<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
MICHIGAN 483 38-2558446
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
BRESNAN CAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 483 13-3887244
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
709 WESTCHESTER AVENUE
WHITE PLAINS, NEW YORK 10604-3023
(914) 993-6600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
WILLIAM J. BRESNAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BRESNAN COMMUNICATIONS, INC.
709 WESTCHESTER AVENUE
WHITE PLAINS, NEW YORK 10604-3023
(914) 993-6600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
Copies to:
<TABLE>
<S> <C>
WILLIAM F. SCHWITTER, ESQ. MARC S. ROSENBERG, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER CRAVATH, SWAINE & MOORE
399 PARK AVENUE WORLDWIDE PLAZA
NEW YORK, NEW YORK 10022 825 EIGHTH AVENUE
(212) 318-6000 NEW YORK, NEW YORK 10019
(212) 474-1000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC : As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), check the following box. / /.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /.
------------------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
- -------------------------------------
% Senior Notes due 2006.......... $100,000,000 100% $100,000,000 $34,483
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457 under the Securities Act.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM NUMBER AND HEADING LOCATION OR CAPTION IN PROSPECTUS
------------------------------------------ ---------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of
Prospectus.............................. Facing Page of Registration Statement;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus........................... Inside Front Cover Page of Prospectus;
Outside Back Cover Page of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors; Selected
Financial and Operating Data
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Not Applicable
6. Dilution.................................. Not Applicable
7. Selling Security Holders.................. Not Applicable
8. Plan of Distribution...................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be
Registered.............................. Outside Front Cover Page of Prospectus;
Description of Notes
10. Interests of Named Experts and Counsel.... Not Applicable
11. Information with Respect to the
Registrants............................. Outside Front Cover Page of Prospectus; Risk
Factors; Capitalization; Organization;
Selected Financial and Operating Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Legislation and
Regulation; Management; Certain
Relationships and Related Transactions;
Principal Partners; The Reorganization;
Description of Partnership Agreements;
Description of Bank Credit Facility;
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
MAY 21, 1996
PROSPECTUS [LOGO]
$100,000,000
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
BRESNAN CAPITAL CORPORATION
% SENIOR NOTES DUE 2006
The % Senior Notes Due 2006 (the "Notes") are being offered by Bresnan
Communications Company Limited Partnership (the "Company" or "Bresnan") and
Bresnan Capital Corporation, a wholly owned subsidiary of the Company that has
nominal assets and does not conduct any operations ("BCC" and, together with the
Company, the "Issuers"), and will mature on , 2006. The Issuers will
be jointly and severally liable for all payments due under the Notes. Interest
on the Notes will be payable semiannually on and of each
year, commencing , 1996. The Notes will be redeemable at the option
of the Issuers, in whole or in part, at any time on or after ,
, at the redemption prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. Upon a Change of Control (as
defined herein), holders of the Notes may require the Issuers to purchase all or
a portion of the Notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of purchase. See
"Description of Notes -- Purchase at the Option of Holders Upon a Change of
Control."
Concurrently with this offering (the "Offering"), Bresnan Communications Company
Holding, L.P. ("BCC Holding"), the general partner of the Company, and BCC
Holding Capital Corporation, a wholly owned subsidiary of BCC Holding, are
jointly offering, by means of a separate prospectus, $100.0 million aggregate
principal amount of their % Senior Debentures Due 2008 (the "BCC Holding
Offering"). The net proceeds from the BCC Holding Offering will be contributed
to the Company by BCC Holding. The Offering is conditioned upon, and is a
condition to, the consummation of the BCC Holding Offering. The Offering and the
BCC Holding Offering are collectively referred to herein as the "Offerings."
The Notes will be senior unsecured obligations of the Issuers and will rank pari
passu in right of payment with all existing and future senior indebtedness of
the Issuers, including indebtedness under the Bank Credit Facility (as defined
herein). The Notes will rank senior in right of payment to any future
subordinated indebtedness of the Issuers. As of March 31, 1996, after giving
effect to the Offerings and the application of the net proceeds thereof, the
total indebtedness of the Issuers would have been approximately $109.7 million
and the total consolidated indebtedness of BCC Holding would have been
approximately $209.7 million. As of such date, after giving effect to the
Offerings and the application of the net proceeds thereof, the Issuers would
have had approximately $2.2 million of indebtedness subordinated to the Notes.
See "Capitalization" and "Description of Notes."
The Notes will be represented by a global security registered in the name of the
nominee of The Depository Trust Company ("DTC"), which will act as the
depositary. Beneficial interests in the Notes represented by such global
security will be shown on, and transfers thereof will be effected only through,
records maintained by DTC and its participants. Except as described herein,
Notes in definitive form will not be issued. See "Description of Notes -- Book-
Entry System."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 HEREOF FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT COMPANY(2)
<S> <C> <C> <C>
Per Note........................................................ % % %
Total........................................................... $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from , 1996 to the date of delivery.
(2) Before deducting expenses payable by the Company, estimated to be $625,000.
The Notes are offered subject to receipt and acceptance by the Underwriters, to
prior sale and to the Underwriters' right to reject any order in whole or in
part and to withdraw, cancel or modify the offer without notice. It is expected
that delivery of the Notes will be made through the facilities of The Depository
Trust Company on or about , 1996.
SALOMON BROTHERS INC
TORONTO DOMINION SECURITIES
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
The date of this Prospectus is , 1996.
