agreement pursuant to Section 9.1(a) as a result of such breach,
and (B) as Seller's sole and exclusive remedy with respect to Buyer's breach,
to receive the Escrow Deposit (and all earnings thereon) as liquidated damages
for Buyer's breach under this Agreement. In the event of any litigation in
relation to this Agreement, the unsuccessful party, in addition to all other
sums that either party may be required to pay, will be required to pay
reasonable attorney's fees and court costs incurred by the successful party in
connection with such litigation.
ARTICLE TEN
CONFIDENTIALITY AND PUBLIC STATEMENTS
Section 10.1 Confidential Information. Seller and Buyer each
acknowledge that prior to the Closing Seller would be irreparably damaged, and
following the Closing Buyer would be irreparably damaged, if confidential
information concerning the business and affairs of the System and the Business
were disclosed to or utilized on behalf of any Person except as permitted under
this Agreement. Seller (with respect to the period following the Closing) and
Buyer (with respect to the period preceding the Closing) each covenant and
agree to and with the other that they will not, at any time, directly or
indirectly, without the prior written consent of the other, make use of or
divulge, or permit any of its Affiliates, associates, directors, officers,
partners, employees or agents to make use of or divulge, to any Person any
non-public information concerning the business or financial or other affairs
of, or any of the methods of doing business used by, the System, the Business,
Seller, PVI or their Affiliates. Seller acknowledges that Buyer will need to
disclose information regarding the System, the Purchased Assets and the
Business to its lenders and investors and potential lenders and investors, and
its and their respective advisors, and that disclosure to such Persons shall
not violate the confidentiality provisions set forth in this Section 10.1. If
for any reason the transactions contemplated by this Agreement are not
consummated, Buyer and Seller shall each return to the other all information
received by it from the other and all copies thereof.
Section 10.2 Public Statement and Press Releases. Neither Seller
nor Buyer, without the prior written consent of the other, or except as
required by law in the judgment of outside legal counsel for such party or
legal process, shall release any information concerning this Agreement or the
transactions contemplated by this Agreement, if such release is intended for or
is reasonably likely to result in public dissemination thereof. Buyer agrees
that the discussion (to the extent permitted under applicable securities laws)
of the transactions contemplated hereby by Seller with
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<PAGE> 49
Seller's lenders and limited partners, Sellers' Affiliates (and their
respective directors, officers, employees, partners and shareholders), Seller's
counsel or other professional advisors, and any Person whose consent or waiver
may be necessary or desirable in order to consummate the transactions
contemplated hereby, shall not be deemed to be "intended for" or to "result in
public dissemination," for the purposes of the foregoing sentence. Seller
agrees that the discussion (to the extent permitted under applicable securities
laws) of the transactions contemplated hereby by Buyer with Buyer's lenders and
shareholders, Buyer's Affiliates (and their respective directors, officers,
employees, partners and shareholders), Buyer's counsel or other professional
advisors, and any Person whose consent or waiver may be necessary or desirable
in order to consummate the transactions contemplated hereby shall not be deemed
to be "intended for" or to "result in public dissemination," for the purposes
of this Section 10.2.
Section 10.3 Injunctive Relief. Seller and Buyer expressly agree
that, in addition to any other right or remedy the others may have, such other
party may seek and obtain specific performance of the covenants and agreements
set forth in or made pursuant to Sections 10. l and 10.2 above and temporary
and permanent injunctive relief to prevent any breach or violation thereof, and
that no bond or other security may be required from such other party in
connection therewith.
Section 10.4 Survival. This Article Ten will survive the
termination of this Agreement.
ARTICLE ELEVEN
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
Section 11.1 Survival of Representations and Warranties. All
representations and warranties made by Buyer or Seller in this Agreement or in
any certificate delivered pursuant to this Agreement shall survive the Closing
for a period of 13 months, except that Seller's representations and warranties
stated in Sections 3.11(a)(iv) and 3.12 shall survive Closing for a period of
time ending, in each case, as of the date of expiration of the applicable
statutory period within which Buyer could assert claims against Seller for a
breach thereof (collectively, "Buyer's Tax Claims").
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Section 11.2 Indemnity by Seller. Seller shall indemnify, defend
and hold harmless Buyer, and its respective officers, directors, affiliates,
controlling persons (if any), employees, attorneys, agents, stockholders and
partners (the "Buyer Indemnitees") against and in respect of any and all
claims, suits, actions and proceedings, and all losses, liabilities, Taxes,
damages and expenses (including reasonable legal fees and expenses of
attorneys), arising out of or based upon (i) any and all misrepresentations or
breaches of warranty or any nonperformance or breach of any covenant or
agreement of Seller contained in this Agreement, the Exhibits and Schedules
hereto, the certificates required by Section 8.2 (vii) and (x), the Bill of
Sale and any other documents or instruments executed and delivered by Seller
pursuant hereto, or (ii) except for the Assumed Liabilities, any liability or
obligation relating to Seller, the System or the Business or Seller's ownership
and operation of the Purchased Assets, the System and the Business prior to the
Closing, including, without limitation, Agreed System Upgrade Expenditures
accrued but not paid by Seller prior to the Closing which are included in the
amount of the Capital Expenditures Amount as finally determined. Any
indemnification payments made by Seller to Buyer shall be deemed an adjustment
to the Purchase Price. Anything to the contrary in this Section 11.2
notwithstanding, it is the intention of the parties that Taxes subject to the
indemnity provided in this Section 11.2 will not include (A) Taxes with respect
to items of income earned by Buyer or purchases or sales of goods or services
made by Buyer after the Closing Date or (B) ad valorem Taxes accruing with
respect to Buyer's assets and properties after the Closing Date.
Section 11.3 Indemnity by Buyer. Buyer agrees to indemnify,
defend and hold harmless Seller and its officers, directors, affiliates,
controlling persons (if any), employees, attorneys, agents, general partners
and limited partners (the "Seller Indemnitees") against and in respect of any
and all claims, suits, actions and proceedings, and all losses, liabilities,
Taxes, damages and expenses (including reasonable legal fees and expenses of
attorneys), arising out of or based upon (i) any and all misrepresentations or
breaches of warranty or any nonperformance or breach of any covenant or
agreement by Buyer contained in this Agreement, the Exhibits and Schedules
hereto, the certificate required by Section 8.3(v), the Assumption Agreement,
the Bill of Sale and any other documents or instruments executed and delivered
by Buyer pursuant hereto, (ii) the Assumed Liabilities, or (iii) any liability
or obligation relating to Buyer, its business or operations, or its ownership
of or the operation of the Purchased Assets, the System and the Business
subsequent to the Closing. Any indemnification payments made by Buyer to Seller
shall be deemed an adjustment to the Purchase Price. Anything to the contrary
in this Section 11.3 notwithstanding, it is the intention of the parties that
Taxes subject to the indemnity provided in this Section 11.3 will not include
(A) Taxes with respect to items of income earned by Seller or
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<PAGE> 51
purchases or sales of goods or services made by Seller on or prior to the
Closing Date (except to the extent that the same shall constitute Assumed
Liabilities) or (B) ad valorem Taxes accruing with respect to Seller's assets
and properties on or prior to the Closing Date (except to the extent that the
same shall constitute Assumed Liabilities).
Section 11.4 Conditions of Indemnifications for Third Party
Claims. The obligations and liabilities of the parties under this Agreement
with respect to, as a result of, or relating to, claims of third parties
(individually, a "Third Party Claim" and collectively, "Third Party Claims"),
shall be subject to the following terms and conditions:
(i) The party entitled to be indemnified under this Article
Eleven (the "Indemnified Party") shall give the party obligated to provide the
indemnity (the "Indemnifying Party") prompt notice (but in no event later than
10 days prior to the time any response to the asserted claim is required,
unless the Indemnified Party has received less than 10 days notice thereof
prior to the required response time, in which event such notice shall be
delivered immediately upon receipt thereof) of any Third Party Claim, and the
Indemnifying Party may undertake the defense of that claim by representatives
chosen by it, which representatives shall be reasonably satisfactory to the
Indemnified Party; and the Indemnified Party shall extend reasonable
cooperation in the defense or prosecution thereof and shall furnish such
records, information and testimony and attend all such conferences, discover
proceedings, hearings, trials, and appeals as may be reasonably requested in
connection therewith, subject to reimbursement by the Indemnifying Party for
actual reasonable out-of-pocket expenses incurred by the Indemnified Party in
connection therewith. Any such notice of a Third Party Claim shall identify
with reasonable specificity the basis for the Third Party Claim, the facts
giving rise to the Third Party Claim and the amount of the Third Party Claim
(or, if such amount is not yet known, a reasonable estimate of the amount of
the Third Party Claim).
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(ii) If the Indemnifying Party, within 15 days after
receipt of any such notice of a Third Party Claim, fails to assume the defense
thereof in accordance with Section 11.4(i), the Indemnified Party shall (upon
further notice to the Indemnifying Party) have the right to undertake (at the
reasonable expense of the Indemnifying Party) the defense, compromise or
settlement of the Third Party Claim; provided, that the Indemnifying Party
shall not be required to pay the fees and expenses of more than one counsel
employed by an Indemnified Party with respect to any Third Party Claim.
(iii) The Indemnifying Party shall have the right, in its
sole discretion, to settle any claim for monetary damages for which
indemnification has been sought and is available hereunder. Anything in this
Section 11.4 to the contrary notwithstanding, (A) the Indemnifying Party shall
not, without the written consent of the Indemnified Party, settle or compromise
any Third Party Claim or consent to the entry of any judgment which does not
include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party of an unconditional release from all
liability in respect of the Third Party Claim; and (B) if there is a reasonably
probability that a Third Party Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other money
payments, the Indemnified Party shall have the right, at the reasonable cost
and expense of the Indemnifying Party, to participate in the defense of the
Third Party Claim (control of the defense to remain with the Indemnifying
Party); provided, that the Indemnifying Party shall not be required to pay the
fees and expenses of more than one counsel employed by an Indemnified Party
with respect to any Third Party Claim.
(iv) Except for Excepted Claims (as defined below), any
indemnification to which Seller or Buyer may be entitled hereunder shall be
effective only if based on a claim asserted by Buyer against Seller or by
Seller against Buyer prior to the expiration of nine months following the
Closing. The following claims for indemnification (the "Excepted Claims") may
be brought by Buyer or Seller, as appropriate, at any time prior to the date of
the expiration of the applicable statutory period within which the claimant, be
it Buyer or Seller, could assert such claims against the other: (i) Buyer's Tax
Claims, (ii) claims arising under Sections 3.10 or 4.5, respectively, (iii)
claims arising under Sections 5. l(c) and 5.2(d), (iv) claims arising under
Article Ten, and (v) claims arising under the Assumption Agreement.
Section 11.5 Threshold; Maximum Indemnification Obligation. Any
other provision of this Article Eleven (but subject to the immediately
following sentence) notwithstanding, neither Buyer nor Seller shall be entitled
to indemnification hereunder unless the aggregate amount of claims for
indemnification by such party exceeds $250,000, in which event, such party
shall be entitled to indemnification for the full amount of all such claims.
Claims by Buyer or Seller against the other arising out of or related to (i)
the adjustments to the Purchase Price provided for in Section 2.3, (ii) the
payment of sales, use, transfer, excise or license taxes, fees or charges
pursuant to Section 2.4(b), and (iii) claims arising under Sections 3.10 and
4.5, in each case shall not be subject to the requirements of the immediately
preceding sentence. Anything to the contrary in this Agreement
notwithstanding, Seller's liability with respect to all claims under
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Sections 11.2 and 11.4 shall be limited to an aggregate amount equal to
$3,400,000 and Buyer's liability with respect to all claims under Sections 11.3
and 11.4 shall be limited to an aggregate amount equal to $3,400,000; provided,
that in no event shall any adjustments to the Purchase Price pursuant to
Section 2.3 be subject to the foregoing limitation.
Section 11.6 Exclusive Nature of Indemnification Remedy. Seller
and Buyer agree that from and after the Closing their sole and exclusive remedy
as against each other with respect to any claims or damages made against or
suffered or incurred by them shall be their respect rights to indemnification
under Sections 11.2, 11.3 and 11.4, as limited by the provisions of Sections
11.1, 11.4 and this Section 11.5, and that, except with respect to intentional
torts, they otherwise shall have no recourse against each other with respect to
any such claims or damages under, with respect to, relating to, or arising out
of, this Agreement and the Schedules and Exhibits hereto, or any other
agreement or instrument executed or delivered pursuant hereto or thereto.
Section 11.7 Security for Claims. In order to secure any
obligations of Seller with respect to the indemnity set forth in Section 11.2,
Buyer, Seller and the Escrow Agent shall at the Closing enter into an indemnity
escrow agreement (the "Indemnity Escrow Agreement"), in the form of Exhibit I
attached hereto, which Indemnity Escrow Agreement shall provide for the payment
of $3,400,000 (the "Indemnity Money") of the Purchase Price into an interest
bearing escrow account to secure such obligations.
ARTICLE TWELVE
MISCELLANEOUS
Section 12.1 Amendments; Waivers. This Agreement may only be
amended pursuant to a written agreement executed by all the parties hereto and
no waiver of compliance with any provision or condition of this Agreement and
no consent provided for in this Agreement shall be effective unless evidenced
by a written instrument executed by the party hereto sought to be charged with
such waiver or consent. No waiver of any term or provision of this Agreement
shall be construed as a further or continuing waiver of such term or provision
or any other term or provision.
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Section 12.2 Entire Agreement. This Agreement and the Schedules
and Exhibits hereto sets forth the entire understanding of the parties and
supersedes any and all prior agreements, memoranda, arrangements and
understandings relating to the subject matter of this Agreement, including,
without limitation that certain proposal letter dated as of May 28, 1996
between Seller and Charter Communications, Inc. No representation, warranty,
promise, inducement or statement of intention has been made by any party which
is not contained in this Agreement and no party shall be bound by, or be liable
for, any alleged representation, promise, inducement or statement of intention
not contained herein or therein.
Section 12.3 Binding Effect: Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. This Agreement may not be assigned by any
party without the prior written consent of the other party hereto.
Section 12.4 Construction: Counterparts. The Article, Section and
paragraph headings of this Agreement are for convenience of reference only and
do not form a part of this Agreement and do not in any way modify, interpret or
construe the intentions of the parties. The parties acknowledge that each of
them have reviewed and revised this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments to this Agreement. This Agreement may be executed in one or more
counterparts, and all such counterparts shall constitute one and the same
instrument.
Section 12.5 Notices. All notices and communications hereunder
shall be in writing and shall be deemed to have been duly given to a party when
delivered in person or sent by overnight delivery, telecopy or enclosed in a
properly sealed envelope, certified or registered mail (postage and
certification or registration prepaid), as follows:
If to Seller: Prime Cable Hickory, L.P.
c/o Prime II Management, L.P.
3000 One American Center
600 Congress Avenue
Austin, Texas 78701
Attention: Jerry D. Lindauer
Telecopy No: (512) 476-4869
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<PAGE> 55
<TABLE>
<S> <C>
With a copy (which
shall not constitute
notice) to: Edens Snodgrass Nichols & Breeland, P.C.
2800 Franklin Plaza
111 Congress Avenue
Austin, Texas 78701
Attention: Patrick K. Breeland
Telecopy No: (512) 505-5911
If to Buyer: Charter Communications, L.P.
12444 Powerscourt Drive
Suite 400
St. Louis, Missouri 63131
Attention: Jerald L. Kent
Telecopy No: (314) 965-8793
With a copy (which
shall not constitute
notice) to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
New York, New York 10022
Attention: Neil A. Torpey
Telecopy No: (212) 319-4090
</TABLE>
Any party may change its address for purposes of notice by giving notice in
accordance with the provisions of this Section 12.5. Any such notice will be
deemed to be given when received, if personally delivered or sent by telecopy,
and, if mailed, five days after deposit in the United States mail, properly
addressed, with proper postage affixed.
Section 12.6 Expenses of the Parties. Except as may otherwise be
provided elsewhere in this Agreement, all expenses incurred by or on behalf of
the parties to this Agreement in connection with the authorization, preparation
and consummation of this Agreement, including, without limitation, all fees and
expenses of agents, representatives, counsel and accountants employed by the
parties to this Agreement in connection authorization, preparation, execution
and consummation of this Agreement shall be borne solely by the party who shall
have incurred the same.
Section 12.7 Governing Law. This Agreement shall be governed by
and construed and enforced in accordance with, the internal laws, and not the
law of conflicts, of the State of North Carolina.
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Section 12.8 Further Actions. At any time and from time to time
after the Closing, Seller and Buyer shall, at its own expense (except as
otherwise provided herein), take such actions and execute and deliver such
documents as may be reasonably necessary to effectuate the purposes of this
Agreement.
Section 12.9 Survival. This Article Twelve will survive the
termination of this Agreement.
** Remainder of Page Intentionally Left Blank. **
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EXECUTED as of the Effective Date.
SELLER:
PRIME CABLE OF HICKORY, L.P.
By: Prime Venture I, Inc.,
Its: General Partner
By:
------------------------------------------
Its:
-----------------------------------------
and
By: Prime Venture I Holdings, L.P.
Its: General Partner
By: Prime Venture I, Inc.
Its: General Partner
By:
----------------------------------
Its:
---------------------------------
and
By: Prime II Management Group, Inc.
Its: General Partner
By:
----------------------------------
Its:
---------------------------------
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BUYER:
Charter Communications II, L.P.
By: CCP II, Inc.