<PAGE> 4
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Issuers have filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Notes offered by this Prospectus. As permitted by the rules
and regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement. For further information
about the Issuers and the Notes offered hereby, reference is made to the
Registration Statement and to the financial statements, exhibits and schedules
filed therewith. Such additional information can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, NW, Washington, D.C. 20549 and at the regional offices
of the Commission at Northwestern Atrium Center, 500 W. Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, New York, New York
10048. Copies of such materials can be obtained by mail from the public
reference section of the Commission at Judiciary Plaza, 450 Fifth Street NW,
Washington, D.C. 20549 at prescribed rates. The statements contained in this
Prospectus regarding the contents of any contract or other document referred to
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
As a result of the Offering, the Issuers will be subject to the
informational reporting requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Under the Indenture relating to the Notes, and
without regard to whether or not the Issuers are still subject to the
informational requirements of the Exchange Act, the Issuers have agreed to file
with the Commission and distribute to the Trustee and the registered holders of
the Notes annual reports of the Company containing audited consolidated
financial statements, as well as quarterly reports containing unaudited
consolidated financial statements for each of the first three quarters of each
fiscal year.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following information is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements and related notes appearing elsewhere in this Prospectus. Prior to
the consummation of the Offerings, the ownership interests in the Company and
BCC Holding will be reorganized. See "The Reorganization." The information set
forth in this Prospectus assumes that the reorganization has occurred. Operating
income before depreciation and amortization and loss on disposal of obsolete
plant ("EBITDA") as used in this Prospectus is not the defined term used in the
Indenture governing the Notes, but is included as supplemental disclosure
because it is a widely accepted financial indicator of a company's ability to
incur and service debt. EBITDA, however, is not a measure determined in
accordance with generally accepted accounting principles ("GAAP") and should not
be considered in isolation or as a substitute for or an alternative to net
income (loss), cash flow from operating activities or other income or cash flow
data prepared in accordance with GAAP or as a measure of a company's operating
performance or liquidity.
THE COMPANY
Bresnan Communications Company Limited Partnership (the "Company" or
"Bresnan") owns, acquires, develops and operates cable television systems in the
Midwest and Southeast United States. The Company's focus is on operating cable
television systems in "classic" markets, where subscribers generally require
cable television to receive a broad array of broadcast television signals. As of
March 31, 1996, the Company's cable television systems passed approximately
311,400 homes and served approximately 210,500 basic subscribers. The total
number of basic subscribers served by the Company includes approximately 118,300
basic subscribers in Michigan and northeastern Wisconsin (the "Michigan
Region"), approximately 61,000 basic subscribers in Minnesota and northwestern
Wisconsin (the "Minnesota Region") and approximately 31,200 basic subscribers in
Georgia and Mississippi (the "Southeast Region"). The Company's cable television
services are marketed under the names "Bresnan Communications" and "Bresnan."
William J. Bresnan and Tele-Communications, Inc. ("TCI"), through their
respective affiliates, effectively own approximately 20% and 78%, respectively,
of the outstanding partnership interests of the Company. Mr. Bresnan, a cable
television pioneer with nearly 40 years of industry experience, founded the
Company in 1984 and, in partnership with TCI, has developed the Company through
internal growth and acquisitions. TCI is the largest cable television operator
in the United States, with consolidated systems serving approximately 12.5
million domestic subscribers. Management believes that its affiliation with TCI
provides substantial benefits to the Company, including (i) the ability to
purchase various programming and certain equipment at rates approximating those
available to TCI, (ii) access to technological developments and (iii) access to
various TCI alternative methods of distribution. See "Certain Relationships and
Related Transactions."
The Company has initiated a significant capital spending program (the
"Capital Improvement Program"), which continues the planned upgrade of
substantially all of its cable television plant to high-capacity, broadband
hybrid fiber optic/coaxial cable plant. Management believes that the Capital
Improvement Program will provide the Company with the core platform to offer
enhanced and new telecommunications services, including additional channels and
tiers, pay-per-view (including near video-on-demand), high-speed data services
and Internet access, digital advertisement insertion, interactive services and
telephony (including personal communications services ("PCS")). The Capital
Improvement Program is underway and is scheduled to be completed by the end of
1997. Assuming no change in the Company's subscriber base and system composition
subsequent to March 31, 1996, following the completion of the Capital
Improvement Program, management believes that approximately 90% of the Company's
basic subscribers will be served by hybrid fiber optic/coaxial cable television
plant and approximately 79% will be served by plant with a bandwidth of 750 MHz
and will be able to receive the equivalent of 80 or more analog channels.
3
<PAGE> 6
Bresnan's operating strategy includes the following elements:
- Clustering in Targeted Markets. The Company seeks to operate cable
television systems in small- and medium-sized cities and towns that have
attractive competitive characteristics and that have residents who
management believes possess a strong sense of community. The Company's
primary focus is on operating in "classic" markets, where subscribers
generally require cable television to receive a broad array of broadcast
television signals. In addition, subscribers in small-and medium-sized
cities and towns may have fewer entertainment alternatives than urban
subscribers. Management believes that there are significant opportunities
to generate revenue by providing enhanced and new telecommunications
services in these markets due to the Company's high levels of penetration
and the limited number of competitors in these markets.
Within its targeted markets, the Company continues to seek to take
advantage of the strategic and operational benefits of having its
subscribers concentrated in regions and clusters. Management believes
that the Company can derive significant operating efficiencies and
revenue opportunities from the clustering of cable television systems.
These operating efficiencies may include centralized management, billing,
marketing, customer service, technical support and administrative
functions. Management believes that clustering will provide the Company
with additional revenue opportunities, including the ability to offer
regional programming and advertising. The Company intends to continue to
acquire cable television systems in markets that meet its target criteria
and to cluster the systems in such markets.
- Upgrading the Company's Cable Television Systems. Management believes
that adhering to high technical standards is integral to increasing
programming choices, improving customer satisfaction and developing
enhanced and new revenue sources. The Capital Improvement Program is
intended to create state-of-the-art systems that will afford the Company
opportunities to realize cash flow growth. Management believes that the
Capital Improvement Program will provide the Company with the core
platform to offer enhanced and new telecommunications services, including
additional channels and tiers, pay-per-view (including
near-video-on-demand), high-speed data services and Internet access,
digital advertisement insertion, interactive services and telephony
(including PCS).
- Maintaining Strong Community Relations. Management believes that
maintaining strong community relations will continue to be important to
Bresnan's long-term success. The Company's community-oriented initiatives
include educational programs and the sponsorship of programs and events
recognizing outstanding local citizens. In addition, certain members of
the Company's management team, including William J. Bresnan, host
community events for political and business leaders as well as
representatives of the local media where they discuss the operations of
the Company and any recent developments in the telecommunications
industry which may have an impact on their communities. Management
believes that its ongoing community relations initiatives result in
consumer and governmental goodwill and name recognition, which have
increased customer loyalty and will likely facilitate future efforts to
provide new telecommunications services.