Its: General Partner
By:
-------------------------------------
Its:
------------------------------------
53
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EXHIBIT AND SCHEDULES
INDEX
Exhibits:
A - Defined Terms
B - Assumption Agreement
C - Form of Seller's FCC Counsel's Opinion
D - Form of Seller's Counsel's Opinion
E - Form of Buyer's Counsel's Opinion
F - Bill of Sale and Assignment
G - Allocation Schedule (if any, post signing)
H - Earnest Money Escrow Agreement
I - Indemnity Escrow Agreement
Schedules:
2.1 - Excluded Assets
3.3 - Seller's Required Consents
3.4(a) - Seller's Financial Statements
3.4(b) - Schedule of Material Assets as of April 30, 1996
3.5 - Material Adverse Changes
3.6 - Information Regarding System and Business
3.7 - Exceptions to Title and Liens
3.8 - Seller's Litigation
3.11(a) - Compliance Issues
3.11(b) - Rate Regulation Issues
3.12 - Tax Information
3.13 - Bonds
3.15 - Insurance
3.16 - Other Required Assets
3.19 - Competition and Overbuilds
4.3 - Buyer's Required Consents
4.4 - Buyer's Litigation
<PAGE> 60
EXHIBIT A
Definitions
"Accountants" is defined in Section 2.4(b).
"Adjustment Assets" is defined in Section 2.3(a).
"Adjustment Liabilities" is defined in Section 2.3(b).
"Affected Employees" is defined in Section 5.8(a).
"Affiliates" means any Person directly or indirectly controlling,
controlled by, or under common control with, the Person with respect to whom
the term "Affiliate" is used.
"Agreed System Upgrade Expenditures" means all funds expended by
Seller in accordance with Section 2.6(b) for which Seller is entitled to
reimbursement by Buyer pursuant to Sections 2.6(b) and 2.6(c).
"Agreement" means this Asset Sale Agreement between Seller and Buyer
entered into as of the Effective Date, and all the exhibits and schedules
hereto.
"Alternative Transaction" means any transaction that could result in
the transfer of control over, or ownership of, all or substantially all the
Purchased Assets that would be inconsistent with the obligations of Seller
under this Agreement, including but not limited to (a) any merger or
consolidation of Seller in which another Person or group of Persons acquired
fifty percent (50%) or more of the equity interests of Seller or the surviving
entity, as the case may be, (b) any offer for equity interests of Seller which,
if consummated, would result in a Person or group of Persons (other than the
partners of Seller as of the date of this Agreement) owning fifty percent (50%)
or more of Seller, or (c) any sale or other disposition of all or substantially
all the Purchased Assets.
"Antenna Service" means the lowest level of basic or standard cable
television service offered by the System.
"Assumed Liabilities" is defined in Section 2.4.
"Assumption Agreement" is defined in Section 2.4.
"Basic Subscribers" means, with respect to the System, the sum of (a)
the aggregate number of persons (excluding "second connections," as such term
is commonly understood in the cable television industry, any account
duplication, any account which has a disconnect request pending at, or which
has had service terminated as of, the Closing Date, any account obtained by
offers made, promotions conducted or discounts given outside the ordinary
course of Seller's business and any account which comes within the definition
of "Basic Subscriber" because such account (or any part thereof) has been
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<PAGE> 61
compromised or written off other than in the ordinary course of Seller's
business consistent with past practice)) who: subscribe to Antenna Service
(provided, however, that if the number of Satellite Tier (as defined below)
subscribers is less than ninety percent (90%) of Antenna Service subscribers to
the System, then the number of Basic Subscribers shall be reduced by the number
equal to the difference between ninety percent (90%) of Antenna Service
subscribers and the number of Satellite Tier subscribers); have paid the
applicable, full non-discounted rate for at least one month's Antenna Service
(including deposit and installation charges, consistent with Seller's past
practices)); and have no outstanding balance in excess of $5.00 which is more
than 62 days past due from the date for which service has been provided, plus
(b) the aggregate number of bulk rate equivalent subscribers of the System.
The number of "bulk rate equivalent subscribers" shall equal the quotient of
(i) the aggregate monthly bulk rate revenues from the provision of Antenna
Service and the Satellite Tier, divided by (ii) the combined standard rate as
of June 1, 1996 for Antenna Service and the Satellite Tier; provided, that the
total number of bulk rate equivalent subscribers shall not exceed the total
number of individual service locations (e.g., apartment units, hotel/motel
rooms), and the number of bulk rate equivalent subscribes shall not include any
subscriber (A) who delivers to Seller notice on or before the Closing Date of
its intention to terminate service completely or who has had its service
terminated on or before the Closing Date or (B) who is explicitly excluded from
the definition of "Basic Subscriber" above.
"Benefit Plans" is defined in Section 3.6(a)(iii).
"Business" is defined in the Background paragraph of this Agreement.
"Bill of Sale" is defined in Section 8.2(i).
"Buyer" is defined in the first paragraph of this Agreement.
"Buyer Indemnitees" is defined in Section 11.2.
"Buyer's Counsel's Opinion" is defined in Section 7.6.
"Buyer's Inspection" is defined in Section 5.5.
"Buyer's Tax Claims" is defined in Section 11.1.
"Capital Expenditures Amount" is defined in Section 2.6(c).
"Catawba County" is defined in Section 2.6(a).
"Catawba Extension" is defined in Section 2.6(b).
"Catawba Franchise Requirement System Upgrade" is defined in Section
2.6(a).
2
<PAGE> 62
EXHIBIT A (CONT.)
"Closing" is defined in Section 8.1.
"Closing Conditions" is defined in Section 8.1.
"Closing Date" is defined in Section 8.1.
"Code" means the Internal Revenue Code of 1986, as currently in
effect.
"Communications Act" means the Communications Act of 1934, as
currently in effect.
"Determination Time" means 11:59 p.m. on the Closing Date.
"DOJ" means the Department of Justice.
"Earnest Money Escrow Agreement" is defined in Section 2.2(b).
"Effective Date" is defined in the first paragraph of this Agreement.
"ERISA" means the Employee Retirement Security Act of 1974, as
amended.
"Escrow Agent" means The Bank of New York.
"Excess Expenditures" is defined in Section 2.6(b).
"Excluded Assets" is defined in Section 2.1.
"FCC" means the Federal Communication Commission.
"Final Adjustment Payment Date" is defined in Section 2.3(b).
"Final Purchase Price" is defined in Section 2.2.
"Final Schedule" is defined in Section 2.3(b).
"FTC" means the Federal Trade Commission.
"Franchises" is defined in Section 3.6(a)(ii).
"Franchising Authorities" means those Governmental Authorities
issuing, and having jurisdiction over, the Franchises.
3
<PAGE> 63
EXHIBIT A (CONT.)
"Governmental Authority" means all of the following: (a) the United
States of America, (b) any state, commonwealth, territory or possession of the
United States of America and any political subdivision thereof (including
counties, municipalities and the like), and (c) any agency, authority or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.
"HSR Act" is defined in Section 5.3.
"HSR Report" is defined in Section 5.3.
"HSR Rules" is defined in Section 5.3.
"Hazardous Substances" is defined in Section 3.14(d).
"Homes Passed" means the sum of (a) each single family residence or
dwelling unit within a building containing multiple dwelling units that can be
served from the activated System distribution cable, utilizing regularly
available flexible drop cables and other customer premises equipment as
necessary, to deliver service which meets the technical standards, on all
channels, as defined in Part 76.605 of the FCC rules, plus (b) commercial and
other buildings (including homes or hotels) actually served by the System.
"Indemnified Party" is defined in Section 11.4.
"Indemnifying Party" is defined in Section 11.4.
"Indemnity Escrow Agreement" is defined in Section 11.7.
"Inspection Period" is defined in Section 5.5.
"Leased Real Property" is defined in Section 3.14(a).
"Legal Requirement" is any statute, ordinance, code, law, rule,
regulation, order or other requirement, standard or procedure enacted, adopted
or applied by any Governmental Authority, including but not limited to judicial
decisions applying common law or interpreting any other Legal Requirement.
"Liens" is defined in Section 2.1.
"Material Required Buyer Consents" is defined in Section 4.3.
"Material Required Seller Consents" is defined in Section 3.3.
"Other Required Assets" is defined in Section 3.16.
4
<PAGE> 64
EXHIBIT A (CONT.)
"Owned Real Property" is defined in Section 3.14(a).
"Pay TV Units" means each unit of premium programming service selected
by and sold to subscribers of the System on an a la carte basis for monthly
fees in addition to the fee for basic cable television service.
"Permitted Liens" means those liens (i) disclosed in Schedule 3.7, (ii)
Liens for Adjustment Liabilities, and (iii) landlord's liens and liens for
property taxes not delinquent, statutory liens and zoning restrictions,
easements, rights-of-way or other restrictions on the use of the Owned Real
Property or the Leased Real Property, provided that such liens and restrictions
were incurred either prior to the time Seller acquired an interest in the Owned
Real Property or the Leased Real Property or in the ordinary course of the
business of the System and that they do not, individually, or in the aggregate,
materially interfere with Seller's operation of the System as currently
operated.
"Permitted Modifications" is defined in Section 5.1(b).
"Person" means an individual, corporation, partnership, limited
liability company, trust or unincorporated organization, or a government or any
agency or political subdivision thereof.
"Plant Reimbursement Amount" is defined in Section 2.6(c).
"Preliminary Purchase Price" is defined in Section 2.2.
"Preliminary Schedule" is defined in Section 2.3.
"Purchased Assets" is defined in Section 2.1.
"Purchase Price" is defined in Section 2.2.
"PVI" means Prime Venture I, Inc., a Delaware corporation and a
general partner of Seller.
"PVIH" is defined in Section 2.3(a).
"Satellite Tier" means that level of cable service containing the
majority of each Systems' satellite programming or the CPS tier (as defined by
the FCC).
"Seller" is defined in the first paragraph of this Agreement.
"Seller Contracts" means all contracts, agreements and leases (other
than those which are Franchises, System Rights, Other Required Assets or
Excluded Assets), to which Seller is a party and that pertain to the ownership,
operation or maintenance of the Purchase Assets, the System or the Business,
including, but not limited to, System Contracts.
5
<PAGE> 65
EXHIBIT A (CONT.)
"Seller Indemnitees" is defined in Section 11.3.
"Seller's Counsel's Opinion" is defined in Section 6.8.
"Seller's FCC Counsel's Opinion" is defined in Section 6.7.
"System" is defined in the Background paragraph of this Agreement.
"System Contracts" is defined in Section 3.6(a)(i).
"System Rights" is defined in Section 3.6(a)(ii).
"Taxes" is defined as all taxes, charges, fees, levies, charges,
imposts, duties, withholdings or other assessments including, without
limitation, income, withholding, capital, excise, employment, occupancy,
property, ad valorem, sales, transfer, recording, documentary, registration,
motor vehicle, franchise, use and gross receipts taxes, imposed by the United
States or any state, county, local government or any subdivision thereof. Such
terms shall also include any interest, penalties, fines or additions
attributable to such assessments.
"Tax Return" is defined as any return, report, information return or
other document (including any related or supporting information) filed or
required to be filed with any taxing authority in connection with the
determination, assessment, collection, administration or imposition of any
Taxes.
"Termination Date" is defined in Section 8.1.
"Third Party Claim" is defined in Section 11.4.
"WARN Act". The Worker Adjustment and Retraining Notification Act.
6
<PAGE> 1
ASSET PURCHASE AGREEMENT
between
CENCOM CABLE INCOME PARTNERS II, L.P.,
as Seller
and
CHARTER COMMUNICATIONS II, L.P.,
as Purchaser
dated as of May 30, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
1. PURCHASE AND SALE OF ASSETS 1
1.1 Assets to be Sold 1
1.2 Excluded Assets 2
2. CALCULATION AND PAYMENT OF PURCHASE PRICE 3
2.1 Payment of Purchase Price 3
2.2 Assumption of Liabilities 3
2.3 Purchase Price 4
2.4 Excluded Liabilities 4
2.5 Allocation of Consideration 4
2.6 Proration of Revenue 4
3. CLOSING 4
3.1 Closing Date 4
3.2 Deliveries by Seller 5
3.3 Deliveries by Purchaser 5
4. REPRESENTATIONS AND WARRANTIES 6
4.1 Organization and Standing 6
4.2 Power and Authority 6
4.3 Authorization 6
5. ADDITIONAL UNDERTAKINGS AND ACTIONS 7
5.1 Consents 7
5.2 Access to Assets 7
5.3 Operations Prior to Closing 7
5.4 Antitrust Laws Compliance 7
5.5 Bulk Sales 8
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER 8
6.1 HSR Act 8
6.2 Governmental or Legal Action 8
6.3 Representations; Performance of Agreements 8
6.4 Financing 9
6.5 No Material Adverse Change. 9
6.6 Consents and Approvals 9
6.7 Transfer Documents 9
6.8 Opinions of Seller's Counsel 9
6.9 Discharge of Liens 9
6.10 No Default Under Documents 9
6.11 Additional Documents and Acts 10
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 10
7.1 HSR Act 10
7.2 Governmental or Legal Actions 10
7.3 Representations; Performance of Agreements 10
7.4 Consent and Approvals 11
7.5 Payments 11
7.7 Additional Documents and Acts 11
8. REMEDIES 11
8.1 Costs 11
8.2 Termination Without Liability 11
8.3 Termination on Default 11
9. INDEMNIFICATION 12
9.1 Seller's Indemnity 12
9.2 Purchaser's Indemnity 12
9.3 Procedure 13
9.4 Preservation and Access to Records 13
10. GENERAL PROVISIONS 14
10.1 Entire Agreement, Modification and Waiver 14
10.2 Rights of Parties 14
10.3 Assignment 14
10.4 Construction 14
10.5 Expenses of the Parties 14
10.6 Further Assurances 15
10.7 Counterparts 15
10.8 Headings 15
</TABLE>
<PAGE> 4
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of this 30th
day of May, 1996 by and between Charter Communications, L.P., a limited
partnership organized and existing under the laws of the State of Delaware ("CC
II" or the "Purchaser") and Cencom Cable Income Partners II, L.P., a limited
partnership organized and existing under the laws of the State of Delaware
("Seller").
W I T N E S S E T H:
WHEREAS, Seller is the owner and operator of a cable television system
serving communities located in and around Anderson County, South Carolina (the
"System");
WHEREAS, Seller desires to sell, and Purchaser desire to purchase,
pursuant to the terms and subject to the conditions of this Agreement, the
System together with all of the assets, property, interests, rights and
privileges of Seller, including but not limited to those utilized in the cable
television business owned and operated by Seller in Anderson County, South
Carolina (the "CATV Business").
NOW, THEREFORE, in consideration of the mutual promises, agreements and
covenants set forth herein, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1 Assets to be Sold. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell, convey, assign, transfer and deliver
to Purchaser at the Closing (as hereinafter defined) and Purchaser hereby agrees
to acquire, for the consideration hereinafter provided, all of the assets,
properties, rights, titles and privileges of Seller of every kind, character and
description, whether tangible, intangible, real, personal or mixed, of whatever
description and wherever located, involved in, related to, owned, used or held
for use or useful in connection with the ownership, use or operation of the
System and all other assets of Seller relating to the System whether or not
required to be listed on Seller's balance sheet in
<PAGE> 5
accordance with generally accepted accounting principles, including,
without limitation, all additions, accessions and substitutions made prior to
the Closing as permitted pursuant to the terms of this Agreement (collectively,
the "Assets"), but excluding the Excluded Assets (defined below) and assets
disposed of by Seller between the date hereof and the Closing Date (as
hereinafter defined) on an arms' length basis in the ordinary course of
business. The Assets include, without limitation, the following:
(a) all of the real property interests of Seller relating to the System
(collectively, the "Real Property");
(b) all items of tangible personal property owned, used, held for use or
useful by Seller in the operation of the System, including, without limitation,
all equipment relating to the System (collectively, the "Equipment"); and
(c) all the rights of Seller under any and all franchises, licenses
(including those required by the FCC), permits, authorizations, easements,
registrations, leases, variances, consents and certificates and similar rights
which authorize or are required in connection with the operation of the System,
including any applications for any of the foregoing (collectively, the
"Governmental Permits") that are obtained from or are pending with any federal,
state, county, municipal, local or foreign government and any governmental
agency, bureau, commission, authority, body, court (or other judicial body),
administrative or executive agency, legislative or quasi-legislative body,
commission, council or other agency, including any such agency, authority or
body responsible for the issuance or administration of any Governmental Permit
or whose consent is required for the sale and transfer of the Assets (each, a
"Governmental Authority") and all subscription contracts with subscribers of
Seller relating to the System, pole attachment agreements, access agreements
and all other contracts, leases, agreements or undertakings (other than those
that are included in the Excluded Assets or which constitute Governmental
Permits), written or oral, relating to the ownership, operation or maintenance
of the System and/or the Assets (the "Contracts").
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, any insurance policies and rights and claims thereunder; all rights
to tax refunds and refunds of fees of any nature, in either case relating to
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<PAGE> 6
the period prior to the Closing Date; Seller's rights under this Agreement, and
the Purchase Price payable pursuant hereto; Seller's organizational documents
and partnership and financial records not included in Section 1.1; Seller's cash
in the bank and cash equivalents at the time of the Closing; and all assets of
Seller other than the Assets (collectively, the "Excluded Assets") are expressly
excluded from this sale, are not to be purchased or assumed by Purchaser, and do
not constitute part of the "Assets."
2. CALCULATION AND PAYMENT OF PURCHASE PRICE
2.1 Payment of Purchase Price.
(a) The purchase price to be paid by Purchaser to Seller for the Assets
shall be an amount equal to $36,700,000 (the "Purchase Price").
(b) On the Closing Date, Purchaser shall pay to Seller the Purchase Price,
by wire transfer of immediately available funds to an account designated by
Seller in writing.
2.2 Assumption of Liabilities. As additional consideration for the Assets,
Purchaser shall, from and after the Closing Date, and pursuant to an Assignment
and Assumption Agreement in a form agreed between the parties (the "Assumption
Agreement"), assume the obligations of Seller under or in connection with all
of the Assets. In addition, Purchaser shall assume (i) all obligations
relating to the Assets entered into by Seller in the ordinary course of
business between the date hereof and the Closing Date (other than any
obligations, if any, relating to the Excluded Assets), to the extent such
obligations continue after the Closing and (ii) all liabilities relating to (y)
all customer advance payments and deposits, prepaid advertising revenues and
other prepaid revenues or income received or held by Seller for services to be
rendered or obligations to be performed in connection with the System
subsequent to the Closing; (z) the performance of the Contracts from and after
the Closing Date; provided, however, that Seller shall pay all sales, use,
excise and similar taxes arising out of the transfer of the Assets.