- Emphasizing Customer Satisfaction. The Company strives to provide
quality customer service and attractive programming choices at reasonable
rates. The Company has established stringent internal customer service
standards, which management believes meet and, in certain respects,
exceed those established by the National Cable Television Association
("NCTA"). The Company has been repeatedly recognized by the industry for
its commitment to innovative customer service programs. In March of 1996,
the Company was the recipient of its fourth Beacon Award from the Cable
Television Public Affairs Association (the "CTPAA"). This year's award
recognized Bresnan's "On Time Program" as the outstanding customer
relations program by a multiple system operator (an "MSO") in the United
States. Management believes that its customer service efforts have
contributed to its subscriber growth and ongoing patronage by existing
subscribers.
4
<PAGE> 7
- Emphasizing Sales and Marketing. The Company seeks to increase
penetration levels for its basic services, "preferred basic" services,
premium services and ancillary services through a variety of promotions
and marketing strategies. For example, the Company has recently
introduced a marketing campaign with Sprint Corporation to offer a
combination of cable television and long distance services. The Company
also intends to continue to offer periodically previews and promotional
pricing of premium services. In addition, the Company is able to market
its products and services to its customers at Company offices as a high
percentage of its customers, relative to the industry, pay their cable
television bills in person. Management believes that its experience in
sales and marketing will be valuable as the Company markets new products
and services in the future.
Bresnan Capital Corporation, a Delaware corporation ("BCC"), is a wholly
owned subsidiary of the Company formed solely for the purpose of serving as an
issuer of the Notes. The Notes will be joint and several obligations of the
Company and BCC, although the Company will receive all of the net proceeds of
the Offering. Certain financial statements of BCC have not been provided herein
because BCC was formed on April 25, 1996 and has not conducted any operations
since that date. The Notes are not obligations of, and are not guaranteed by,
either the partners of the Company or their respective affiliates, including
William J. Bresnan and TCI.
THE OFFERING
NOTES OFFERED................. $100.0 million principal amount of %
Senior Notes Due 2006.
ISSUERS....................... Bresnan Communications Company Limited
Partnership, a Michigan limited partnership,
and Bresnan Capital Corporation, a Delaware
corporation.
MATURITY...................... The Notes will mature on , 2006.
INTEREST PAYMENT DATES........ Interest on the Notes is payable semiannually
on each and , commencing
, 1996.
OPTIONAL REDEMPTION........... The Notes will be redeemable at the option of
the Issuers, in whole or in part, at any time
on or after , , at the
redemption prices set forth herein, plus
accrued and unpaid interest, if any, to the
date of redemption.
SINKING FUND.................. None.
CHANGE OF CONTROL............. Upon a Change of Control, the Issuers will be
required to make an offer to purchase the Notes
at a purchase price equal to 101% of the
principal amount thereof plus accrued and
unpaid interest, if any, to the date of
purchase. See "Description of Notes -- Purchase
at the Option of Holders Upon a Change of
Control."
RANKING....................... The Notes will be senior unsecured obligations
of the Issuers and will rank pari passu in
right of payment with all existing and future
senior indebtedness of the Issuers, including
indebtedness under the Bank Credit Facility.
The Notes will rank senior in right of payment
to any future subordinated indebtedness of the
Issuers. BCC has nominal assets and does not
conduct any operations. As of March 31, 1996,
after giving effect to the Offerings and the
application of the net proceeds thereof, the
total indebtedness of the Issuers would have
been approximately $109.7 million and the total
consolidated indebtedness
5
<PAGE> 8
of BCC Holding would have been approximately
$209.7 million. As of such date, after giving
effect to the Offerings and the application of
the net proceeds thereof, the Issuers would
have had approximately $2.2 million of
indebtedness subordinated to the Notes. See
"Risk Factors -- Substantial Leverage,"
"Capitalization" and "Description of Notes."
CERTAIN COVENANTS............. The Indenture (as defined herein) for the Notes
will contain limitations on, among other
things, (a) the incurrence of additional
indebtedness, (b) the payment of dividends and
other distributions with respect to Equity
Interests of the Company and the purchase,
redemption or retirement of Equity Interests of
the Company, (c) the incurrence of certain
Liens, (d) transactions with Affiliates and (e)
certain consolidations, mergers and transfers
of assets. During any period of time the
ratings assigned to the Notes are Investment
Grade Ratings, the foregoing covenants will
cease to be in effect with the exception of the
covenants which contain limitations on, among
other things, (a) the incurrence of certain
Liens and (b) certain consolidations, mergers
and transfers of assets. All of these
limitations are subject to a number of
important qualifications. See "Description of
Notes -- Certain Covenants."
CONCURRENT BCC HOLDING
OFFERING...................... Concurrently with the Offering, BCC Holding,
the general partner of the Company, and BCC
Holding Capital Corporation, a wholly owned
subsidiary of BCC Holding, are jointly
offering, by means of a separate prospectus,
$100.0 million aggregate principal amount of
their % Senior Debentures Due 2008. The
net proceeds from the BCC Holding Offering will
be contributed to the Company by BCC Holding.
The Offering is conditioned upon, and is a
condition to, the consummation of the BCC
Holding Offering. See "Concurrent BCC Holding
Offering."
USE OF PROCEEDS............... The net proceeds of the Offerings, including
the net proceeds from the BCC Holding Offering
to be contributed to the Company by BCC Holding
(together, approximately $195.0 million), will
be used to repay amounts outstanding under the
Bank Credit Facility (approximately $156.2
million, including accrued interest), to repay
indebtedness outstanding under a subordinated
promissory note (the "TCID Note") in favor of
TCID of Michigan, Inc. ("TCID"), an affiliate
of TCI (approximately $37.3 million, including
accrued interest), and for general purposes.
See "Use of Proceeds," "Certain Relationships
and Related Transactions" and "Description of
Bank Credit Facility."
RISK FACTORS.................. See "Risk Factors" for a discussion of certain
factors that should be considered by
prospective purchasers of the Notes.