Except as otherwise provided in this Section 2.2, Purchaser shall not assume or
become liable for any other obligations, liabilities or indebtedness of Seller.
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<PAGE> 7
2.3 Purchase Price Adjustments.
(a) At the Closing, the Purchase Price shall be increased by an amount
equal to 99% of the face amount of accounts receivable from subscribers of the
System which, as of the Closing Date, have been outstanding for 60 days or
less. There shall be no increase to the Purchase Price for accounts receivable
from subscribers of the System which have been outstanding for more than 60
days.
(b) Following the Closing, Purchaser and Seller shall adjust the Purchase
Price pursuant to customary working capital adjustments for transactions of
this type calculated as of the Closing Date. The difference between the actual
Purchase Price paid and the adjusted Purchase Price shall be paid in cash by
the party owing such adjustment no later than sixty (60) days after the Closing
Date.
2.4 Excluded Liabilities. Seller shall pay or otherwise satisfy all
indebtedness, liabilities or other obligations of Seller arising prior to or on
the Closing Date from the ownership or operation of any of the Assets.
2.5 Allocation of Consideration. The parties agree that the consideration
payable for the Assets, consisting of the Purchase Price and the liabilities of
Seller to be assumed by Purchaser hereunder, shall be allocated among the
Assets in accordance with Section 1060 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder. The parties agree to cooperate in the
preparation, execution and filing with the Internal Revenue Service of all
information to be filed by the parties under Section 1060 and such regulations,
and to file Form 8594 (or any substitute therefor) when required by applicable
law.
2.6 Proration of Revenue. All revenue earned arising from the Assets shall
be prorated between Purchaser and Seller as of (and the Closing shall be deemed
effective as of) 11:59 p.m., New York time, on the Closing Date.
3. CLOSING
3.1 Closing Date. The closing of the transactions contemplated hereunder
(the "Closing") shall take place at the offices of Paul, Hastings, Janofsky &
Walker, 399 Park Avenue, 31st Floor, New York, New York 10022, at 10:00 A.M.
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<PAGE> 8
New York time on August 30, 1996, or on such other date and at such other time
as the Purchaser and Seller may mutually agree (the "Closing Date"). Purchaser
shall be entitled to possession of the Assets upon the Closing.
3.2 Deliveries by Seller. At the Closing, Seller shall deliver to
Purchaser the following:
(a) One or more bills of sale and all such other general instruments of
transfer, assignment and conveyance, general warranty deeds, certificates of
title, assignments, evidences of consent or waiver, and other instruments or
documents in form and substance reasonably satisfactory to Purchaser and its
counsel as shall be necessary to evidence or perfect the sale, assignment,
transfer and conveyance of the Assets to Purchaser and effectively vest in the
Purchaser all right, title and interest in and to the Assets free and clear of
any and all liens, encumbrances and other restrictions (other than liens and
encumbrances agreed upon by the parties, such liens and encumbrances being
"Permitted Encumbrances") in accordance with the terms of this Agreement,
together with possession (or constructive possession, in the case of
intangibles) thereof.
(b) An executed Assumption Agreement.
(c) A Certificate of Non-Foreign Status which meets the requirements of
Treasury Regulation Section 1.1445-2, duly executed and acknowledged,
certifying under penalties of perjury that Seller is not a foreign person for
United States income tax purposes.
(d) Originals or true and complete copies of all books and records,
memoranda and data relating to the System; provided that Seller may retain such
duplicate copies as Seller reasonably deems appropriate.
(e) Such other documents, opinions, instruments and certificates, in form
and substance reasonably satisfactory to Purchaser, as Purchaser may reasonably
request.
3.3 Deliveries by Purchaser. At the Closing, Purchaser shall deliver to
Seller the following:
(a) The payment described in Section 2.1(b).
(b) An executed Assumption Agreement.
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<PAGE> 9
(c) Such other documents, opinions, instruments and certificates, in form
and substance reasonably satisfactory to Seller, as Seller may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES
Seller hereby represents and warrants to Purchaser, and Purchaser hereby
represents and warrants to Seller that:
4.1 Organization and Standing. Each such party is duly formed, validly
existing and in good standing as a limited partnership under the laws of the
jurisdiction of its formation. Each such party is duly qualified to do
business in each jurisdiction where the failure to so qualify would have a
material adverse affect on such party's ability to conduct its business or
operations or to consummate the transactions to be consummated by it under this
Agreement and each such party is in good standing in each jurisdiction in which
it is so qualified.
4.2 Power and Authority. Each such party has all requisite power and
authority to execute, deliver and perform this Agreement and to take any action
which it may be required to take hereunder. Seller further represents and
warrants that it has all requisite power to perform its business as now
conducted and to own its properties and assets.
4.3 Authorization. The execution, delivery and performance of this
Agreement by such party has been duly and validly authorized by all action
required to be taken with respect to such party. This Agreement has been, and
on the date of the Closing all other documents, agreements and instruments to
be executed and delivered at the Closing by such party pursuant hereto
(together with all such documents, agreements and instruments to be executed
and delivered by each other party hereto, the "Transaction Documents") will
have been, duly and validly executed by properly authorized officers or other
authorized representatives of such party. This Agreement constitutes, and on
the Closing Date all other Transaction Documents to which such party is or will
be a signatory will constitute, the valid and binding obligations of such
party, enforceable against such party in accordance with their respective
terms. Neither the execution of this Agreement or any of the Transaction
Documents, nor the consummation of the transactions contemplated herein or
therein, will violate
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<PAGE> 10
any instrument of such party, or any agreement, permit, order, judgment, decree,
law or regulation to which such person is party or by which it is, or its assets
and properties are, bound.
5. ADDITIONAL UNDERTAKINGS AND ACTIONS
5.1 Consents.
(a) As soon as possible after the execution of this Agreement, Seller will
commence making the applications and filings required to obtain all consents
required to be obtained to effect the consummation of the transactions
contemplated hereby, including the written consents of the Limited Partners
holding a majority of units of limited partnership of the Seller (the
"Consents"). Seller will use its best efforts to obtain the Consents from the
appropriate Governmental Authorities and other persons at the earliest possible
date. Purchaser agrees that it will cooperate fully with Seller, and will do
all things reasonably necessary to assist Seller in obtaining all Consents.
5.2 Access to Assets. On and after the date of this Agreement, Purchaser
and its counsel, accountants and other representatives shall have reasonable
access, during normal business hours and upon reasonable notice, to all
properties, books, accounts, contracts, commitments, and records, documents or
other data or information of Seller relating to the System.
5.3 Operations Prior to Closing. Except as otherwise expressly
contemplated by this Agreement, at all times from and after the date hereof and
up to and including the Closing Date, Seller shall operate the System only in
the ordinary course.
5.4 Antitrust Laws Compliance. As soon as practicable after the date of
execution of this Agreement, Seller and Purchaser shall each make filings if
and as required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and related acts and regulations (the "HSR Act"). Each party shall
keep the other party apprised of the status of any inquiries made of such party
by the Federal Trade Commission, the Antitrust Division of the United States
Department of Justice, or any other Governmental Authority with respect to this
Agreement or the transactions contemplated hereby. Each party shall use
reasonable
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<PAGE> 11
efforts to obtain the earliest termination or waiver of the HSR Act
waiting period possible.
5.5 Bulk Sales. Purchaser waives compliance with provisions of the Uniform
Commercial Code relating to bulk transfer and similar laws in connection with
the sale of the Assets, subject to the indemnification provisions of Section 9
hereof.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any one or more of which may be waived by Purchaser, in its sole discretion;
provided, however, that no such waiver of a condition shall constitute a waiver
by Purchaser of any of its other rights or remedies, at law or in equity, if
Seller shall be in default of any of its obligations under this Agreement.
6.1 HSR Act. All filings required under the HSR Act, if any, shall have
been made and the applicable waiting period shall have expired or been earlier
terminated without the receipt of any objection or the commencement or threat
of any litigation by a Governmental Authority of competent jurisdiction to
restrain or prevent the consummation of the transactions contemplated by this
Agreement.
6.2 Governmental or Legal Action. No action, suit or proceeding shall
be pending or threatened by any Governmental Authority or other person and
no law, rule or regulation or similar requirement shall have been enacted,
promulgated or issued or deemed applicable to any of the transactions
contemplated by this Agreement by any Governmental Authority or other
person that would (a) prohibit Purchaser's ownership or operation of all
or a material portion of the System or the Assets, (b) enjoin, prevent or make
illegal the consummation of the transactions contemplated by this Agreement or
(c) challenge, set aside or modify any authorization of the transactions
provided for herein or any approvals, consents, waivers or authorizations made
or described hereunder.
6.3 Representations; Performance of Agreements. The representations and
warranties of Seller set forth in Section 4 hereof shall be true in all
material respects as of and at the Closing Date with the same effect as though
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<PAGE> 12
such representations and warranties had been made again at and as of such time.
Seller shall have performed, satisfied and complied in all material respects
with all covenants, obligations, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Seller at or prior to
the Closing Date.
6.4 Financing. Purchaser shall have obtained such financing as it may
require in order to consummate the transactions contemplated by this Agreement.
6.5 No Material Adverse Change. There shall not have occurred, since the
date of this Agreement, a material adverse change in the business, assets,
liabilities, prospects, condition (financial or other) or number of subscribers
of the CATV Business or the System.
6.6 Consents and Approvals. Seller shall have delivered to Purchaser
evidence that all of the Consents have been obtained or given and all such
Consents shall be in form and substance reasonably satisfactory to Purchaser
and Seller.
6.7 Transfer Documents. Seller shall have delivered to Purchaser customary
bills of sale, general warranty deeds, assignments and other instruments of
transfer sufficient to convey good and marketable title to the Assets in
accordance with the terms of this Agreement, including the documents and
instruments described under Section 3.2(a). Seller shall have executed and
delivered to Purchaser the Assumption Agreement.
6.8 Opinions of Seller's Counsel. Purchaser shall have received the
opinions of counsel for Seller reasonably required by Purchaser.
6.9 Discharge of Liens. Seller shall have secured the termination,
discharge and release of all material encumbrances of any nature on the Assets.
6.10 No Default Under Documents. As of the Closing Date, Seller shall not
be in material violation or default under any statute, rule, regulation,
agreement, or other document to which Seller is a party or by which Seller is
bound in a manner which would materially adversely affect the operation of the
System, nor shall Seller have knowledge of any condition or event which, with
notice or lapse of time or both, would constitute such a violation or default.
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<PAGE> 13
6.11 Additional Documents and Acts. Seller shall have delivered or caused
to be delivered to Purchaser all such additional documents and instruments, in
form and content reasonably satisfactory to Purchaser and its counsel, as
Purchaser shall reasonably request, and shall have done all other acts or
things reasonably requested by Purchaser to evidence compliance with the
conditions set forth in this Section 6.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under the Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
any one or more of which may be waived by Seller in its sole discretion;
provided, however, that no such waiver of a condition shall constitute a waiver
by Seller of any of its rights or remedies, at law or in equity, if Purchaser
shall be in default of any of its obligations under this Agreement.
7.1 HSR Act. All filings required under the HSR Act, if any, shall have
been made and the applicable waiting period shall have expired or been earlier
terminated without the receipt of any objection or the commencement or threat
of any litigation by a Governmental Authority of competent jurisdiction to
restrain or prevent the consummation of the transactions contemplated by this
Agreement.
7.2 Governmental or Legal Actions. No action, suit or proceeding shall be
pending or threatened by any Governmental Authority or other person and no law,
rule, regulation or other similar requirement shall have been enacted,
promulgated or issued or deemed applicable to any of the transactions
contemplated by this Agreement by any Governmental Authority or other person
that would (a) prohibit Purchaser's ownership or operation of all or any
material portion of the System or the Assets, (b) enjoin, prevent or make
illegal the consummation of the transactions contemplated by this Agreement, or
(c) challenge, set aside or modify any authorization of the transactions
provided for herein or any approvals, consents, waivers or authorizations made
or described hereunder.
7.3 Representations; Performance of Agreements. The representations and
warranties of Purchaser set forth in Section 4 hereof shall be true in all
material respects as of and at the Closing Date with the same effect as though
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<PAGE> 14
such representations and warranties had been made again at and as of such time.
Purchaser shall have performed, satisfied and complied in all material
respects with all covenants, obligations, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by Purchaser at or
prior to the Closing Date.
7.4 Consent and Approvals. All Consents shall have been obtained or given.
7.5 Payments. Purchaser shall have paid to Seller the Purchase Price.
7.6 Assumption of Liabilities. Purchaser shall have delivered to Seller
the Assumption Agreement.
7.7 Additional Documents and Acts. Purchaser shall have delivered or
caused to be delivered to Seller all such additional documents and instruments,
in form and content reasonably satisfactory to Seller and its counsel, as
Seller shall reasonably request, and shall have done all other acts or things
reasonably requested by Seller to evidence compliance with the conditions set
forth in this Section 7.
8. REMEDIES
8.1 Costs. If any legal action or other proceeding is brought for the
enforcement of this Agreement or any other instrument or document to be
executed, delivered or performed hereunder, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions
of this Agreement or any other instrument or document to be executed, delivered
or performed hereunder, the successful or prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
8.2 Termination Without Liability. On the Closing Date, either party may
terminate this Agreement, without liability to the other, if any conditions
precedent to such party's performance shall not have been satisfied on the
Closing Date.
8.3 Termination on Default. Without limiting the provisions of Sections
8.1, 8.2 and 9 hereof, if either Seller, on the one hand, or Purchaser, on the
other hand,
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shall default in the due and timely performance of any of the covenants or
agreements under the Agreement, the other of Seller or Purchaser, as the case
may be, may, in addition to any other remedy available thereto, on the
Closing Date give notice of termination ("Termination Notice") of this
Agreement. The Termination Notice shall specify with particularity the default
or defaults on which it is based and state that this Agreement is terminated.
The Termination Notice shall be effective when given. The rights and remedies
granted in this Section 8.3 are cumulative and not exclusive of any other right
or remedy granted herein or provided by law or in equity.
9. INDEMNIFICATION
9.1 Seller's Indemnity. Seller shall indemnify and hold harmless Purchaser
and its shareholders, partners, officers, directors, employees, controlling
persons and representatives, against and in respect of any and all claims,
damages, losses, costs, expenses (including reasonable legal, accounting and
experts' fees and other fees and expenses incurred in the investigation or
defense of any of the following, and any interest and penalties), obligations
and liabilities which any such person may incur or suffer, as a result of,
arising in connection with or relating to any and all claims of third parties
(including the claims of any limited partners of the Seller) against, relating
to or pertaining to the Seller, the Assets and/or the System, which arise in
connection with or relate to the period prior to the Closing or to the
transactions contemplated hereunder and/or the authority of the Seller to enter
into and consummate such transactions and/or the propriety of such
transactions.
9.2 Purchaser's Indemnity. Purchaser shall indemnify and hold harmless
Seller against and in respect of any and all claims, damages, losses, costs,
expenses (including reasonable legal, accounting and experts' fees and other
fees and expenses incurred in the investigation or defense of any of the
following, and any interest and penalties), obligations and liabilities which
Seller may incur as a result of, arising in connection with or relating to
which it may incur by reason of a material breach of any of the representations
or warranties of Purchaser set forth in this Agreement.
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9.3 Procedure. In the event that any claim shall be asserted against a
party entitled to indemnification hereunder (the "Indemnitee"), the Indemnitee
shall promptly notify the other party (the "Indemnitor") of such claim in
writing, and shall extend to the Indemnitor an opportunity to defend against
such claim at the Indemnitor's sole expense. Within 15 days of receiving any
such notice from the Indemnitee, the Indemnitor shall notify the Indemnitee as
to whether or not the Indemnitor elects to assume the defense of any such
claim. In the event the Indemnitor does not so elect to assume such defense,
any costs incurred by the Indemnitee in defending such claim shall be
reimbursed to the Indemnitee, on an as-incurred basis, pursuant to this Section
9. In the event the Indemnitor elects to assume such defense, the Indemnitee
shall, at its option and expense, have the right to participate in any defense
undertaken by the Indemnitor with legal counsel of its own selection, provided
that such legal counsel is reasonably acceptable to Indemnitor. No settlement
or compromise of any claim that may result in indemnification liability may be
made by the Indemnitor without the prior written consent of the Indemnitee,
which consent may not be unreasonably withheld.
9.4 Preservation and Access to Records. Purchaser will preserve and keep
all books and records of Seller included in the Assets for a period of at least
five years from the Closing Date, except such records as Purchaser usually
disposes of in the ordinary course of business. During the period that such
books and records are preserved, duly authorized representatives of Seller
shall have access thereto, on reasonable prior notice to Purchaser and during
regular business hours to examine, inspect and copy, at its own expense, such
books and records, so long as such examination and inspection takes place on
the premises of Purchaser and does not unreasonably interfere with Purchaser's
use thereof. Purchaser, on the one hand, and Seller, on the other hand, agree
that each of them shall reasonably cooperate with the other of Purchaser or
Seller, as applicable, if the records relating to the System owned shall be of
material assistance to the other of Purchaser or Seller in any threatened or
pending litigation or proceeding or the preparation of tax returns.
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10. GENERAL PROVISIONS
10.1 Entire Agreement, Modification and Waiver. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
all the parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
10.2 Rights of Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of
this Agreement upon any persons other than the parties and their respective
permitted successors and assigns, nor is anything in this Agreement intended
to relieve or discharge the obligation or liability of any third person or any
party to this Agreement, nor shall any provision give any third person any
right of subrogation or action against any party to this Agreement.
10.3 Assignment. No assignment of any rights or obligations of either
party under this Agreement may be made without the prior written consent of the
other party to this Agreement, which consent is not to be unreasonably
withheld, except that Purchaser shall have the right to assign any or all of its
rights and liabilities hereunder to any of its affiliates, provided that each
such affiliate assumes Purchaser's obligations hereunder; and further provided
that Seller shall have been promptly provided written notice of such assignment
(including the name of the assignee). Any attempted assignment of rights or
obligations in violation of this Section 10.3 shall be null and void. Reference
to any of the parties in this Agreement shall be deemed to include the
successors and assigns of such party.