6
<PAGE> 9
SUMMARY FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS EXCEPT PER SUBSCRIBER DATA)
The summary financial data as of and for each of the years in the five-year
period ended December 31, 1995 set forth below have been derived from the
audited financial statements of the Company. The summary financial data as of
and for the three-month period ended March 31, 1996 set forth below have been
derived from the unaudited financial statements of the Company. The Company
acquired cable television systems serving (i) Ontonagon, Michigan on December
31, 1991; (ii) Grenada, Mississippi on December 3, 1992; (iii) Hinesville,
Georgia on December 1, 1993; (iv) Mankato, Marshall and Montevideo, Minnesota on
July 25, 1994; (v) Bruce, Mississippi on January 31, 1995; and (vi) Crosby,
Minnesota on August 1, 1995. Each of the acquisitions made by the Company was
accounted for pursuant to the purchase method of accounting; accordingly, the
Company's financial and operating data include the financial and operating data
of these cable television systems since the dates of their respective
acquisitions.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................. $ 41,914 $ 46,347 $ 51,902 $ 61,380 $ 70,389 $ 16,692 $ 18,302
Operating costs and expenses:
Cost of service................... 5,124 5,807 6,681 8,126 9,219 2,121 2,251
Programming expense............... 8,933 9,059 10,185 13,012 15,902 3,849 4,323
Selling, general and
administrative.................. 9,574 10,359 12,111 14,459 16,713 3,838 4,343
Depreciation and amortization .... 14,636 15,006 14,844 16,843 21,930 5,293 5,575
Loss on disposal of obsolete
plant........................... 1,368 176 5,493 43 275 -- 156
-------- -------- -------- -------- -------- -------- --------
Total operating costs and
expenses.................... 39,635 40,407 49,314 52,483 64,039 15,101 16,648
-------- -------- -------- -------- -------- -------- --------
Operating income.................... 2,279 5,940 2,588 8,897 6,350 1,591 1,654
Other (income) expense:
Interest.......................... 11,691 8,578 7,571 12,557 16,063 4,091 3,786
Gain on investment................ -- (1,348) -- -- (390) (390) --
-------- -------- -------- -------- -------- -------- --------
Net loss............................ $ (9,412) $ (1,290) $ (4,983) $ (3,660) $ (9,323) $ (2,110) $ (2,132)
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (end of period):
Total assets........................ $ 93,105 $ 99,158 $117,587 $150,619 $143,992 $148,533 $141,244
Total debt.......................... 130,950 134,227 156,598 187,798 185,480 187,998 186,345
Partners' (deficit)................. (52,080) (53,370) (58,353) (62,013) (71,336) (64,123) (73,468)
FINANCIAL RATIOS AND OTHER DATA:
EBITDA(a)........................... $ 18,283 $ 21,122 $ 22,925 $ 25,783 $ 28,555 $ 6,884 $ 7,385
Capital expenditures................ 6,945 11,742 11,982 6,323 14,640 2,106 3,133
Ratio of total debt to EBITDA(b).... 7.16x 6.35x 6.83x 7.28x 6.50x 6.83x 6.30x
Monthly revenue per average basic
subscriber........................ $ 23.94 $ 25.27 $ 26.09 $ 27.16 $ 28.47 $ 27.27 $ 29.05
Annual EBITDA per average basic
subscriber(b)..................... 125.30 138.18 138.29 136.91 138.58 134.97 140.68
Annual capital expenditures per
average basic subscriber(b)....... 47.60 76.81 72.28 33.58 71.05 41,29 59.68
SUMMARY SUBSCRIBER DATA (end of
period):
Homes passed........................ 224,078 231,710 267,096 297,763 310,093 300,094 311,359
Basic subscribers................... 148,201 157,553 174,009 202,636 209,459 205,374 210,500
Basic penetration................... 66.1% 68.0% 65.1% 68.1% 67.5% 68.4% 67.6%
Premium units....................... 63,645 73,013 109,450 136,179 142,299 138,300 140,267
Pay-to-basic ratio(c)............... 42.9% 46.3% 62.9% 67.2% 67.9% 67.3% 66.8%
</TABLE>
7
<PAGE> 10
- ---------------
(a) EBITDA represents operating income before depreciation and amortization and
loss on disposal of obsolete plant. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to incur and
service debt. EBITDA, however, is not a measure determined in accordance
with GAAP and should not be considered in isolation or as a substitute for
or an alternative to net income (loss), cash flow from operating activities
or other income or cash flow data prepared in accordance with GAAP or as a
measure of a company's operating performance or liquidity. EBITDA as used in
this Prospectus is not the defined term used in the Indenture governing the
Notes.
(b) With respect to the three months ended March 31, 1995 and 1996, EBITDA and
capital expenditures have been annualized for comparative purposes.
(c) Pay-to-basic ratio measures premium units as a percentage of basic
subscribers and, as a result of the competitive pricing of premium service
packages, does not correspond to a proportionate increase in operating
income or EBITDA.
8
<PAGE> 11
RISK FACTORS
Prior to making an investment decision, prospective investors should
carefully consider, along with the other matters referred to herein, the
following:
SUBSTANTIAL LEVERAGE
The Company has and, following the Offerings, will have a significant
amount of indebtedness outstanding. As of March 31, 1996, after giving effect to
the Offerings and the application of the net proceeds thereof, the Company's
total indebtedness would have been approximately $109.7 million. The Company is
a party to a credit agreement with a group of lenders (the "Bank Credit
Facility") pursuant to which it may borrow up to $225.0 million, subject to
certain limitations. Following the Offerings, the Company will have
approximately $28.7 million of available borrowings under the Bank Credit
Facility, subject to the covenants contained therein, and it expects to continue
to borrow funds under such facility. The Company may use such borrowings for
general purposes, such as the Capital Improvement Program, and to finance
acquisitions. The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including that (i) the ability of the
Company to obtain any necessary additional financing in the future for working
capital, capital expenditures, debt service requirements or other purposes may
be limited, and if the Company is able to obtain such additional financing, the
terms of such financing may not be favorable to the Company; (ii) a substantial
portion of the Company's cash flow from operating activities must be dedicated
to the payment of the principal of and interest on its outstanding indebtedness
and the outstanding indebtedness of BCC Holding and will not be available for
other purposes, including for the Capital Improvement Program; (iii) the
Company's level of indebtedness and restrictions contained in the Company's debt
instruments, including the Indenture relating to the Notes, could limit its
flexibility in operating, or reacting to changes in, its business; (iv) the
Company is more highly leveraged than some of its competitors, which may place
it at a competitive disadvantage; and (v) the Company's high level of
indebtedness could make it more vulnerable in the event of a downturn in its
business. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
HISTORY OF NET LOSSES; DEFICIENCY OF EARNINGS AVAILABLE TO COVER FIXED CHARGES
The Company has sustained net losses in each of the years in the five-year
period ended December 31, 1995 and in the three-month period ended March 31,
1996. For the year ended December 31, 1995 and the three months ended March 31,
1996, the Company's earnings were insufficient to cover its fixed charges by
approximately $9.5 million and $2.1 million, respectively, and, in addition,
after giving effect to the Offerings and the application of the net proceeds
thereof as if they had occurred on January 1, 1995 and January 1, 1996, the
Company's earnings would have been insufficient to cover its fixed charges by
approximately $4.0 million and $1.1 million for the year ended December 31, 1995
and the three months ended March 31, 1996, respectively, or $14.5 million and
$3.6 million, respectively, assuming that the Company services the % Senior
Debentures Due 2008 to be issued by BCC Holding.