10.4 Construction. The language in this Agreement shall, in all cases, be
construed as a whole according to its fair meaning and neither strictly for nor
against Seller or Purchaser.
10.5 Expenses of the Parties. Except as expressly provided herein, all
expenses incurred by or on behalf of the parties hereto in connection with the
authorization,
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preparation and consummation of this Agreement including, without
limitation, all fees and expenses of agents, representatives, counsel and
accountants employed by the parties hereto in connection with the authorization,
preparation, execution and consummation of this Agreement shall be borne solely
by the party who shall have incurred the same.
10.6 Further Assurances. Seller, at any time after the Closing Date, will
promptly execute, acknowledge and deliver any further deeds, assignments,
conveyances and other assurances, documents and instruments of transfer,
reasonably requested by Purchaser and necessary for Seller to comply with its
covenants contained herein and will take any other action consistent with the
terms of this Agreement that may reasonably be requested by Purchaser for the
purpose of assigning, transferring, granting, conveying, vesting and confirming
ownership in or to Purchaser, or reducing to Purchaser's possession, any or
all of the Assets.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
10.8 Headings. The headings contained in this Agreement are solely for
convenience of reference and shall not affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Asset Purchase Agreement as of the date first written above.
SELLER:
CENCOM CABLE INCOME PARTNERS II, L.P.
By: Cencom Partners, Inc.,
its General Partner
By:/s/ Theodore W. Browne, II
------------------------------------
Name: Theodore W. Browne, II
Title: Executive Vice President
PURCHASER:
CHARTER COMMUNICATIONS II, L.P.
By: CCP II, Inc.,
its General Partner
By: /s/ Robert C. Bailey
-------------------------------
Name: Robert C. Bailey
Title: Executive Vice President
Signature Page for Anderson County, SC Asset Purchase Agreement
<PAGE> 1
SECOND
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
between
CENCOM PARTNERS, L.P.,
as Seller
and
CHARTER COMMUNICATIONS, L.P.,
as Purchaser
dated as of January 16, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE OF ASSETS .................................... 1
1.1 Assets to be Sold ..................................... 1
1.2 Excluded Assets ....................................... 2
2. CALCULATION AND PAYMENT OF PURCHASE PRICE ...................... 3
2.1 Payment of Purchase Price ............................. 3
2.2 Assumption of Liabilities ............................. 3
2.3 Purchase Price ........................................ 4
2.4 Excluded Liabilities .................................. 4
2.5 Allocation of Consideration ........................... 4
2.6 Proration of Revenue .................................. 4
3. CLOSING ........................................................ 5
3.1 Closing Date .......................................... 5
3.2 Deliveries by Seller .................................. 5
3.3 Deliveries by Purchaser................................ 6
4. REPRESENTATIONS AND WARRANTIES ................................. 6
4.1 Organization and Standing ............................. 6
4.2 Power and Authority .................................. 6
4.3 Authorization ......................................... 6
5. ADDITIONAL UNDERTAKINGS AND ACTIONS ............................ 7
5.1 Consents .............................................. 7
5.2 Access to Assets ...................................... 7
5.3 Operations Prior to Closing ........................... 7
5.4 Antitrust Laws Compliance ............................. 7
5.5 Bulk Sales ............................................ 8
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER ............... 8
6.1 HSR Act ............................................... 8
6.2 Governmental or Legal Action .......................... 8
6.3 Representations; Performance of Agreements ............ 9
6.4 Financing ............................................. 9
6.5 Consents and Approvals ............................... 9
6.6 Transfer Documents .................................... 9
6.7 Opinions of Seller's Counsel .......................... 9
6.8 Discharge of Liens .................................... 9
6.9 No Default Under Documents ............................ 9
6.10 Additional Documents and Acts ......................... 10
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER .................. 10
7.1 HSR Act ............................................... 10
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7.2 Governmental or Legal Actions ......................... 10
7.3 Representations; Performance of Agreements ............ 11
7.4 Consent and Approvals ................................. 11
7.5 Payments .............................................. 11
7.6 Assumption of Liabilities ............................. 11
7.7 Additional Documents and Acts ......................... 11
8. REMEDIES ...................................................... 11
8.1 Costs ................................................. 11
8.2 Termination Without Liability ......................... 11
8.3 Termination on Default ................................ 12
9. INDEMNIFICATION ................................................ 12
9.1 Seller's Indemnity .................................... 12
9.2 Purchaser's Indemnity ................................. 12
9.3 Procedure ............................................. 13
9.4 Preservation and Access to Records .................... 13
10. GENERAL PROVISIONS ............................................ 14
10.1 Entire Agreement, Modification and Waiver ............. 14
10.2 Rights of Parties ..................................... 14
10.3 Assignment ............................................ 14
10.4 Construction .......................................... 14
10.5 Expenses of the Parties ............................... 14
10.6 Further Assurances .................................... 15
10.7 Counterparts .......................................... 15
10.8 Headings .............................................. 15
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SECOND
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
THIS SECOND AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (this
"Agreement") is made as of this 16th day of January, 1997 by and between
Charter Communications, L.P., a limited partnership organized and existing
under the laws of the State of Delaware ("CC I" or the "Purchaser") and Cencom
Partners, L.P., a limited partnership organized and existing under the laws of
the State of Delaware ("Seller"), and hereby amends that Amended and Restated
Asset Purchase Agreement dated as of the 30th day of May, 1996 between the
parties.
W I T N E S S E T H:
WHEREAS, Seller is the owner and operator of a cable television system
serving Sanford, North Carolina (the "System");
WHEREAS, Seller desires to sell, and Purchaser desire to purchase,
pursuant to the terms and subject to the conditions of this Agreement, the
System together with all of the assets, property, interests, rights and
privileges of Seller, including but not limited to those utilized in the cable
television business owned and operated by Seller in Sanford, North Carolina
(the "CATV Business").
NOW, THEREFORE, in consideration of the mutual promises, agreements and
covenants set forth herein, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1 Assets to be Sold. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell, convey, assign, transfer and deliver
to Purchaser at the Closing (as hereinafter defined) and Purchaser hereby
agrees to acquire, for the consideration hereinafter provided, all of the
assets, properties, rights, titles and privileges of Seller of every kind,
character and description, whether tangible, intangible, real, personal or
mixed, of whatever description and wherever located, involved in, related to,
owned, used or held for use or useful in connection with the ownership, use or
operation of the System and all other
<PAGE> 5
assets of Seller relating to the System whether or not required to be
listed on Seller's balance sheet in accordance with generally accepted
accounting principles, including, without limitation, all additions, accessions
and substitutions made prior to the Closing as permitted pursuant to the terms
of this Agreement (collectively, the "Assets"), but excluding the Excluded
Assets (defined below) and assets disposed of by Seller between the date hereof
and the Closing Date on an arms' length basis in the ordinary course of
business. The Assets include, without limitation, the following:
(a) all of the real property interests of Seller relating to the System
(collectively, the "Real Property");
(b) all items of tangible personal property owned, used, held for use or
useful by Seller in the operation of the System, including, without limitation,
all equipment relating to the System (collectively, the "Equipment"); and
(c) all the rights of Seller under any and all franchises, licenses
(including those required by the FCC), permits, authorizations, easements,
registrations, leases, variances, consents and certificates and similar rights
which authorize or are required in connection with the operation of the System,
including any applications for any of the foregoing (collectively, the
"Governmental Permits") that are obtained from or are pending with any federal,
state, county, municipal, local or foreign government and any governmental
agency, bureau, commission, authority, body, court (or other judicial body),
administrative or executive agency, legislative or quasi-legislative body,
commission, council or other agency, including any such agency, authority or
body responsible for the issuance or administration of any Governmental Permit
or whose consent is required for the sale and transfer of the Assets (each, a
"Governmental Authority") and all subscription contracts with subscribers of
Seller relating to the System, pole attachment agreements, access agreements
and all other contracts, leases, agreements or undertakings (other than those
that are included in the Excluded Assets or which constitute Governmental
Permits), written or oral, relating to the ownership, operation or maintenance
of the System and/or the Assets (the "Contracts").
1.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, any insurance policies and
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rights and claims thereunder; all rights to tax refunds and refunds of fees of
any nature, in either case relating to the period prior to the Closing Date;
Seller's rights under this Agreement, and the Purchase Price payable
pursuant hereto; Seller's organizational documents and partnership and
financial records not included in Section 1.1; Seller's cash in the bank and
cash equivalents at the time of the Closing; and all assets of Seller other
than the Assets (collectively, the "Excluded Assets") are expressly excluded
from this sale, are not to be purchased or assumed by Purchaser, and do not
constitute part of the "Assets."
2. CALCULATION AND PAYMENT OF PURCHASE PRICE
2.1 Payment of Purchase Price.
(a) The purchase price to be paid by Purchaser to Seller for the Assets
shall be an amount equal to $20,750,000 (the "Purchase Price").
(b) On the Closing Date, Purchaser shall pay to Seller the Purchase Price,
by wire transfer of immediately available funds to an account designated by
Seller in writing.
2.2 Assumption of Liabilities. As additional consideration for the
Assets, Purchaser shall, from and after the Closing Date, and pursuant to an
Assignment and Assumption Agreement in a form agreed between the parties (the
"Assumption Agreement"), assume the obligations of Seller under or in
connection with all of the Assets. In addition, Purchaser shall assume (i) all
obligations relating to the Assets entered into by Seller in the ordinary
course of business between the date hereof and the Closing Date (other than any
obligations, if any, relating to the Excluded Assets), to the extent such
obligations continue after the Closing and (ii) all liabilities relating to (y)
all customer advance payments and deposits, prepaid advertising revenues and
other prepaid revenues or income received or held by Seller for services to be
rendered or obligations to be performed in connection with the System
subsequent to the Closing; (z) the performance of the Contracts from and
after the Closing Date; provided, however, that Seller shall pay all sales,
use, excise and similar taxes arising out of the transfer of the Assets.
Except as otherwise provided in this Section 2.2, Purchaser
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shall not assume or become liable for any other obligations, liabilities
or indebtedness of Seller.
2.3 Purchase Price Adjustments.
(a) At the Closing, the Purchase Price shall be increased by an amount
equal to 99% of the face amount of accounts receivable from subscribers of the
System which, as of the Closing Date, have been outstanding for 60 days or
less. There shall be no increase to the Purchase Price for accounts receivable
from subscribers of the System which have been outstanding for more than 60
days.
(b) Following the Closing, Purchaser and Seller shall adjust the Purchase
Price pursuant to customary working capital adjustments for transactions of
this type calculated as of the Closing Date. The difference between the actual
Purchase Price paid and the adjusted Purchase Price shall be paid in cash by
the party owing such adjustment no later than sixty (60) days after the Closing
Date.
2.4 Excluded Liabilities. Seller shall pay or otherwise satisfy all
indebtedness, liabilities or other obligations of Seller arising prior to or on
the Closing Date from the ownership or operation of any of the Assets.
2.5 Allocation of Consideration. The parties agree that the consideration
payable for the Assets, consisting of the Purchase Price and the liabilities of
Seller to be assumed by Purchaser hereunder, shall be allocated among the
Assets in accordance with Section 1060 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder. The parties agree to cooperate in the
preparation, execution and filing with the Internal Revenue Service of all
information to be filed by the parties under Section 1060 and such regulations,
and to file Form 8594 (or any substitute therefor) when required by applicable
law.
2.6 Proration of Revenue. All revenue earned arising from the Assets
shall be prorated between Purchaser and Seller as of (and the Closing
shall be deemed effective as of) 11:59 p.m., New York time, on the Closing
Date.
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3. CLOSING
3.1 Closing Date. The closing of the transactions contemplated hereunder
(the "Closing") shall take place at the offices of Paul, Hastings, Janofsky &
Walker, 399 Park Avenue, 31st Floor, New York, New York 10022, at 10:00 A.M.
New York time on May 30, 1997, or on such other date and at such other time as
the Purchaser and Seller may mutually agree (the "Closing Date"). Purchaser
shall be entitled to possession of the Assets upon the Closing.
3.2 Deliveries by Seller. At the Closing, Seller shall deliver to
Purchaser the following:
(a) One or more bills of sale and all such other general instruments of
transfer, assignment and conveyance, general warranty deeds, certificates of
title, assignments, evidences of consent or waiver, and other instruments or
documents in form and substance reasonably satisfactory to Purchaser and its
counsel as shall be necessary to evidence or perfect the sale, assignment,
transfer and conveyance of the Assets to Purchaser and effectively vest in the
Purchaser all right, title and interest in and to the Assets free and clear of
any and all liens, encumbrances and other restrictions (other than liens and
encumbrances agreed upon by the parties, such liens and encumbrances being
"Permitted Encumbrances") in accordance with the terms of this Agreement,
together with possession (or constructive possession, in the case of
intangibles) thereof.
(b) An executed Assumption Agreement.
(c) A Certificate of Non-Foreign Status which meets the requirements of
Treasury Regulation Section 1.1445-2, duly executed and acknowledged,
certifying under penalties of perjury that Seller is not a foreign person for
United States income tax purposes.
(d) Originals or true and complete copies of all books and records,
memoranda and data relating to the System; provided that Seller may retain such
duplicate copies as Seller reasonably deems appropriate.
(e) Such other documents, opinions, instruments and certificates, in form
and substance reasonably satisfactory to Purchaser, as Purchaser may reasonably
request.
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3.3 Deliveries by Purchaser. At the Closing, Purchaser shall deliver to
Seller the following:
(a) The payment described in Section 2.1(b).
(b) An executed Assumption Agreement.
(c) Such other documents, opinions, instruments and certificates, in form
and substance reasonably satisfactory to Seller, as Seller may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES
Seller hereby represents and warrants to Purchaser, and Purchaser hereby
represents and warrants to Seller that:
4.1 Organization and Standing. Each such party is duly formed, validly
existing and in good standing as a limited partnership under the laws of the
jurisdiction of its formation. Each such party is duly qualified to do
business in each jurisdiction where the failure to so qualify would have a
material adverse affect on such party's ability to conduct its business or
operations or to consummate the transactions to be consummated by it under this
Agreement and each such party is in good standing in each jurisdiction in which
it is so qualified.
4.2 Power and Authority. Each such party has all requisite power and
authority to execute, deliver and perform this Agreement and to take any action
which it may be required to take hereunder. Seller further represents and
warrants that it has all requisite power to perform its business as now
conducted and to own its properties and assets.
4.3 Authorization. The execution, delivery and performance of this
Agreement by such party has been duly and validly authorized by all action
required to be taken with respect to such party. This Agreement has been, and
on the date of the Closing all other documents, agreements and instruments to
be executed and delivered at the Closing by such party pursuant hereto
(together with all such documents, agreements and instruments to be executed
and delivered by each other party hereto, the "Transaction Documents") will
have been, duly and validly executed by properly authorized officers or other
authorized representatives of such party. This Agreement constitutes,
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and on the Closing Date all other Transaction Documents to which such
party is or will be a signatory will constitute, the valid and binding
obligations of such party, enforceable against such party in accordance with
their respective terms. Neither the execution of this Agreement or any of the
Transaction Documents, nor the consummation of the transactions contemplated
herein or therein, will violate any instrument of such party, or any agreement,
permit, order, judgment, decree, law or regulation to which such person is
party or by which it is, or its assets and properties are, bound.
5. ADDITIONAL UNDERTAKINGS AND ACTIONS
5.1 Consents. As soon as possible after the execution of this Agreement,
Seller will commence making the applications and filings required to obtain all
consents required to be obtained to effect the consummation of the transactions
contemplated hereby, including but not limited to the written consents of the
limited partners holding a majority of units of limited partnership of Cencom
Cable Income Partners II, L.P. (the "Consents"). Seller will use its best
efforts to obtain the Consents from the appropriate Governmental Authorities
and other persons at the earliest possible date. Purchaser agrees that it will
cooperate fully with Seller, and will do all things reasonably necessary to
assist Seller in obtaining all Consents.
5.2 Access to Assets. On and after the date of this Agreement, Purchaser
and its counsel, accountants and other representatives shall have reasonable
access, during normal business hours and upon reasonable notice, to all
properties, books, accounts, contracts, commitments, and records, documents or
other data or information of Seller relating to the System.
5.3 Operations Prior to Closing. Except as otherwise expressly
contemplated by this Agreement, at all times from and after the date
hereof and up to and including the Closing Date, Seller shall operate the
System only in the ordinary course.
5.4 Antitrust Laws Compliance. As soon as practicable after the date of
execution of this Agreement, Seller and Purchaser shall each make filings if
and as required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and related acts and regulations (the "HSR Act").
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Each party shall keep the other party apprised of the status of any inquiries
made of such party by the Federal Trade Commission, the Antitrust Division
of the United States Department of Justice, or any other Governmental Authority
with respect to this Agreement or the transactions contemplated hereby. Each
party shall use reasonable efforts to obtain the earliest termination or waiver
of the HSR Act waiting period possible.
5.5 Bulk Sales. Purchaser waives compliance with provisions of the
Uniform Commercial Code relating to bulk transfer and similar laws in
connection with the sale of the Assets, subject to the indemnification
provisions of Section 9 hereof.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any one or more of which may be waived by Purchaser, in its sole discretion;
provided, however, that no such waiver of a condition shall constitute a waiver
by Purchaser of any of its other rights or remedies, at law or in equity, if
Seller shall be in default of any of its obligations under this Agreement.
6.1 HSR Act. All filings required under the HSR Act, if any, shall have
been made and the applicable waiting period shall have expired or been earlier
terminated without the receipt of any objection or the commencement or threat
of any litigation by a Governmental Authority of competent jurisdiction to
restrain or prevent the consummation of the transactions contemplated by this
Agreement.
6.2 Governmental or Legal Action. No action, suit or proceeding shall be
pending or threatened by any Governmental Authority or other person and no law,
rule or regulation or similar requirement shall have been enacted, promulgated
or issued or deemed applicable to any of the transactions contemplated by this
Agreement by any Governmental Authority or other person that would (a) prohibit
Purchaser's ownership or operation of all or a material portion of the System
or the Assets, (b) enjoin, prevent or make illegal the consummation of the
transactions contemplated by this Agreement or (c) challenge, set aside or
modify any authorization of the transactions provided for
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herein or any approvals, consents, waivers or authorizations made or
described hereunder.
6.3 Representations; Performance of Agreements. The representations and
warranties of Seller set forth in Section 4 hereof shall be true in all
material respects as of and at the Closing Date with the same effect as though
such representations and warranties had been made again at and as of such time.
Seller shall have performed, satisfied and complied in all material respects
with all covenants, obligations, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Seller at or prior to
the Closing Date.
6.4 Financing. Purchaser shall have obtained such financing as it may
require in order to consummate the transactions contemplated by this Agreement.
6.5 Consents and Approvals. Seller shall have delivered to Purchaser
evidence that all of the Consents have been obtained or given and all such
Consents shall be in form and substance reasonably satisfactory to Purchaser
and Seller.
6.6 Transfer Documents. Seller shall have delivered to Purchaser
customary bills of sale, general warranty deeds, assignments and other
instruments of transfer sufficient to convey good and marketable title to the
Assets in accordance with the terms of this Agreement, including the documents
and instruments described under Section 3.2(a). Seller shall have executed and
delivered to Purchaser the Assumption Agreement.
6.7 Opinions of Seller's Counsel. Purchaser shall have received the
opinions of counsel for Seller reasonably required by Purchaser.
6.8 Discharge of Liens. Seller shall have secured the termination,
discharge and release of all material encumbrances of any nature on the Assets.
6.9 No Default Under Documents. As of the Closing Date, Seller shall
not be in material violation or default under any statute, rule, regulation,
agreement, or other document to which Seller is a party or by which Seller is
bound in a manner which would materially adversely affect the operation of the
System, nor shall Seller have knowledge
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of any condition or event which, with notice or lapse of time or both, would
constitute such a violation or default.
6.10 Additional Documents and Acts. Seller shall have delivered or caused
to be delivered to Purchaser all such additional documents and instruments, in
form and content reasonably satisfactory to Purchaser and its counsel, as
Purchaser shall reasonably request, and shall have done all other acts or
things reasonably requested by Purchaser to evidence compliance with the
conditions set forth in this Section 6.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under the Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
any one or more of which may be waived by Seller in its sole discretion;
provided, however, that no such waiver of a condition shall constitute a waiver
by Seller of any of its rights or remedies, at law or in equity, if Purchaser
shall be in default of any of its obligations under this Agreement.
7.1 HSR Act. All filings required under the HSR Act, if any, shall have
been made and the applicable waiting period shall have expired or been earlier
terminated without the receipt of any objection or the commencement or threat
of any litigation by a Governmental Authority of competent jurisdiction to
restrain or prevent the consummation of the transactions contemplated by this
Agreement.
7.2 Governmental or Legal Actions. No action, suit or proceeding shall be
pending or threatened by any Governmental Authority or other person and no law,
rule, regulation or other similar requirement shall have been enacted,
promulgated or issued or deemed applicable to any of the transactions
contemplated by this Agreement by any Governmental Authority or other person
that would (a) prohibit Purchaser's ownership or operation of all or any
material portion of the System or the Assets, (b) enjoin, prevent or make
illegal the consummation of the transactions contemplated by this Agreement, or
(c) challenge, set aside or modify any authorization of the transactions
provided for herein or any approvals, consents, waivers or authorizations made
or described hereunder.
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7.3 Representations; Performance of Agreements. The representations and
warranties of Purchaser set forth in Section 4 hereof shall be true in all
material respects as of and at the Closing Date with the same effect as though
such representations and warranties had been made again at and as of such time.
Purchaser shall have performed, satisfied and complied in all material
respects with all covenants, obligations, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by Purchaser at or
prior to the Closing Date.
7.4 Consent and Approvals. All consents and authorizations required to be
obtained by Purchaser, shall have been obtained or given.
7.5 Payments. Purchaser shall have paid to Seller the Purchase Price.
7.6 Assumption of Liabilities. Purchaser shall have delivered to Seller
the Assumption Agreement.
7.7 Additional Documents and Acts. Purchaser shall have delivered or
caused to be delivered to Seller all such additional documents and instruments,
in form and content reasonably satisfactory to Seller and its counsel, as
Seller shall reasonably request, and shall have done all other acts or things
reasonably requested by Seller to evidence compliance with the conditions set
forth in this Section 7.
8. REMEDIES
8.1 Costs. If any legal action or other proceeding is brought for the
enforcement of this Agreement or any other instrument or document to be
executed, delivered or performed hereunder, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions
of this Agreement or any other instrument or document to be executed, delivered
or performed hereunder, the successful or prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
8.2 Termination Without Liability. On the Closing Date, either party may
terminate this Agreement, without liability to the other, if any conditions
precedent to such
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party's performance shall not have been satisfied on the Closing Date.
8.3 Termination on Default. Without limiting the provisions of Sections
8.1, 8.2 and 9 hereof, if either Seller, on the one hand, or Purchaser, on the
other hand, shall default in the due and timely performance of any of the
covenants or agreements under the Agreement, the other of Seller or Purchaser,
as the case may be, may, in addition to any other remedy available thereto, on
the Closing Date give notice of termination ("Termination Notice") of this
Agreement. The Termination Notice shall specify with particularity the default
or defaults on which it is based and state that this Agreement is terminated.
The Termination Notice shall be effective when given. The rights and remedies
granted in this Section 8.3 are cumulative and not exclusive of any other right
or remedy granted herein or provided by law or in equity.
9. INDEMNIFICATION
9.1 Seller's Indemnity. Seller shall indemnify and hold harmless
Purchaser and its shareholders, partners, officers, directors, employees,
controlling persons and representatives, against and in respect of any and all
claims, damages, losses, costs, expenses (including reasonable legal,
accounting and experts' fees and other fees and expenses incurred in the
investigation or defense of any of the following, and any interest and
penalties), obligations and liabilities which any such person may incur or
suffer, as a result of, arising in connection with or relating to any and all
claims of third parties (including the claims of any limited partners of the
Seller) against, relating to or pertaining to the Seller, the Assets and/or the
System, which arise in connection with or relate to the period prior to the
Closing or to the transactions contemplated hereunder and/or the authority of
the Seller to enter into and consummate such transactions and/or the propriety
of such transactions.
9.2 Purchaser's Indemnity. Purchaser shall indemnify and hold harmless
Seller against and in respect of any and all claims, damages, losses, costs,
expenses (including reasonable legal, accounting and experts' fees and other
fees and expenses incurred in the investigation or defense of any of the
following, and any interest and penalties), obligations and liabilities which
Seller may incur as a
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result of, arising in connection with or relating to which it may incur by
reason of a material breach of any of the representations or warranties of
Purchaser set forth in this Agreement.
9.3 Procedure. In the event that any claim shall be asserted against a
party entitled to indemnification hereunder (the "Indemnitee"), the Indemnitee
shall promptly notify the other party (the "Indemnitor") of such claim in
writing, and shall extend to the Indemnitor an opportunity to defend against
such claim at the Indemnitor's sole expense. Within 15 days of receiving any
such notice from the Indemnitee, the Indemnitor shall notify the Indemnitee as
to whether or not the Indemnitor elects to assume the defense of any such
claim. In the event the Indemnitor does not so elect to assume such defense,
any costs incurred by the Indemnitee in defending such claim shall be
reimbursed to the Indemnitee, on an as-incurred basis, pursuant to this Section
9. In the event the Indemnitor elects to assume such defense, the Indemnitee
shall, at its option and expense, have the right to participate in any defense
undertaken by the Indemnitor with legal counsel of its own selection, provided
that such legal counsel is reasonably acceptable to Indemnitor. No
settlement or compromise of any claim that may result in indemnification
liability may be made by the Indemnitor without the prior written consent of
the Indemnitee, which consent may not be unreasonably withheld.
9.4 Preservation and Access to Records. Purchaser will preserve and keep
all books and records of Seller included in the Assets for a period of at least
five years from the Closing Date, except such records as Purchaser usually
disposes of in the ordinary course of business. During the period that such
books and records are preserved, duly authorized representatives of Seller
shall have access thereto, on reasonable prior notice to Purchaser and during
regular business hours to examine, inspect and copy, at its own expense, such
books and records, so long as such examination and inspection takes place on
the premises of Purchaser and does not unreasonably interfere with Purchaser's
use thereof. Purchaser, on the one hand, and Seller, on the other hand, agree
that each of them shall reasonably cooperate with the other of Purchaser or
Seller, as applicable, if the records relating to the System owned shall be of
material assistance to the other of Purchaser or Seller in any threatened or
pending litigation or proceeding or the preparation of tax returns.
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10. GENERAL PROVISIONS
10.1 Entire Agreement, Modification and Waiver. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
all the parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
10.2 Rights of Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of
this Agreement upon any persons other than the parties and their respective
permitted successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third person or any
party to this Agreement, nor shall any provision give any third person any
right of subrogation or action against any party to this Agreement.
10.3 Assignment. No assignment of any rights or obligations of either
party under this Agreement may be made without the prior written consent of the
other party to this Agreement, which consent is not to be unreasonably
withheld, except that Purchaser shall have the right to assign any or all of
its rights and liabilities hereunder to any of its affiliates, provided that
each such affiliate assumes Purchaser's obligations hereunder; and further
provided that Seller shall have been promptly provided written notice of such
assignment (including the name of the assignee). Any attempted assignment of
rights or obligations in violation of this Section 10.3 shall be null and void.
Reference to any of the parties in this Agreement shall be deemed to include
the successors and assigns of such party.
10.4 Construction. The language in this Agreement shall, in all cases, be
construed as a whole according to its fair meaning and neither strictly for nor
against Seller or Purchaser.
10.5 Expenses of the Parties. Except as expressly provided herein, all
expenses incurred by or on behalf of
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the parties hereto in connection with the authorization, preparation and
consummation of this Agreement including, without limitation, all fees
and expenses of agents, representatives, counsel and accountants employed by
the parties hereto in connection with the authorization, preparation, execution
and consummation of this Agreement shall be borne solely by the party who shall
have incurred the same.
10.6 Further Assurances. Seller, at any time after the Closing Date, will
promptly execute, acknowledge and deliver any further deeds, assignments,
conveyances and other assurances, documents and instruments of transfer,
reasonably requested by Purchaser and necessary for Seller to comply with its
covenants contained herein and will take any other action consistent with the
terms of this Agreement that may reasonably be requested by Purchaser for the
purpose of assigning, transferring, granting, conveying, vesting and confirming
ownership in or to Purchaser, or reducing to Purchaser's possession, any or all
of the Assets.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
10.8 Headings. The headings contained in this Agreement are solely for
convenience of reference and shall not affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Second Amended and Restated Asset Purchase Agreement as of the
date first written above.
SELLER:
CENCOM PARTNERS, L.P.
By: Cencom Partners, Inc.,
its General Partner
By: /s/ Jerald L. Kent
------------------------------------
Name: Jerald L. Kent
Title: Executive Vice President
PURCHASER:
CHARTER COMMUNICATIONS, L.P.
By: CCP One, Inc.,
its General Partner
By: /s/ Kent D. Kalkwarf
------------------------------------
Name: Kent D. Kalkwarf
Title: Vice President
Signature Page for Sanford, NC Asset Purchase Agreement
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SECOND
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
among
CENCOM PARTNERS, L.P.,
as Seller
and
CHARTER COMMUNICATIONS II, L.P.,
as Purchaser
dated as of January 16, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . 1
1.1 Assets to be Sold . . . . . . . . . . . . . . . . . . . . 1
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . 2
1.3 "AS IS" AND "WHERE IS". . . . . . . . . . . . . . . . . . 3
2. CALCULATION AND PAYMENT OF PURCHASE PRICE . . . . . . . . . . . 3
2.1 Payment of Purchase Price . . . . . . . . . . . . . . . . 3
2.2 Assumption of Liabilities . . . . . . . . . . . . . . . . 3
2.3 Purchase Price . . . . . . . . . . . . . . . . . . . . . 4
2.4 Excluded Liabilities. . . . . . . . . . . . . . . . . . . 4
2.5 Allocation of Consideration . . . . . . . . . . . . . . . 4
2.6 Provation of Revenue. . . . . . . . . . . . . . . . . . 5
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Deliveries by Seller . . . . . . . . . . . . . . . . . . 5
3.3 Deliveries by Purchaser . . . . . . . . . . . . . . . . 6
4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 6
4.1 Organization and Standing . . . . . .. . . . . . . . . . 6
4.2 Power and Authority . . . . . . . . . . . . . . . . . . 6
4.3 Authorization . . . . . . . . . . . . . . . . . . . . . 7
5. ADDITIONAL UNDERTAKINGS AND ACTIONS . . . . . . . . . . . . . 7
5.1 Consents . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Access to Assets . . . . . . . . . . . . . . . . . . . . 7
5.3 Operations Prior to Closing . . . . . . . . . . . . . . . 8
5.4 Antitrust Laws Compliance . . . . . . . . . . . . . . . 8
5.5 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . 8
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER . . . . . . . 8
6.1 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Governmental or Legal Action . . . . . . . . . . . . . . . 9
6.3 Representations; Performance of Agreements . . . . . . . . 9
6.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . 9
6.5 Consents and Approvals . . . . . . . . . . . . . . . . . . 9
6.6 Transger Documents . . . . . . . . . . . . . . . . . . . . 9
6.7 Opinions of Seller's Counsel . . . . . . . . . . . . . 10
6.8 Discharge of Liens . . . . . . . . . . . . . . . . . . . 10
6.9 No Default Under Documents . . . . . . . . . . . . . . . 10
6.10 Additional Documents and Acts . . . . . . . . . . . . . . 10
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7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER . . . . . . . . 10
7.1 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2 Governmental or Legal Actions . . . . . . . . . . . . . 11
7.3 Representations; Performance of Agreements . . . . . . 11
7.4 Consent and Approvals . . . . . . . . . . . . . . . . . 11
7.5 Payments . . . . . . . . . . . . . . . . . . . . . . . 11
7.6 Assumption of Liabilities . . . . . . . . . . . . . . . 11
7.7 Additional Documents and Acts . . . . . . . . . . . . . 11
8. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8.1 Costs . . . . . . . . . . . . . . . . . . . . . . . . 12
8.2 Termination Without Liability . . . . . . . . . . . . 12
8.3 Termination on Default . . . . . . . . . . . . . . . . 12
9. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Seller's Indemnity . . . . . . . . . . . . . . . . . . 12
9.2 Purchaser's Indemnity . . . . . . . . . . . . . . . . . 13
9.3 Procedure . . . . . . . . . . . . . . . . . . . . . . 13
9.4 Preservation and Access to Records . . . . . . . . . . 14
10. MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . 14
10.1 Entire Agreement, Modification and Waiver . . . . . . . 14
10.2 Rights of Parties . . . . . . . . . . . . . . . 14
10.3 Assignment . . . . . . . . . . . . . . . . . . . 15
10.4 Construction . . . . . . . . . . . . . . . . . . 15
10.5 Expenses of the Parties . . . . . . . . . . . . 15
10.6 Further Assurances . . . . . . . . . . . . . . . 15
10.7 Counterparts . . . . . . . . . . . . . . . . . . 15
10.8 Headings . . . . . . . . . . . . . . . . . . . . 16
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SECOND AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
THIS SECOND AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (this
"Agreement") is made as of this 16th day of January, 1997 by and between
Charter Communications II, L.P., a limited partnership organized and existing
under the laws of the State of Delaware ("CC II" or the "Purchaser") and Cencom
Partners, L.P., a limited partnership organized and existing under the laws of
the State of Delaware ("Seller"), and hereby amends that Amended and Restated
Asset Purchase Agreement dated as of the 26th day of April, 1996 between the
parties hereto.
W I T N E S S E T H:
WHEREAS, Seller is the owner and operator of a cable television system
serving Abbeville, South Carolina (the "System");
WHEREAS, Seller desires to sell, and Purchaser desire to purchase,
pursuant to the terms and subject to the conditions of this Agreement, the
System together with all of the assets, property, interests, rights and
privileges of Seller, including but not limited to those utilized in the cable
television business owned and operated by Seller in Abbeville, South Carolina
(the "CATV Business").
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1 Assets to be Sold. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell, convey, assign, transfer and deliver
to Purchaser at the Closing (as hereinafter defined) and Purchaser hereby
agrees to acquire, for the consideration hereinafter provided, all of the
assets, properties, rights, titles and privileges of Seller of every kind,
character and description, whether tangible, intangible, real, personal or
mixed, of whatever description and wherever located, involved in, related to,
owned, used or held for use or useful in connection with the ownership, use or
operation of the System and all other assets of Seller relating to the System
whether or not
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required to be listed on Seller's balance sheet in accordance with generally
accepted accounting principles, including, without limitation, all additions,
accessions and substitutions made prior to the Closing as permitted pursuant to
the terms of this Agreement (collectively, the "Assets"), but excluding the
Excluded Assets (defined below) and assets disposed of by Seller between the
date hereof and the Closing Date on an arms' length basis in the ordinary
course of business. The Assets include, without limitation, the following:
(a) all of the real property interests of Seller relating to the System
(collectively, the "Real Property");
(b) all items of tangible personal property owned, used, held for use or
useful by Seller in the operation of the System, including, without limitation,
all equipment relating to the System (collectively, the "Equipment"); and
(c) all the rights of Seller under any and all franchises, licenses
(including those required by the FCC), permits, authorizations, easements,
registrations, leases, variances, consents and certificates and similar rights
which authorize or are required in connection with the operation of the System,
including any applications for any of the foregoing (collectively, the
"Governmental Permits") that are obtained from or are pending with any federal,
state, county, municipal, local or foreign government and any governmental
agency, bureau, commission, authority, body, court (or other judicial body),
administrative or executive agency, legislative or quasi-legislative body,
commission, council or other agency, including any such agency, authority or
body responsible for the issuance or administration of any Governmental Permit
or whose consent is required for the sale and transfer of the Assets (each, a
"Governmental Authority") and all subscription contracts with subscribers of
Seller relating to the System, pole attachment agreements, access agreements
and all other contracts, leases, agreements or undertakings (other than those
that are included in the Excluded Assets or which constitute Governmental
Permits), written or oral, relating to the ownership, operation or maintenance
of the System and/or the Assets (the "Contracts").