COMPETITION
Operators of cable television systems, including the Company, face
competition on a number of fronts, including from other such operators. Under
the Cable Television Consumer Protection and Competition Act of 1992 (the "1992
Cable Act"), franchising authorities are prohibited from granting exclusive
cable television franchises and from unreasonably refusing to award additional
competitive franchises. As a result, the Company's cable television systems are
operated under non-exclusive franchises granted by local authorities. Such
franchises are subject to renewal and renegotiation from time to time. Competing
operators may build systems in areas in which the Company holds franchises
("overbuilds"). Municipal authorities, which are permitted under the 1992 Cable
Act to operate cable television systems in their communities without franchises,
may also seek to compete with the Company by overbuilding. See
"Business -- Competition."
9
<PAGE> 12
The Company also faces competition from companies that provide video
programming using alternative technologies for receiving and distributing
television broadcast signals. Such current and potential competitors include
direct broadcast satellite ("DBS") providers, Multipoint Multichannel
Distribution Systems ("MMDS"), and operators of master antenna television
("MATV") and satellite master antenna television ("SMATV") systems. DBS systems,
which distribute programming to home satellite dishes, and MMDS systems, which
distribute programming via microwave, currently constitute the most prevalent
form of competition for traditional cable television systems. Establishing a DBS
or MMDS network is less capital intensive than building a traditional cable
television system, primarily due to the lack of reliance on cable television
plant. DBS systems typically have an advantage in areas of lower population
density. Several companies have launched or plan to launch DBS services that, in
certain instances, compete or may compete with the cable television services
provided by the Company. One company offers MMDS services in an area which
includes a portion of the Company's Bay City, Michigan cable television system.
The Telecommunications Act of 1996 (the "Telecommunications Act") permits
telephone companies to provide competitive video programming through several
means, subject to certain limitations, and has relaxed statutory and regulatory
restrictions on the ability of local exchange carriers ("LECs"), including the
Regional Bell Operating Companies (the "RBOCs") and their subsidiaries, to
compete with operators of cable television systems. 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 "Business -- Competition" and
"Legislation and Regulation." Many of the Company's potential competitors,
including the RBOCs, have significantly greater financial and other resources
than those available to the Company. In addition, RBOCs and other telephone
companies are exploring ways to deliver video programming over their existing
plant.
In addition, the Telecommunications Act may exempt certain of the Company's
competitors from regulation as cable systems. The new legislation amends the
definition of a "cable system" under the Communications Act of 1934 (the
"Communications Act") so that providers of competitive video programming will
only be regulated and franchised as "cable systems" if they use public
rights-of-way. Thus, a broader class of entities providing video programming
(including some entities which may be in competition with the Company such as
those operating SMATV systems previously subject to regulation) may be exempt
from regulation as cable television systems under the Communications Act.
Exemption from regulation may provide a competitive advantage to certain of the
Company's current and potential competitors.
The Company faces competition from other communications and entertainment
media, including conventional off-air television and radio broadcasting
services, newspapers, movie theaters, live sports events and home video
products. The Company cannot predict the extent to which such competition may
affect the Company's business and operations. See "Business -- Competition" and
"Legislation and Regulation."
FUTURE CAPITAL REQUIREMENTS
In response to existing and potential competition, technological
developments and, in certain instances, pursuant to requirements of certain of
its franchise agreements, the Company expects to expand and upgrade its cable
television plant to increase channel capacity and to provide the core platform
for the delivery of local telephone service. Recently, the Company commenced the
Capital Improvement Program to accomplish these purposes. Completion of the
Capital Improvement Program is currently scheduled for the end of 1997 and the
Company intends to spend an aggregate amount of approximately $61.9 million in
1996 and 1997 in connection with the planned program. Although the Company
anticipates that it will complete the Capital Improvement Program, there can be
no assurance that the Company will be able to do so or that such completion will
allow it to compete effectively with competitors which either do not rely on
cable into the home to deliver services (e.g., DBS, MMDS, MATV and SMATV) or
have access to significantly greater amounts of capital and an existing
communications network. In addition, the Company currently estimates that it
will make other capital expenditures in 1996
10
<PAGE> 13
and 1997 in an aggregate amount of approximately $13.5 million, principally for
technical and office equipment and other fixed assets. There can be no assurance
that the Company will be able to fund its planned capital expenditures. The
Company's inability to complete the Capital Improvement Program or make its
other planned capital expenditures could have a material adverse effect on the
financial condition or results of operations of the Company and on its
competitive position. See "Business -- The Capital Improvement Program."
POTENTIAL CONFLICTS OF INTEREST
The Company is part of a group of entities controlled primarily by William
J. Bresnan and TCI. This group of entities includes two partnerships with
significant international cable television operations, Bresnan International
Partners (Chile), L.P. and Bresnan International Partners (Poland), L.P.
(collectively, the "BIPs"). Neither the Company nor BCC Holding holds any equity
interests in either of the BIPs.
Bresnan Communications, Inc. ("BCI") and Bresnan Management Services, Inc.
("BMSI"), two affiliates of the Company wholly owned by William J. Bresnan,
perform substantially all of the management and administrative functions of both
the Company and the BIPs. Consequently, there are constraints on the ability of
the employees of BCI and BMSI to devote all or a significant portion of their
time to the Company and conflicts of interest may arise in the allocation of
management and administrative services and personnel between the Company and the
BIPs. While currently the ownership interests in the Company and the BIPs are
substantially similar, such interests may change over time and no formal
procedures exist for determining whether the Company or the BIPs will receive
priority in respect of their respective requirements for BCI and BMSI personnel.
In addition, TCI and other media and telecommunications companies in which
TCI has ownership interests are in the business of providing cable, telephony
and other telecommunications services. As a result, TCI may have interests or
acquire interests in the future in entities that may conflict with the interests
of the Company. See "Certain Relationships and Related Transactions" and
"Principal Partners."
LOSS OF FAVORABLE PROGRAMMING AND EQUIPMENT SUPPLY
Pursuant to an agreement with Satellite Services, Inc. ("SSI"), a wholly
owned subsidiary of TCI, the Company is able to purchase various programming
services at rates approximating those available to TCI. In addition, pursuant to
an agreement with Community Tele-Communications, Inc. ("CTCI"), an affiliate of
TCI that negotiates equipment purchase prices on behalf of TCI and its
affiliates, CTCI has agreed to make its discounts on purchases of certain
equipment necessary to construct and maintain cable television systems available
to the Company. In certain cases, the Company would lose these beneficial rates
if TCID elected to transfer its interest in the Company. As management believes
that the rates at which the Company purchases programming from SSI and equipment
through CTCI are significantly lower than those it could obtain independently,
loss of access to programming and equipment at such favorable rates could have a
material adverse effect on the financial condition and results of operations of
the Company. See "Certain Relationships and Related Transactions."
RESTRICTIONS IMPOSED BY THE BANK CREDIT FACILITY; CHANGE OF CONTROL
The Bank Credit Facility ranks pari passu in right of payment with the
Notes and contains a number of significant covenants that, among other things,
restrict the ability of the Company to pledge its assets, dispose of assets or
merge, incur indebtedness, pay dividends, repurchase or redeem equity interests
and indebtedness, create liens, make capital expenditures and make certain
investments or acquisitions. In addition, the Bank Credit Facility contains,
among other covenants, requirements that the Company maintain specified
financial ratios. The ability of the Company to comply with such provisions may
be affected by events beyond its control. The breach of any of these covenants
would result in a default under the Bank Credit Facility.
11
<PAGE> 14
In addition, it is an event of default under the Bank Credit Facility if
any entity effectively controlled by either of William J. Bresnan or TCI ceases
to be a general partner of the Company. See "Description of Bank Credit
Facility." Consequently, a change of control under the Bank Credit Facility may
occur without triggering a Change of Control under the Notes. A change of
control may occur under the Bank Credit Facility upon the exercise of the
buy-sell provisions contained in the Agreement of Limited Partnership of BCC
Holding. The buy-sell provisions may be invoked at any time after December 31,
2000 and are automatically triggered upon certain deadlocks of the executive
committee of BCC Holding. See "Description of Partnership Agreements -- BCC
Holding's Partnership Agreement -- Buy-Sell Procedure."
In the event of any such default, lenders party to the Bank Credit Facility
could elect to declare all amounts borrowed under the Bank Credit Facility,
together with accrued interest and other fees, to be due and payable. If the
amounts outstanding under the Bank Credit Facility were to be accelerated,
thereby causing an acceleration of amounts outstanding under the Notes, there
can be no assurance that the Company could repay such amounts and the Notes in
full. In addition, there can be no assurance that the Company could repurchase
any of the Notes upon a Change of Control. See "Description of Notes -- Purchase
at the Option of Holders Upon a Change of Control."
In connection with the Offerings, the Company intends to enter into an
agreement with its lenders to amend certain of the covenants contained in the
Bank Credit Facility. Following such amendment, BCC Holding's ability to incur
additional indebtedness will also be restricted by the Bank Credit Facility. See
"Description of Bank Credit Facility."
REGULATION OF THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. The 1992 Cable Act
significantly expanded the scope of cable television regulation. In particular,
regulations adopted by the Federal Communications Commission ("FCC") pursuant to
the 1992 Cable Act limit the Company's ability to set and increase rates for the
Company's basic and cable programming service ("CPS") packages and for the
provision of cable television-related equipment. The Company's "preferred basic"
services are classified as CPS packages. The 1992 Cable Act permits certified
local franchising authorities to order refunds of rates paid in the previous
twelve-month period determined to be in excess of the permitted reasonable
rates. The Company has been and is subject to certain refund orders and
mandatory rate reductions. It is possible that rate reductions or refunds of
previously collected fees may be required in the future. See "Legislation and
Regulation."
The Telecommunications Act, which became law on February 8, 1996,
materially alters federal, state and local laws and regulations pertaining to
cable television, telecommunications and other related services and, in
particular, substantially amends the Communications Act, including the
re-regulation of subscriber rate provisions under the 1992 Cable Act. The
Telecommunications Act imposes certain new requirements on operators of cable
television systems, which may increase operating expenses for operators of cable
television systems, including the Company, and may provide a competitive
advantage to less regulated providers of video programming 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 Company. Although the new legislation may substantially lessen
regulatory burdens, the cable television industry may be subject to additional
competition as a result thereof. See "Business -- Competition." There are
numerous rulemakings to be undertaken by the FCC which will interpret and
implement the provisions of the Telecommunications Act. In addition, certain
provisions of the new legislation (such as the deregulation of rates for CPS
packages) will not immediately be effective. Furthermore, certain provisions of
the Telecommunications Act have been, and likely will be, subject to judicial
challenge. The Company is unable at this time to predict the outcome of such
rulemakings or litigation or the short and long-term effect (financial or
otherwise) of the Telecommunications Act and FCC rulemakings on the Company. See
"Legislation and Regulation."
12
<PAGE> 15
RISKS OF GROWTH STRATEGY
The Company expects that a substantial portion of any future growth will be
achieved through the provision of additional telecommunications services and the
acquisition of additional cable television systems. There can be no assurance
that the Company will be able to offer successfully additional
telecommunications services or that such services will generate additional cash
flows. In addition, acquisitions of cable television systems are subject to
certain material contingencies, including approval by the FCC of transfers of
certain licenses and approval by each municipality or franchising authority of
the transfer of the franchises issued by it. No assurance can be given that the
Company will be able to obtain the required approvals to complete any future
acquisitions or that onerous conditions will not be imposed in connection with
obtaining any such approval. In addition, there can be no assurance that the
Company will, in the future, be able to complete successfully acquisitions of
additional cable television systems consistent with its business strategy or
that the Company will be able to integrate successfully any acquired businesses
into its operations. Furthermore, unexpected liabilities and contingencies
associated with acquired businesses may accompany acquisitions.