1.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, any insurance policies and
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rights and claims thereunder; all rights to tax refunds and refunds of
fees of any nature, in either case relating to the period prior to the Closing
Date; Seller's rights under this Agreement, and the Purchase Price payable
pursuant hereto; Seller's organizational documents and partnership and
financial records not included in Section 1.1; Seller's cash in the bank and
cash equivalents at the time of the Closing and accounts receivable; and all
assets of Seller other than the Assets (collectively, the "Excluded Assets")
are expressly excluded from this sale, are not to be purchased or assumed by
Purchaser, and do not constitute part of the "Assets."
1.3 "AS IS" AND "WHERE IS". PURCHASER SHALL ACQUIRE THE ASSETS, "AS IS" AND
"WHERE IS," EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES IN ARTICLE III
HEREOF, AND ANY AND ALL OTHER REPRESENTATIONS AND WARRANTIES WITH RESPECT TO
THE ASSETS, WHETHER EXPRESS OR IMPLIED, ARE HEREBY DISCLAIMED, INCLUDING ANY
REPRESENTATIONS OR WARRANTIES AS TO MERCHANTABILITY OR FITNESS FOR ANY
PARTICULAR PURPOSE.
2. CALCULATION AND PAYMENT OF PURCHASE PRICE
2.1 Payment of Purchase Price.
(a) The purchase price to be paid by Purchaser to Seller for the Assets
shall be an amount equal to $4,200,000 (the "Purchase Price").
(b) On the Closing Date, Purchaser shall pay to Seller the Purchase Price
less then $500,000 advance previously paid by Purchaser to Seller (the
"Advance"), by wire transfer of immediately available funds to an account
designated by Seller in writing.
2.2 Assumption of Liabilities. As additional consideration for the Assets,
Purchaser shall, from and after the Closing Date, and pursuant to an Assignment
and Assumption Agreement in a form agreed between the parties (the "Assumption
Agreement"), assume the obligations of Seller under or in connection with all
of the Assets. In addition, Purchaser shall assume (i) all obligations
relating to the Assets entered into by Seller in the ordinary course of
business between the date hereof and the Closing Date (other than any
obligations, if any, relating
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to the Excluded Assets), to the extent such obligations continue after the
Closing and (ii) all liabilities relating to (y) all customer advance payments
and deposits, prepaid advertising revenues and other prepaid revenues or income
received or held by Seller for services to be rendered or obligations to be
performed in connection with the System subsequent to the Closing; (z) the
performance of the Contracts from and after the Closing Date; provided,
however, that Seller shall pay all sales, use, excise and similar taxes arising
out of the transfer of the Assets. Except as otherwise provided in this
Section 2.2, Purchaser shall not assume or become liable for any other
obligations, liabilities or indebtedness of Seller.
2.3 Purchase Price Adjustments.
(a) At the Closing, the Purchase Price shall be increased by an amount
equal to 99% of the face amount of accounts receivable from subscribers of the
System which, as of the Closing Date, have been outstanding for 60 days or
less. There shall be no increase to the Purchase Price for accounts receivable
from subscribers of the System which have been outstanding for more than 60
days.
(b) Following the Closing, Purchaser and Seller shall adjust the Purchase
Price pursuant to customary working capital adjustments for transactions of
this type calculated as of the Closing Date. The difference between the actual
Purchase Price paid and the adjusted Purchase Price shall be paid in cash by
the party owing such adjustment no later than sixty (60) days after the Closing
Date.
2.4 Excluded Liabilities. Seller shall pay or otherwise satisfy all
indebtedness, liabilities or other obligations of Seller arising prior to or on
the Closing Date from the ownership or operation of any of the Assets.
2.5 Allocation of Consideration. The parties agree that the consideration
payable for the Assets, consisting of the Purchase Price and the liabilities of
Seller to be assumed by Purchaser hereunder, shall be allocated among the
Assets in accordance with Section 1060 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder. The parties agree to cooperate
in the preparation, execution and filing with the Internal Revenue Service of
all information to be filed by the parties under
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Section 1060 and such regulations, and to file Form 8594 (or any
substitute therefor) when required by applicable law.
2.6 Provation of Revenue. All revenue earned arising from the Assets shall
be prorated between Purchaser and Seller as of (and the Closing shall be deemed
effective as of) 12:01 a.m., New York time, on the Closing Date.
3. CLOSING
3.1 Closing Date. The closing of the transactions contemplated hereunder
(the "Closing") shall take place at the offices of Paul, Hastings, Janofsky &
Walker, 399 Park Avenue, 31st Floor, New York, New York 10022, at 10:00 A.M.
New York time on May 30, 1997, or on such other date and at such other time as
the Purchaser and Seller may mutually agree (the "Closing Date"). Purchaser
shall be entitled to possession of the Assets upon the Closing.
3.2 Deliveries by Seller. At the Closing, Seller shall deliver to Purchaser
the following:
(a) One or more bills of sale and all such other general instruments of
transfer, assignment and conveyance, general warranty deeds, certificates of
title, assignments, evidences of consent or waiver, and other instruments or
documents in form and substance reasonably satisfactory to Purchaser and its
counsel as shall be necessary to evidence or perfect the sale, assignment,
transfer and conveyance of the Assets to Purchaser and effectively vest in the
Purchaser all right, title and interest in and to the Assets free and clear of
any and all liens, encumbrances and other restrictions (other than liens and
encumbrances agreed upon by the parties, such liens and encumbrances being
"Permitted Encumbrances") in accordance with the terms of this Agreement,
together with possession (or constructive possession, in the case of
intangibles) thereof.
(b) An executed Assumption Agreement.
(c) A Certificate of Non-Foreign Status which meets the requirements of
Treasury Regulation Section 1.1445-2, duly executed and acknowledged,
certifying under penalties of perjury that Seller is not a foreign person for
United States income tax purposes.
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(d) Originals or true and complete copies of all books and records,
memoranda and data relating to the System; provided that Seller may retain such
duplicate copies as Seller reasonably deems appropriate.
(e) Such other documents, opinions, instruments and certificates, in form
and substance reasonably satisfactory to Purchaser, as Purchaser may reasonably
request.
3.3 Deliveries by Purchaser. At the Closing, Purchaser shall deliver to
Seller the following:
(a) The payment described in Section 2.1(b).
(b) An executed Assumption Agreement.
(c) Such other documents, opinions, instruments and certificates, in form
and substance reasonably satisfactory to Seller, as Seller may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES
Seller hereby represents and warrants to Purchaser, and Purchaser hereby
represents and warrants to Seller that:
4.1 Organization and Standing. Each such party is duly formed, validly
existing and in good standing as a limited partnership under the laws of the
jurisdiction of its formation. Each such party is duly qualified to do
business in each jurisdiction where the failure to so qualify would have a
material adverse affect on such party's ability to conduct its business or
operations or to consummate the transactions to be consummated by it under this
Agreement and each such party is in good standing in each jurisdiction in which
it is so qualified.
4.2 Power and Authority. Each such party has all requisite power and
authority to execute, deliver and perform this Agreement and to take any action
which it may be required to take hereunder. Seller further represents and
warrants that it has all requisite power to perform its business as now
conducted and to own its properties and assets.
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4.3 Authorization. The execution, delivery and performance of this
Agreement by such party has been duly and validly authorized by all action
required to be taken with respect to such party. This Agreement has been, and
on the date of the Closing all other documents, agreements and instruments to
be executed and delivered at the Closing by such party pursuant hereto
(together with all such documents, agreements and instruments to be executed
and delivered by each other party hereto, the "Transaction Documents") will
have been, duly and validly executed by properly authorized officers or other
authorized representatives of such party. This Agreement constitutes, and on
the Closing Date all other Transaction Documents to which such party is or will
be a signatory will constitute, the valid and binding obligations of such
party, enforceable against such party in accordance with their respective
terms. Neither the execution of this Agreement or any of the Transaction
Documents, nor the consummation of the transactions contemplated herein or
therein, will violate any instrument of such party, or any agreement, permit,
order, judgment, decree, law or regulation to which such person is party or by
which it is, or its assets and properties are, bound.
5. ADDITIONAL UNDERTAKINGS AND ACTIONS
5.1 Consents. As soon as possible after the execution of this Agreement,
Seller will commence making the applications and filings required to obtain all
consents required to be obtained to effect the consummation of the transactions
contemplated hereby, including but not limited to the written consents of the
limited partners holding a majority of units of limited partnership of Cencom
Cable Income Partners II, L.P. (the "Consents"). Seller will use its best
efforts to obtain the Consents from the appropriate Governmental Authorities
and other persons at the earliest possible date. Purchaser
agrees that it will cooperate fully with Seller, and will do all things
reasonably necessary to assist Seller in obtaining all Consents.
5.2 Access to Assets. On and after the date of this Agreement, Purchaser
and its counsel, accountants and other representatives shall have reasonable
access, during normal business hours and upon reasonable notice, to all
properties, books, accounts, contracts, commitments, and
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records, documents or other data or information of Seller relating to the
System.
5.3 Operations Prior to Closing. Except as otherwise expressly contemplated
by this Agreement, at all times from and after the date hereof and up to and
including the Closing Date, Seller shall operate the System only in the
ordinary course.
5.4 Antitrust Laws Compliance. As soon as practicable after the date of
execution of this Agreement, Seller and Purchaser shall each make filings if
and as required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and related acts and regulations (the "HSR Act"). Each party shall
keep the other party apprised of the status of any inquiries made of such party
by the Federal Trade Commission, the Antitrust Division of the United States
Department of Justice, or any other Governmental Authority with respect to this
Agreement or the transactions contemplated hereby. Each party shall use
reasonable efforts to obtain the earliest termination or waiver of the HSR Act
waiting period possible.
5.5 Bulk Sales. Purchaser waives compliance with provisions of the Uniform
Commercial Code relating to bulk transfer and similar laws in connection with
the sale of the Assets, subject to the indemnification provisions of Section 9
hereof.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any one or more of which may be waived by Purchaser, in its sole discretion;
provided, however, that no such waiver of a condition shall constitute a waiver
by Purchaser of any of its other rights or remedies, at law or in equity, if
Seller shall be in default of any of its obligations under this Agreement.
6.1 HSR Act. All filings required under the HSR Act, if any, shall have
been made and the applicable waiting period shall have expired or been earlier
terminated without the receipt of any objection or the commencement or threat
of any litigation by a Governmental Authority of competent
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jurisdiction to restrain or prevent the consummation of the transactions
contemplated by this Agreement.
6.2 Governmental or Legal Action. No action, suit or proceeding shall be
pending or threatened by any Governmental Authority or other person and no law,
rule or regulation or similar requirement shall have been enacted, promulgated
or issued or deemed applicable to any of the transactions contemplated by this
Agreement by any Governmental Authority or other person that would (a) prohibit
Purchaser's ownership or operation of all or a material portion of the System
or the Assets, (b) enjoin, prevent or make illegal the consummation of the
transactions contemplated by this Agreement or (c) challenge, set aside or
modify any authorization of the transactions provided for herein or any
approvals, consents, waivers or authorizations made or described hereunder.
6.3 Representations; Performance of Agreements. The representations and
warranties of Seller set forth in Section 4 hereof shall be true in all
material respects as of and at the Closing Date with the same effect as though
such representations and warranties had been made again at and as of such time.
Seller shall have performed, satisfied and complied in all material respects
with all covenants, obligations, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by Seller at or prior to
the Closing Date.
6.4 Financing. Purchaser shall have obtained such financing as it may
require in order to consummate the transactions contemplated by this Agreement.
6.5 Consents and Approvals. Seller shall have delivered to Purchaser
evidence that all of the Consents have been obtained or given and all such
Consents shall be in form and substance reasonably satisfactory to Purchaser
and Seller.
6.6 Transfer Documents. Seller shall have delivered to Purchaser customary
bills of sale, general warranty deeds, assignments and other instruments of
transfer sufficient to convey good and marketable title to the Assets in
accordance with the terms of this Agreement, including the documents and
instruments described under Section 3.2(a). Seller shall have executed and
delivered to Purchaser the Assumption Agreement.
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6.7 Opinions of Seller's Counsel. Purchaser shall have received the
opinions of counsel for Seller reasonably required by Purchaser.
6.8 Discharge of Liens. Seller shall have secured the termination,
discharge and release of all material encumbrances of any nature on the Assets.
6.9 No Default Under Documents. As of the Closing Date, Seller shall not be
in material violation or default under any statute, rule, regulation,
agreement, or other document to which Seller is a party or by which Seller is
bound in a manner which would materially adversely affect the operation of the
System, nor shall Seller have knowledge of any condition or event which, with
notice or lapse of time or both, would constitute such a violation or default.
6.10 Additional Documents and Acts. Seller shall have delivered or caused
to be delivered to Purchaser all such additional documents and instruments, in
form and content reasonably satisfactory to Purchaser and its counsel, as
Purchaser shall reasonably request, and shall have done all other acts or
things reasonably requested by Purchaser to evidence compliance with the
conditions set forth in this Section 6.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under the Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
any one or more of which may be waived by Seller in its sole discretion;
provided, however, that no such waiver of a condition shall constitute a waiver
by Seller of any of its rights or remedies, at law or in equity, if Purchaser
shall be in default of any of its obligations under this Agreement.
7.1 HSR Act. All filings required under the HSR Act, if any, shall have
been made and the applicable waiting period shall have expired or been earlier
terminated without the receipt of any objection or the commencement or threat
of any litigation by a Governmental Authority of competent jurisdiction to
restrain or prevent the consummation of the transactions contemplated by this
Agreement.
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7.2 Governmental or Legal Actions. No action, suit or proceeding shall be
pending or threatened by any Governmental Authority or other person and no law,
rule, regulation or other similar requirement shall have been enacted,
promulgated or issued or deemed applicable to any of the transactions
contemplated by this Agreement by any Governmental Authority or other person
that would (a) prohibit Purchaser's ownership or operation of all or any
material portion of the System or the Assets, (b) enjoin, prevent or make
illegal the consummation of the transactions contemplated by this Agreement, or
(c) challenge, set aside or modify any authorization of the transactions
provided for herein or any approvals, consents, waivers or authorizations made
or described hereunder.
7.3 Representations; Performance of Agreements. The representations and
warranties of Purchaser set forth in Section 4 hereof shall be true in all
material respects as of and at the Closing Date with the same effect as though
such representations and warranties had been made again at and as of such time.
Purchaser shall have performed, satisfied and complied in all material
respects with all covenants, obligations, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by Purchaser at or
prior to the Closing Date.
7. 4 Consent and Approvals. All consents and authorizations required to be
obtained by Purchaser, shall have been obtained or given.
7. 5 Payments. Purchaser shall have paid to Seller the Purchase Price less
the Advance.
7.6 Assumption of Liabilities. Purchaser shall have delivered to Seller the
Assumption Agreement.
7.7 Additional Documents and Acts. Purchaser shall have delivered or caused
to be delivered to Seller all such additional documents and instruments, in
form and content reasonably satisfactory to Seller and its counsel, as Seller
shall reasonably request, and shall have done all other acts or things
reasonably requested by Seller to evidence compliance with the conditions set
forth in this Section 7.
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8. REMEDIES
8.1 Costs. If any legal action or other proceeding is brought for the
enforcement of this Agreement or any other instrument or document to be
executed, delivered or performed hereunder, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions
of this Agreement or any other instrument or document to be executed, delivered
or performed hereunder, the successful or prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
8.2 Termination Without Liability. On the Closing Date, either party may
terminate this Agreement, without liability to the other, if any conditions
precedent to such party's performance shall not have been satisfied on the
Closing Date.
8.3 Termination on Default. Without limiting the provisions of Sections
8.1, 8.2 and 9 hereof, if either Seller, on the one hand, or Purchaser, on the
other hand, shall default in the due and timely performance of any of the
covenants or agreements under the Agreement, the other of Seller or Purchaser,
as the case may be, may, in addition to any other remedy available thereto, on
the Closing Date give notice of termination ("Termination Notice") of this
Agreement. The Termination Notice shall specify with particularity the default
or defaults on which it is based and state that this Agreement is terminated.
The Termination Notice shall be effective when given. The rights and remedies
granted in this Section 8.3 are cumulative and not exclusive of any other right
or remedy granted herein or provided by law or in equity.
9. INDEMNIFICATION
9.1 Seller's Indemnity. Seller shall indemnify and hold harmless Purchaser
and its shareholders, partners, officers, directors, employees, controlling
persons and representatives, against and in respect of any and all claims,
damages, losses, costs, expenses (including reasonable legal, accounting and
experts' fees and other fees and expenses incurred in the investigation or
defense of any of the following, and any interest and penalties),
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obligations and liabilities which any such person may incur or suffer, as a
result of, arising in connection with or relating to any and all claims of
third parties (including the claims of any limited partners of the Seller)
against, relating to or pertaining to the Seller, the Assets and/or the System,
which arise in connection with or relate to the period prior to the Closing or
to the transactions contemplated hereunder and/or the authority of the Seller
to enter into and consummate such transactions and/or the propriety of such
transactions.
9.2 Purchaser's Indemnity. Purchaser shall indemnify and hold harmless
Seller against and in respect of any and all claims, damages, losses, costs,
expenses (including reasonable legal, accounting and experts' fees and other
fees and expenses incurred in the investigation or defense of any of the
following, and any interest and penalties), obligations and liabilities which
Seller may incur as a result of, arising in connection with or relating to
which it may incur by reason of a material breach of any of the
representations or warranties of Purchaser set forth in this Agreement.