DEPENDENCE ON KEY PERSONNEL
The Company's operations are managed by a small number of key executive
officers. The loss of certain of these key executive officers could have a
material adverse effect on the financial condition and results of operations of
the Company.
ABSENCE OF ACTIVE TRADING MARKET
The Notes are new issues of securities for which there is currently no
active trading market. If the Notes are traded after their initial issuance,
they may trade at a discount from their initial offering prices, depending upon
prevailing interest rates, the market for similar securities and other factors,
including general economic conditions and the financial condition of the
Company. The Company does not intend to apply for a listing of the Notes on any
securities exchange or authorization for quotation of the Notes on any quotation
system. The Underwriters have informed the Company that they currently intend to
make a market in the Notes. However, the Underwriters are not obligated to do
so, and any such market making may be discontinued at any time without notice.
No assurance can be given as to the development or the liquidity of any trading
market for the Notes. See "Underwriting."
CONCURRENT BCC HOLDING OFFERING
Concurrently with the Offering, BCC Holding, the general partner of the
Company, and BCC Holding Capital Corporation, a wholly owned subsidiary of BCC
Holding, are jointly offering, by means of a separate prospectus, $100.0 million
aggregate principal amount of their % Senior Debentures Due 2008. The net
proceeds from the BCC Holding Offering will be contributed to the Company by BCC
Holding. The Offering is conditioned upon, and is a condition to, the
consummation of the BCC Holding Offering.
13
<PAGE> 16
USE OF PROCEEDS
The net proceeds of the Offerings, including the net proceeds from the BCC
Holding Offering to be contributed to the Company by BCC Holding, are estimated
to be approximately $195.0 million. A portion of the net proceeds of the
Offerings will be used to repay amounts outstanding under the Bank Credit
Facility and to repay the TCID Note. The aggregate amounts outstanding,
including accrued interest, under the Bank Credit Facility to be repaid are
expected to be approximately $156.2 million as of the closing of the Offerings.
Commitments under the Bank Credit Facility will not be reduced as a result of
this use of proceeds. See "Description of Bank Credit Facility." The aggregate
amount of outstanding principal of, and accrued interest on, the TCID Note is
expected to be approximately $37.3 million as of the closing of the Offerings.
See "Certain Relationships and Related Transactions." The remaining $1.5 million
of net proceeds will be used for general purposes, including to pay fees and
expenses relating to an amendment to the Bank Credit Facility.
Following the Offerings, the Company will have approximately $28.7 million
of available borrowings under the Bank Credit Facility, subject to the covenants
contained therein, and it expects to continue to borrow funds under such
facility. The Company may use such borrowings for general purposes, such as the
Capital Improvement Program, and to finance acquisitions. The Company explores,
on an ongoing basis, possible acquisitions of cable television systems, some of
which could be significant. Currently, the Company has no agreements in
principle regarding any such acquisition. See "Risk Factors -- Substantial
Leverage."
The amounts outstanding under the Bank Credit Facility become due and
payable on various dates through 2003 and bear interest at rates which, as of
March 31, 1996, ranged from 6.7% to 8.7%. The TCID Note, including accrued
interest, becomes due and payable on the earlier of April 30, 2001 or the first
business day following the full repayment of all amounts outstanding under the
Bank Credit Facility and bears interest at a rate which, as of March 31, 1996,
was approximately 8.3%.
The Toronto-Dominion Bank, an affiliate of Toronto Dominion Securities
(USA) Inc., is a lender under the Bank Credit Facility and will receive
approximately $27.8 million of the repayment of borrowings under such facility.
See "Underwriting."
14
<PAGE> 17
CAPITALIZATION
The following table sets forth the cash and cash equivalents and
capitalization of the Company as of March 31, 1996 (i) on an historic basis and
(ii) as adjusted to give effect to the Offerings and the application of the net
proceeds thereof. See "Use of Proceeds."
<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
AS
ACTUAL ADJUSTED
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................ $ 794 $ 777
======== ========
Total Debt
Bank Credit Facility................................... $162,000(a) $ 7,500(b)
The Notes offered hereby............................... -- 100,000
TCID Note.............................................. 22,100(c) --
Other debt............................................. 2,245 2,245
-------- --------
Total debt..................................... 186,345 109,745
Partners' (deficit) equity............................... (73,468) 22,814(d)
-------- --------
Total capitalization........................... $112,877 $132,559
======== ========
</TABLE>
- ---------------
(a) Does not include $2.1 million of accrued but unpaid interest to be repaid
from the net proceeds of the Offerings. See "Use of Proceeds."
(b) Following the Offerings, the Company will have approximately $28.7 million
of available borrowings under the Bank Credit Facility, subject to the
covenants contained therein, and it expects to continue to borrow funds
under such facility.
(c) Does not include $14.8 million of accrued but unpaid interest to be repaid
from the net proceeds of the Offerings. See "Use of Proceeds."
(d) Reflects a $1.7 million charge related to the write-off of deferred
financing costs associated with previous amendments to the Bank Credit
Facility and the capital contribution to the Company by BCC Holding of the
net proceeds from the BCC Holding Offering.
15
<PAGE> 18
ORGANIZATION
[Organization chart showing percentage of L.P. and G.P. of William J.
Bresnan and Limited Parters with respect to Bresnan Communications, Inc.
("BCI"), BCI (USA), L.P., BCI Management, L.P., TCID of Michigan, Inc.
("TCID"), Bresnan Communications Company Holding, L.P. ("BCC Holding"), BCC
Holding Capital Corporation, BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP
(THE "COMPANY"), and BRESNAN CAPITAL CORPORATION ("BCC"). Some of the
percentage amounts represent the economic and voting interest held in each
entity and are rounded to the nearest one-hundredth of one percent.]