9.3 Procedure. In the event that any claim shall be asserted against a
party entitled to indemnification hereunder (the "Indemnitee"), the Indemnitee
shall promptly notify the other party (the "Indemnitor") of such claim in
writing, and shall extend to the Indemnitor an opportunity to defend against
such claim at the Indemnitor's sole expense. Within 15 days of receiving any
such notice from the Indemnitee, the Indemnitor shall notify the Indemnitee as
to whether or not the Indemnitor elects to assume the defense of any such
claim. In the event the Indemnitor does not so elect to assume such defense,
any costs incurred by the Indemnitee in defending such claim shall be
reimbursed to the Indemnitee, on an as-incurred basis, pursuant to this Section
9. In the event the Indemnitor elects to assume such defense, the Indemnitee
shall, at its option and expense, have the right to participate in any defense
undertaken by the Indemnitor with legal counsel of its own selection, provided
that such legal counsel is reasonably acceptable to Indemnitor. No settlement
or compromise of any claim that may result in indemnification liability may be
made by the Indemnitor without the prior written consent of the Indemnitee,
which consent may not be unreasonably withheld.
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9.4 Preservation and Access to Records. Purchaser will preserve and keep
all books and records of Seller included in the Assets for a period of at least
five years from the Closing Date, except such records as Purchaser usually
disposes of in the ordinary course of business. During the period that such
books and records are preserved, duly authorized representatives of Seller
shall have access thereto, on reasonable prior notice to Purchaser and during
regular business hours to examine, inspect and copy, at its own expense, such
books and records, so long as such examination and inspection takes place on
the premises of Purchaser and does not unreasonably interfere with Purchaser's
use thereof. Purchaser, on the one hand, and Seller, on the other hand, agree
that each of them shall reasonably cooperate with the other of Purchaser or
Seller, as applicable, if the records relating to the System owned shall be of
material assistance to the other of Purchaser or Seller in any threatened or
pending litigation or proceeding or the preparation of tax returns.
10. MISCELLANEOUS PROVISIONS
10.1 Entire Agreement, Modification and Waiver. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
all the parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
10.2 Rights of Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of
this Agreement upon any persons other than the parties and their respective
permitted successors and assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third person or any
party to this Agreement, nor shall any provision give any third person any
right of subrogation or action against any party to this Agreement.
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10. 3 Assignment. No assignment of any rights or obligations of either party
under this Agreement may be made without the prior written consent of the other
party to this Agreement, which consent is not to be unreasonably withheld,
except that Purchaser shall have the right to assign any or all of its rights
and liabilities hereunder to any of its affiliates, provided that each such
affiliate assumes Purchaser's obligations hereunder; and further provided that
Seller shall have been promptly provided written notice of such assignment
(including the name of the assignee). Any attempted assignment of rights or
obligations in violation of this Section 10.3 shall be null and void.
Reference to any of the parties in this Agreement shall be deemed to include
the successors and assigns of such party.
10.4 Construction. The language in this Agreement shall, in all cases, be
construed as a whole according to its fair meaning and neither strictly for nor
against Seller or Purchaser.
10.5 Expenses of the Parties. Except as expressly provided herein, all
expenses incurred by or on behalf of the parties hereto in connection with the
authorization, preparation and consummation of this Agreement including,
without limitation, all fees and expenses of agents, representatives, counsel
and accountants employed by the parties hereto in connection with the
authorization, preparation, execution and consummation of this Agreement shall
be borne solely by the party who shall have incurred the same.
10.6 Further Assurances. Seller, at any time after the Closing Date, will
promptly execute, acknowledge and deliver any further deeds, assignments,
conveyances and other assurances, documents and instruments of transfer,
reasonably requested by Purchaser and necessary for Seller to comply with its
covenants contained herein and will take any other action consistent with the
terms of this Agreement that may reasonably be requested by Purchaser for the
purpose of assigning, transferring, granting, conveying, vesting and confirming
ownership in or to Purchaser, or reducing to Purchaser's possession, any or all
of the Assets.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an
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original and all of which together shall be considered one and the same
agreement.
10.8 Headings. The headings contained in this Agreement are solely for
convenience of reference and shall not affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Second Amended and Restated Asset Purchase Agreement as of the
date first written above.
SELLER:
CENCOM PARTNERS, L.P.
By: Cencom Partners, Inc.,
its General Partner
By: /s/ Jerald L. Kent
-------------------------
Name: Jerald L. Kent
Title: Executive Vice President
PURCHASER:
CHARTER COMMUNICATIONS II, L.P.
By: CCP II, Inc.,
its general partner
By: /s/ Kent D. Kalkwarf
------------------------
Name: Kent D. Kalkwarf
Title: Vice President
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Signature Page for Abbeville, SC Asset Purchase Agreement
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<PAGE> 1
SECOND
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
between
CENCOM PARTNERS, L.P.,
as Seller
and
CHARTER COMMUNICATIONS II, L.P.,
as Purchaser
dated as of January 16, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . . . . 1
1.1 Assets to be Sold . . . . .. . . . . . . . . . . . . . . 1
1.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . 2
2. CALCULATION AND PAYMENT OF PURCHASE PRICE . . . . . . . . . . 3
2.1 Payment of Purchase Price . . . . . . . . . . . . . .. . 3
2.2 Assumption of Liabilities . . . . . . . . . . . .. . . . 3
2.3 Purchase Price . . . . . . . . . . . . . . . . . . . . 4
2.4 Excluded Liabilities . . . . . . . . . . . . . . . . . . 4
2.5 Allocation of Consideration . . . . . . . . . . . . . . 4
2.6 Proration of Revenue . . . . . . . . . . . . . . . . . 4
3. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . 4
3.2 Deliveries by Seller . . . . . . . . . . . . . . . . . . 5
3.3 Deliveries by Purchaser . . . . . . . . . . . . . . . 5
4. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . 6
4.1 Organization and Standing . . . . . . . . . . . . . . . 6
4.2 Power and Authority . . . . . . . .. . . . . . . . . . . 6
4.3 Authorization . . . . . . . . . . . . . . . . . . . . . 6
5. ADDITIONAL UNDERTAKINGS AND ACTIONS . . . . . . . . . . . . . . 7
5.1 Consents . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Access to Assets . . . . . . . . . . . . . . . . . . . . 7
5.3 Operations Prior to Closing . . . . . . . . . . . . . . . 7
5.4 Antitrust Laws Compliance . . . . . . . . . . . . . . . 7
5.5 Bulk Sales . . . . . . . . . . . . . . . . . . . . . . . 8
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER . . . . . . 8
6.1 HSR Act . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Governmental or Legal Action . . . . . . . . . . . . . 8
6.3 Representations; Performance of Agreements . . . . . . . 8
6.4 Financing . . . . . . . . . . . . . . . . . . . . . . .9
6.5 Consents and Approvals . . . . . . . . . . . . . . . 9
6.6 Transfer Documents . . . . . . . . . . . . . . . . . . 9
6.7 Opinions of Seller's Counsel . . . . . . . . . . . . . 9
6.8 Discharge of Liens . . . . . . . . . . . . . . . . . 9
6.9 No Default Under Documents . . . . . . . . . . . . . . 9
6.10 Additional Documents and Acts . . . . . . . . . . . . 9
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER 10
7.1 HSR Act . . . . . . . . . . . . . . . . . . . . . . .10
7.2 Governmental or Legal Actions . . . . . . . . . . . . .10
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7.3 Representations; Performance of Agreements . . . . . . 10
7.4 Consent and Approvals . . . . . . . . . . . . . . . . 11
7.5 Payments . . . . . . . . . . . . . . . . . . . . . . . 11
7.6 Assumption of Liabilities. . . . . . . . . . . . . . . 11
7.7 Additional Documents and Acts . . . . . . . . . . . . 11
8. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.1 Costs . . . . . . . . . . . . . . . . . . . . . . . 11
8.2 Termination Without Liability . . . . . . . . . . . . 11
8.3 Termination on Default . . . . . . . . . . . . . . . 11
9. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 12
9.1 Seller's Indemnity . . . . . . . . . . . . . . . . . 12
9.2 Purchaser's Indemnity . . . . . . . . . . . . . . . . 12
9.3 Procedure . . . . . . . . . . . . . . . . . . . . . . .12
9.4 Preservation and Access to Records . . . . . . . . . . 13
10. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . 13
10.1 Entire Agreement, Modification and Waiver . . . 13
10.2 Rights of Parties . . . . . . . . . . . . . . 14
10.3 Assignment . . . . . . . . . . . . . . . . . . 14
10.4 Construction . . . . . . . . . .. . . . . . . . 14
10.5 Expenses of the Parties . . . . . . . .. . . . . 14
10.6 Further Assurances . . . . . . . . . . . . . . 14
10.7 Counterparts . . . . . . . . . . . . . . . . . 15
10.8 Headings . . . . . . . . . . . . . . . . . . . 15
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<PAGE> 4
SECOND
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
THIS SECOND AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (this
"Agreement") is made as of this 16th day of January, 1997 by and between
Charter Communications II, L.P., a limited partnership organized and existing
under the laws of the State of Delaware ("CC II" or the "Purchaser") and Cencom
Partners, L.P., a limited partnership organized and existing under the laws of
the State of Delaware ("Seller"), and hereby amends that Amended and Restated
Asset Purchase Agreement dated as of May 30, 1996 between Charter
Communications, L.P. and the Seller.
W I T N E S S E T H:
WHEREAS, Seller is the owner and operator of a cable television system
serving Lincolnton, North Carolina (the "System");
WHEREAS, Seller desires to sell, and Purchaser desire to purchase,
pursuant to the terms and subject to the conditions of this Agreement, the
System together with all of the assets, property, interests, rights and
privileges of Seller, including but not limited to those utilized in the cable
television business owned and operated by Seller in Lincolnton, North Carolina
(the "CATV Business").
NOW, THEREFORE, in consideration of the mutual promises, agreements and
covenants set forth herein, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto, intending
legally to be bound, hereby agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1 Assets to be Sold. Subject to the terms and conditions of this
Agreement, Seller hereby agrees to sell, convey, assign, transfer and deliver
to Purchaser at the Closing (as hereinafter defined) and Purchaser hereby
agrees to acquire, for the consideration hereinafter provided, all of the
assets, properties, rights, titles and privileges of Seller of every kind,
character and description, whether tangible, intangible, real, personal or
mixed, of whatever description
NY-160016.4
<PAGE> 5
and wherever located, involved in, related to, owned, used or held for use or
useful in connection with the ownership, use or operation of the System and all
other assets of Seller relating to the System whether or not required to be
listed on Seller's balance sheet in accordance with generally accepted
accounting principles, including, without limitation, all additions, accessions
and substitutions made prior to the Closing as permitted pursuant to the terms
of this Agreement (collectively, the "Assets"), but excluding the Excluded
Assets (defined below) and assets disposed of by Seller between the date hereof
and the Closing Date on an arms' length basis in the ordinary course of
business. The Assets include, without limitation, the following:
(a) all of the real property interests of Seller relating to the System
(collectively, the "Real Property");
(b) all items of tangible personal property owned, used, held for use or
useful by Seller in the operation of the System, including, without limitation,
all equipment relating to the System (collectively, the "Equipment"); and
(c) all the rights of Seller under any and all franchises, licenses
(including those required by the FCC), permits, authorizations, easements,
registrations, leases, variances, consents and certificates and similar rights
which authorize or are required in connection with the operation of the System,
including any applications for any of the foregoing (collectively, the
"Governmental Permits") that are obtained from or are pending with any federal,
state, county, municipal, local or foreign government and any governmental
agency, bureau, commission, authority, body, court (or other judicial body),
administrative or executive agency, legislative or quasi-legislative body,
commission, council or other agency, including any such agency, authority or
body responsible for the issuance or administration of any Governmental Permit
or whose consent is required for the sale and transfer of the Assets (each, a
"Governmental Authority") and all subscription contracts with subscribers of
Seller relating to the System, pole attachment agreements, access agreements
and all other contracts, leases, agreements or undertakings (other than those
that are included in the Excluded Assets or which constitute Governmental
Permits), written or oral, relating to the ownership, operation or maintenance
of the System and/or the Assets (the "Contracts").
1.2 Excluded Assets. Notwithstanding anything to the contrary in this
Agreement, any insurance policies and rights and claims thereunder; all rights
to tax refunds and
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<PAGE> 6
refunds of fees of any nature, in either case relating to the period
prior to the Closing Date; Seller's rights under this Agreement, and the
Purchase Price payable pursuant hereto; Seller's organizational documents and
partnership and financial records not included in Section 1.1; Seller's cash in
the bank and cash equivalents at the time of the Closing; and all assets of
Seller other than the Assets (collectively, the "Excluded Assets") are
expressly excluded from this sale, are not to be purchased or assumed by
Purchaser, and do not constitute part of the "Assets."
2. CALCULATION AND PAYMENT OF PURCHASE PRICE
2.1 Payment of Purchase Price.
(a) The purchase price to be paid by Purchaser to Seller for the Assets
shall be an amount equal to $27,500,000 (the "Purchase Price").
(b) On the Closing Date, Purchaser shall pay to Seller the Purchase
Price, by wire transfer of immediately available funds to an account designated
by Seller in writing.
2.2 Assumption of Liabilities. As additional consideration for the Assets,
Purchaser shall, from and after the Closing Date, and pursuant to an Assignment
and Assumption Agreement in a form agreed between the parties (the "Assumption
Agreement"), assume the obligations of Seller under or in connection with all
of the Assets. In addition, Purchaser shall assume (i) all obligations
relating to the Assets entered into by Seller in the ordinary course of
business between the date hereof and the Closing Date (other than any
obligations, if any, relating to the Excluded Assets), to the extent such
obligations continue after the Closing and (ii) all liabilities relating to (y)
all customer advance payments and deposits, prepaid advertising revenues and
other prepaid revenues or income received or held by Seller for services to be
rendered or obligations to be performed in connection with the System
subsequent to the Closing; (z) the performance of the Contracts from and
after the Closing Date; provided, however, that Seller shall
pay all sales, use, excise and similar taxes arising out of the transfer of the
Assets. Except as otherwise provided in this Section 2.2, Purchaser shall not
assume or become liable for any other obligations, liabilities or indebtedness
of Seller.
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<PAGE> 7
2.3 Purchase Price Adjustments.
(a) At the Closing, the Purchase Price shall be increased by an amount
equal to 99% of the face amount of accounts receivable from subscribers of the
System which, as of the Closing Date, have been outstanding for 60 days or
less. There shall be no increase to the Purchase Price for accounts receivable
from subscribers of the System which have been outstanding for more than 60
days.
(b) Following the Closing, Purchaser and Seller shall adjust the Purchase
Price pursuant to customary working capital adjustments for transactions of
this type calculated as of the Closing Date. The difference between the actual
Purchase Price paid and the adjusted Purchase Price shall be paid in cash by
the party owing such adjustment no later than sixty (60) days after the Closing
Date.
2.4 Excluded Liabilities. Seller shall pay or otherwise satisfy all
indebtedness, liabilities or other obligations of Seller arising prior to or on
the Closing Date from the ownership or operation of any of the Assets.
2.5 Allocation of Consideration. The parties agree that the consideration
payable for the Assets, consisting of the Purchase Price and the liabilities of
Seller to be assumed by Purchaser hereunder, shall be allocated among the
Assets in accordance with Section 1060 of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder. The parties agree to cooperate in the
preparation, execution and filing with the Internal Revenue Service of all
information to be filed by the parties under Section 1060 and such regulations,
and to file Form 8594 (or any substitute therefor) when required by applicable
law.
2. 6 Proration of Revenue. All revenue earned arising from the Assets
shall be prorated between Purchaser and Seller as of (and the Closing shall be
deemed effective as of) 11:59 p.m., New York time, on the Closing Date.
3. CLOSING
3.1 Closing Date. The closing of the transactions contemplated hereunder
(the "Closing") shall take place at the offices of Paul, Hastings, Janofsky &
Walker, 399 Park Avenue, 31st Floor, New York, New York 10022, at 10:00 A.M.
New York time on May 30, 1997, or on such other date and at
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<PAGE> 8
such other time as the Purchaser and Seller may mutually agree (the
"Closing Date"). Purchaser shall be entitled to possession of the Assets upon
the Closing.
3.2 Deliveries by Seller. At the Closing, Seller shall deliver to Purchaser
the following:
(a) One or more bills of sale and all such other general instruments of
transfer, assignment and conveyance, general warranty deeds, certificates of
title, assignments, evidences of consent or waiver, and other instruments or
documents in form and substance reasonably satisfactory to Purchaser and its
counsel as shall be necessary to evidence or perfect the sale, assignment,
transfer and conveyance of the Assets to Purchaser and effectively vest in the
Purchaser all right, title and interest in and to the Assets free and clear of
any and all liens, encumbrances and other restrictions (other than liens and
encumbrances agreed upon by the parties, such liens and encumbrances being
"Permitted Encumbrances") in accordance with the terms of this Agreement,
together with possession (or constructive possession, in the case of
intangibles) thereof.
(b) An executed Assumption Agreement.
(c) A Certificate of Non-Foreign Status which meets the requirements of
Treasury Regulation Section 1.1445-2, duly executed and acknowledged,
certifying under penalties of perjury that Seller is not a foreign person for
United States income tax purposes.
(d) Originals or true and complete copies of all books and records,
memoranda and data relating to the System; provided that Seller may retain such
duplicate copies as Seller reasonably deems appropriate.
(e) Such other documents, opinions, instruments and certificates, in form
and substance reasonably satisfactory to Purchaser, as Purchaser may reasonably
request.
3.3 Deliveries by Purchaser. At the Closing, Purchaser shall deliver to
Seller the following:
(a) The payment described in Section 2.1(b).
(b) An executed Assumption Agreement.
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<PAGE> 9
(c) Such other documents, opinions, instruments and certificates, in form
and substance reasonably satisfactory to Seller, as Seller may reasonably
request.
4. REPRESENTATIONS AND WARRANTIES
Seller hereby represents and warrants to Purchaser, and Purchaser hereby
represents and warrants to Seller that:
4.1 Organization and Standing. Each such party is duly formed, validly
existing and in good standing as a limited partnership under the laws of the
jurisdiction of its formation. Each such party is duly qualified to do
business in each jurisdiction where the failure to so qualify would have a
material adverse affect on such party's ability to conduct its business or
operations or to consummate the transactions to be consummated by it under this
Agreement and each such party is in good standing in each jurisdiction in which
it is so qualified.
4.2 Power and Authority. Each such party has all requisite power and
authority to execute, deliver and perform this Agreement and to take any action
which it may be required to take hereunder. Seller further represents and
warrants that it has all requisite power to perform its business as now
conducted and to own its properties and assets.
4.3 Authorization. The execution, delivery and performance of this
Agreement by such party has been duly and validly authorized by all action
required to be taken with respect to such party. This Agreement has been, and
on the date of the Closing all other documents, agreements and instruments to
be executed and delivered at the Closing by such party pursuant hereto
(together with all such documents, agreements and instruments to be executed
and delivered by each other party hereto, the "Transaction Documents") will
have been, duly and validly executed by properly authorized officers or other
authorized representatives of such party. This Agreement constitutes, and on
the Closing Date all other Transaction Documents to which such party is or will
be a signatory will constitute, the valid and binding obligations of such
party, enforceable against such party in accordance with their respective
terms. Neither the execution of this Agreement or any of the Transaction
Documents, nor the consummation of the transactions contemplated herein or
therein, will violate any instrument of such party, or any agreement, permit,
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<PAGE> 10
order, judgment, decree, law or regulation to which such person is party
or by which it is, or its assets and properties are, bound.
5. ADDITIONAL UNDERTAKINGS AND ACTIONS
5.1 Consents. As soon as possible after the execution of this Agreement,
Seller will commence making the applications and filings required to obtain all
consents required to be obtained to effect the consummation of the transactions
contemplated hereby, including but not limited to the written consents of the
limited partners holding a majority of units of limited partnership of Cencom
Cable Income Partners II, L.P. (the "Consents"). Seller will use its best
efforts to obtain the Consents from the appropriate Governmental Authorities
and other persons at the earliest possible date. Purchaser agrees that it will
cooperate fully with Seller, and will do all things reasonably necessary to
assist Seller in obtaining all Consents.
5.2 Access to Assets. On and after the date of this Agreement, Purchaser
and its counsel, accountants and other representatives shall have reasonable
access, during normal business hours and upon reasonable notice, to all
properties, books, accounts, contracts, commitments, and records, documents or
other data or information of Seller relating to the System.
5.3 Operations Prior to Closing. Except as otherwise expressly
contemplated by this Agreement, at all times from and after the date hereof and
up to and including the Closing Date, Seller shall operate the System only in
the ordinary course.
5.4 Antitrust Laws Compliance. As soon as practicable after the date of
execution of this Agreement, Seller and Purchaser shall each make filings if
and as required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and related acts and regulations (the "HSR Act"). Each party shall
keep the other party apprised of the status of any inquiries made of such party
by the Federal Trade Commission, the Antitrust Division of the United States
Department of Justice, or any other Governmental Authority with respect to this
Agreement or the transactions contemplated hereby. Each party shall use
reasonable efforts to obtain the earliest termination or waiver of the HSR Act
waiting period possible.
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<PAGE> 11
5.5 Bulk Sales. Purchaser waives compliance with provisions of the Uniform
Commercial Code relating to bulk transfer and similar laws in connection with
the sale of the Assets, subject to the indemnification provisions of Section 9
hereof.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are subject to the
satisfaction at or prior to the Closing of each of the following conditions,
any one or more of which may be waived by Purchaser, in its sole discretion;
provided, however, that no such waiver of a condition shall constitute a waiver
by Purchaser of any of its other rights or remedies, at law or in equity, if
Seller shall be in default of any of its obligations under this Agreement.
6.1 HSR Act. All filings required under the HSR Act, if any, shall have
been made and the applicable waiting period shall have expired or been earlier
terminated without the receipt of any objection or the commencement or threat
of any litigation by a Governmental Authority of competent jurisdiction to
restrain or prevent the consummation of the transactions contemplated by this
Agreement.
6.2 Governmental or Legal Action. No action, suit or proceeding shall be
pending or threatened by any Governmental Authority or other person and no law,
rule or regulation or similar requirement shall have been enacted, promulgated
or issued or deemed applicable to any of the transactions contemplated by this
Agreement by any Governmental Authority or other person that would (a) prohibit
Purchaser's ownership or operation of all or a material portion of the System
or the Assets, (b) enjoin, prevent or make illegal the consummation of the
transactions contemplated by this Agreement or (c) challenge, set aside or
modify any authorization of the transactions provided for herein or any
approvals, consents, waivers or authorizations made or described hereunder.
6.3 Representations; Performance of Agreements. The representations and
warranties of Seller set forth in Section 4 hereof shall be true in all
material respects as of and at the Closing Date with the same effect as though
such representations and warranties had been made again at and as of such time.
Seller shall have performed, satisfied and complied in all material respects
with all covenants, obligations, agreements and conditions required by this
-8-
<PAGE> 12
Agreement to be performed, satisfied or complied with by Seller at or prior to
the Closing Date.
6.4 Financing. Purchaser shall have obtained such financing as it may
require in order to consummate the transactions contemplated by this Agreement.
6.5 Consents and Approvals. Seller shall have delivered to Purchaser
evidence that all of the Consents have been obtained or given and all such
Consents shall be in form and substance reasonably satisfactory to Purchaser
and Seller.
6.6 Transfer Documents. Seller shall have delivered to Purchaser customary
bills of sale, general warranty deeds, assignments and other instruments of
transfer sufficient to convey good and marketable title to the Assets in
accordance with the terms of this Agreement, including the documents and
instruments described under Section 3.2(a). Seller shall have executed and
delivered to Purchaser the Assumption Agreement.
6.7 Opinions of Seller's Counsel. Purchaser shall have received the
opinions of counsel for Seller reasonably required by Purchaser.
6.8 Discharge of Liens. Seller shall have secured the termination,
discharge and release of all material encumbrances of any nature on the Assets.
6.9 No Default Under Documents. As of the Closing Date, Seller shall not be
in material violation or default under any statute, rule, regulation,
agreement, or other document to which Seller is a party or by which Seller is
bound in a manner which would materially adversely affect the operation of the
System, nor shall Seller have knowledge of any condition or event which, with
notice or lapse of time or both, would constitute such a violation or default.
6.10 Additional Documents and Acts. Seller shall have delivered or caused
to be delivered to Purchaser all such additional documents and instruments, in
form and content reasonably satisfactory to Purchaser and its counsel, as
Purchaser shall reasonably request, and shall have done all other acts or
things reasonably requested by Purchaser to evidence compliance with the
conditions set forth in this Section 6.
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<PAGE> 13
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under the Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions,
any one or more of which may be waived by Seller in its sole discretion;
provided, however, that no such waiver of a condition shall constitute a waiver
by Seller of any of its rights or remedies, at law or in equity, if Purchaser
shall be in default of any of its obligations under this Agreement.
7.1 HSR Act. All filings required under the HSR Act, if any, shall have
been made and the applicable waiting period shall have expired or been earlier
terminated without the receipt of any objection or the commencement or threat
of any litigation by a Governmental Authority of competent jurisdiction to
restrain or prevent the consummation of the transactions contemplated by this
Agreement.
7.2 Governmental or Legal Actions. No action, suit or proceeding shall be
pending or threatened by any Governmental Authority or other person and no law,
rule, regulation or other similar requirement shall have been enacted,
promulgated or issued or deemed applicable to any of the transactions
contemplated by this Agreement by any Governmental Authority or other person
that would (a) prohibit Purchaser's ownership or operation of all or any
material portion of the System or the Assets, (b) enjoin, prevent or make
illegal the consummation of the transactions contemplated by this Agreement, or
(c) challenge, set aside or modify any authorization of the transactions
provided for herein or any approvals, consents, waivers or authorizations made
or described hereunder.
7.3 Representations; Performance of Agreements. The representations and
warranties of Purchaser set forth in Section 4 hereof shall be true in all
material respects as of and at the Closing Date with the same effect as though
such representations and warranties had been made again at and as of such time.
Purchaser shall have performed, satisfied and complied in all material
respects with all covenants, obligations, agreements and conditions required by
this Agreement to be performed, satisfied or complied with by Purchaser at or
prior to the Closing Date.
7.4 Consent and Approvals. All consents and authorizations required to be
obtained by Purchaser, shall have been obtained or given.
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<PAGE> 14
7.5 Payments. Purchaser shall have paid to Seller the Purchase Price.
7.6 Assumption of Liabilities. Purchaser shall have delivered to Seller the
Assumption Agreement.
7.7 Additional Documents and Acts. Purchaser shall have delivered or caused
to be delivered to Seller all such additional documents and instruments, in
form and content reasonably satisfactory to Seller and its counsel, as Seller
shall reasonably request, and shall have done all other acts or things
reasonably requested by Seller to evidence compliance with the conditions set
forth in this Section 7.
8. REMEDIES
8.1 Costs. If any legal action or other proceeding is brought for the
enforcement of this Agreement or any other instrument or document to be
executed, delivered or performed hereunder, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions
of this Agreement or any other instrument or document to be executed, delivered
or performed hereunder, the successful or prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
8.2 Termination Without Liability. On the Closing Date, either party may
terminate this Agreement, without liability to the other, if any conditions
precedent to such party's performance shall not have been satisfied on the
Closing Date.
8.3 Termination on Default. Without limiting the provisions of Sections
8.1, 8.2 and 9 hereof, if either Seller, on the one hand, or Purchaser, on the
other hand, shall default in the due and timely performance of any of the
covenants or agreements under the Agreement, the other of Seller or Purchaser,
as the case may be, may, in addition to any other remedy available thereto, on
the Closing Date give notice of termination ("Termination Notice") of this
Agreement. The Termination Notice shall specify with particularity the default
or defaults on which it is based and state that this Agreement is terminated.
The Termination Notice shall be effective when given. The rights and remedies
granted in this Section 8.3 are
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<PAGE> 15
cumulative and not exclusive of any other right or remedy granted herein or
provided by law or in equity.
9. INDEMNIFICATION
9.1 Seller's Indemnity. Seller shall indemnify and hold harmless
Purchaser and its shareholders, partners, officers, directors, employees,
controlling persons and representatives, against and in respect of any and all
claims, damages, losses, costs, expenses (including reasonable legal,
accounting and experts' fees and other fees and expenses incurred in the
investigation or defense of any of the following, and any interest and
penalties), obligations and liabilities which any such person may incur or
suffer, as a result of, arising in connection with or relating to any and all
claims of third parties (including the claims of any limited partners of the
Seller) against, relating to or pertaining to the Seller, the Assets and/or the
System, which arise in connection with or relate to the period prior to the
Closing or to the transactions contemplated hereunder and/or the authority of
the Seller to enter into and consummate such transactions and/or the propriety
of such transactions.
9.2 Purchaser's Indemnity. Purchaser shall indemnify and hold harmless
Seller against and in respect of any and all claims, damages, losses, costs,
expenses (including reasonable legal, accounting and experts' fees and other
fees and expenses incurred in the investigation or defense of any of the
following, and any interest and penalties), obligations and liabilities which
Seller may incur as a result of, arising in connection with or relating to
which it may incur by reason of a material breach of any of the representations
or warranties of Purchaser set forth in this Agreement.
9.3 Procedure. In the event that any claim shall be asserted against a
party entitled to indemnification hereunder (the "Indemnitee"), the Indemnitee
shall promptly notify the other party (the "Indemnitor") of such claim in
writing, and shall extend to the Indemnitor an opportunity to defend against
such claim at the Indemnitor's sole expense. Within 15 days of receiving any
such notice from the Indemnitee, the Indemnitor shall notify the Indemnitee as
to whether or not the Indemnitor elects to assume the defense of any such
claim. In the event the Indemnitor does not so elect to assume such defense,
any costs incurred by the Indemnitee in defending such claim shall be
reimbursed
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<PAGE> 16
to the Indemnitee, on an as-incurred basis, pursuant to this Section 9. In
the event the Indemnitor elects to assume such defense, the Indemnitee shall,
at its option and expense, have the right to participate in any defense
undertaken by the Indemnitor with legal counsel of its own selection, provided
that such legal counsel is reasonably acceptable to Indemnitor. No settlement
or compromise of any claim that may result in indemnification liability may be
made by the Indemnitor without the prior written consent of the Indemnitee,
which consent may not be unreasonably withheld.
9.4 Preservation and Access to Records. Purchaser will preserve and
keep all books and records of Seller included in the Assets for a period of at
least five years from the Closing Date, except such records as Purchaser
usually disposes of in the ordinary course of business. During the period that
such books and records are preserved, duly authorized representatives of Seller
shall have access thereto, on reasonable prior notice to Purchaser and during
regular business hours to examine, inspect and copy, at its own expense, such
books and records, so long as such examination and inspection takes place on
the premises of Purchaser and does not unreasonably interfere with Purchaser's
use thereof. Purchaser, on the one hand, and Seller, on the other hand, agree
that each of them shall reasonably cooperate with the other of Purchaser or
Seller, as applicable, if the records relating to the System owned shall be of
material assistance to the other of Purchaser or Seller in any threatened or
pending litigation or proceeding or the preparation of tax returns.
10. GENERAL PROVISIONS
10.1 Entire Agreement, Modification and Waiver. This Agreement constitutes
the entire agreement between the parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous agreements,
representations and understandings of the parties. No supplement, modification
or amendment of this Agreement shall be binding unless executed in writing by
all the parties. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
10.2 Rights of Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights
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<PAGE> 17
or remedies under or by reason of this Agreement upon any persons other
than the parties and their respective permitted successors and assigns, nor is
anything in this Agreement intended to relieve or discharge the obligation or
liability of any third person or any party to this Agreement, nor shall any
provision give any third person any right of subrogation or action against any
party to this Agreement.
10.3 Assignment. No assignment of any rights or obligations of either party
under this Agreement may be made without the prior written consent of the other
party to this Agreement, which consent is not to be unreasonably withheld,
except that Purchaser shall have the right to assign any or all of its rights
and liabilities hereunder to any of its affiliates, provided that each such
affiliate assumes Purchaser's obligations hereunder; and further provided that
Seller shall have been promptly provided written notice of such assignment
(including the name of the assignee). Any attempted assignment of rights or
obligations in violation of this Section 10.3 shall be null and void.
Reference to any of the parties in this Agreement shall be deemed to include
the successors and assigns of such party.
10.4 Construction. The language in this Agreement shall, in all cases, be
construed as a whole according to its fair meaning and neither strictly for nor
against Seller or Purchaser.
10.5 Expenses of the Parties. Except as expressly provided herein, all
expenses incurred by or on behalf of the parties hereto in connection with the
authorization, preparation and consummation of this Agreement including,
without limitation, all fees and expenses of agents, representatives, counsel
and accountants employed by the parties hereto in connection with the
authorization, preparation, execution and consummation of this Agreement shall
be borne solely by the party who shall have incurred the same.
10.6 Further Assurances. Seller, at any time after the Closing Date, will
promptly execute, acknowledge and deliver any further deeds, assignments,
conveyances and other assurances, documents and instruments of transfer,
reasonably requested by Purchaser and necessary for Seller to comply with its
covenants contained herein and will take any other action consistent with the
terms of this Agreement that may reasonably be requested by Purchaser for the
purpose of assigning, transferring, granting, conveying,
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<PAGE> 18
vesting and confirming ownership in or to Purchaser, or reducing to
Purchaser's possession, any or all of the Assets.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
10.8 Headings. The headings contained in this Agreement are solely for
convenience of reference and shall not affect the meaning or interpretation of
this Agreement or of any term or provision hereof.
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<PAGE> 19
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Second Amended and Restated Asset Purchase Agreement as of the
date first written above.
SELLER:
CENCOM PARTNERS, L.P.
By: Cencom Partners, Inc.,
its General Partner
By: /s/ Jerald L. Kent
-------------------------
Name: Jerald L. Kent
Title: Executive Vice President
PURCHASER:
CHARTER COMMUNICATIONS II, L.P.
By: CCP II, Inc.,
its General Partner
By: /s/ Kent D. Kalkwarf
-----------------------
Name: Kent D. Kalkwarf
Title: Vice President
Signature Page for Lincolnton, NC Asset Purchase Agreement
NY-160016.4
<PAGE> 1
EXHIBIT 12.1
CHARTER COMMUNICATIONS SOUTHEAST HOLDINGS, L.P.
RATIO OF EARNINGS TO FIXED CHARGES CALCULATION
(In thousands except ratio amounts)
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- --------
<S> <C> <C> <C>
Earnings
- --------
Loss before taxes $(40,420) $(27,515) $(9,609)
Fixed Charges 42,398 19,511 4,903
-------- ------- --------
Earnings 1,978 (8,004) (4,706)
Fixed Charges
Interest Expense 41,021 18,722 4,655
Interest Element of Rentals 206 132 33
Amortization of debt costs 1,171 657 215
-------- ------- --------
Total Fixed Charges $ 42,398 $19,511 $4,903
======== ======= ========
Ratio of Earnings to Fixed Charges - - -
</TABLE>
(1) Earnings for the year ended December 31, 1996, 1995 and 1994 were
insufficient to cover the fixed charges by $40,420, $27,515 and $9,609,
respectively. As a result of such deficiencies, the ratios are not
presented above.
<PAGE> 1
EXHIBIT 21.1
List of Subsidiaries of the Registrants
Charter Communications Southeast Holdings, L.P.
1. Charter Communications Southeast Properties, Inc.
2. Charter Communications Southeast Holdings Capital Corporation
3. CCP One, Inc.
4. Charter Communications, L.P.
5. CCP II, Inc.
6. Charter Communications II, L.P.
7. CCP III, Inc.
8. Charter Communications III, L.P.
9. Peachtree Cable TV, Inc.
All of the above-named subsidiaries were incorporated or organized under the
laws of the State of Delaware, except for Peachtree Cable TV, Inc., which was
incorporated under the laws of the State of Nevada.
Charter Communications Southeast Holdings Capital Corporation does not have any
subsidiaries.
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