Other affiliates of the Company include, but are not limited to:
- BMSI refers to Bresnan Management Services, Inc., wholly owned by William
J. Bresnan.
- BIPs refers to Bresnan International Partners (Chile), L.P. and Bresnan
International Partners (Poland), L.P. William J. Bresnan, directly and
indirectly, effectively owns a 20% interest in each of the BIPs. TCI,
directly and indirectly, effectively owns an 80% interest in each of the
BIPs. Corporations wholly owned by Mr. Bresnan act as the general
partners of the managing general partners of the BIPs.
16
<PAGE> 19
SELECTED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS EXCEPT PER SUBSCRIBER DATA)
The selected financial data as of and for each of the years in the
five-year period ended December 31, 1995 set forth below have been derived from
the audited financial statements of the Company. These data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the audited financial statements and related
notes for each of the three years in the period ended December 31, 1995 included
elsewhere in this Prospectus. The statement of operations data with respect to
the fiscal years ended December 31, 1991 and 1992 have been derived from audited
financial statements of the Company not included herein. The selected financial
data as of and for the three-month period ended March 31, 1996 set forth below
have been derived from the unaudited financial statements of the Company;
however, in the opinion of management, such data reflect all adjustments
(consisting only of normal recurring adjustments) necessary to fairly present
the data for such interim period. Operating results for the interim period are
not necessarily indicative of the results that may be expected for a full year.
The Company acquired cable television systems serving (i) Ontonagon, Michigan on
December 31, 1991; (ii) Grenada, Mississippi on December 3, 1992; (iii)
Hinesville, Georgia on December 1, 1993; (iv) Mankato, Marshall and Montevideo,
Minnesota on July 25, 1994; (v) Bruce, Mississippi on January 31, 1995; and (vi)
Crosby, Minnesota on August 1, 1995. Each of the acquisitions made by the
Company was accounted for pursuant to the purchase method of accounting;
accordingly, the Company's financial and operating data include the financial
and operating data of these cable television systems since the dates of their
respective acquisitions.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue............................. $ 41,914 $ 46,347 $ 51,902 $ 61,380 $ 70,389 $ 16,692 $ 18,302
Operating costs and expenses:
Cost of service................... 5,124 5,807 6,681 8,126 9,219 2,121 2,251
Programming expense............... 8,933 9,059 10,185 13,012 15,902 3,849 4,323
Selling, general and
administrative.................. 9,574 10,359 12,111 14,459 16,713 3,838 4,343
Depreciation and amortization..... 14,636 15,006 14,844 16,843 21,930 5,293 5,575
Loss on disposal of obsolete
plant........................... 1,368 176 5,493 43 275 -- 156
-------- -------- -------- -------- -------- -------- --------
Total operating costs and
expenses.................... 39,635 40,407 49,314 52,483 64,039 15,101 16,648
-------- -------- -------- -------- -------- -------- --------
Operating income.................... 2,279 5,940 2,588 8,897 6,350 1,591 1,654
Other (income) expense:
Interest.......................... 11,691 8,578 7,571 12,557 16,063 4,091 3,786
Gain on investment................ -- (1,348) -- -- (390) (390) --
-------- -------- -------- -------- -------- -------- --------
Net loss............................ $ (9,412) $ (1,290) $ (4,983) $ (3,660) $ (9,323) $ (2,110) $ (2,132)
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (end of period):
Total assets........................ $ 93,105 $ 99,158 $ 117,587 $ 150,619 $ 143,992 $ 148,533 $ 141,244
Total debt.......................... 130,950 134,227 156,598 187,798 185,480 187,998 186,345
Partners' (deficit)................. (52,080) (53,370) (58,353) (62,013) (71,336) (64,123) (73,468)
FINANCIAL RATIOS AND OTHER DATA:
Deficiency of earnings available to
cover fixed charges(a)............ $ 9,471 $ 1,376 $ 5,193 $ 3,670 $ 9,504 $ 2,155 $ 2,132
EBITDA(b)........................... 18,283 21,122 22,925 25,783 28,555 6,884 7,385
Capital expenditures................ 6,945 11,742 11,982 6,323 14,640 2,106 3,133
Ratio of total debt to EBITDA(c).... 7.16x 6.35x 6.83x 7.28x 6.50x 6.83x 6.30x
Monthly revenue per average basic
subscriber........................ $ 23.94 $ 25.27 $ 26.09 $ 27.16 $ 28.47 $ 27.27 $ 29.05
Annual EBITDA per average basic
subscriber(c)..................... 125.30 138.18 138.29 136.91 138.58 134.97 140.68
Annual capital expenditures per
average basic subscriber(c)....... 47.60 76.81 72.28 33.58 71.05 41.29 59.68
SUMMARY SUBSCRIBER DATA (end of
period):
Homes passed........................ 224,078 231,710 267,096 297,763 310,093 300,094 311,359
Basic subscribers................... 148,201 157,553 174,009 202,636 209,459 205,374 210,500
Basic penetration................... 66.1% 68.0% 65.1% 68.1% 67.5% 68.4% 67.6%
Premium units....................... 63,645 73,013 109,450 136,179 142,299 138,300 140,267
Pay-to-basic ratio(d)............... 42.9% 46.3% 62.9% 67.2% 67.9% 67.3% 66.8%
</TABLE>
17
<PAGE> 20
- ---------------
(a) For purposes of computing the deficiency of earnings available to cover
fixed charges, earnings represent the sum of net loss plus fixed charges.
Fixed charges represent interest paid or accrued on indebtedness of the
Company, the amortization of deferred loan charges and the portion of rents
deemed representative of the interest factor. On a pro forma basis, after
giving effect to the Offerings, and the application of the net proceeds
thereof as if they had occurred on January 1, 1995 and January 1, 1996,
respectively, the Company's earnings would have been insufficient to cover
its fixed charges by approximately $4.0 million and $1.1 million for the
year ended December 31, 1995 and the three months ended March 31, 1996,
respectively, or $14.5 million and $3.6 million, respectively, assuming that
the Company services the % Senior Debentures Due 2008 to be issued by BCC
Holding.
(b) EBITDA represents operating income before depreciation and amortization and
loss on disposal of obsolete plant. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to incur and
service debt. EBITDA, however, is not a measure determined in accordance
with GAAP and should not be considered in isolation or a substitute for or
an alternative to net income (loss), cash flow from operating activities or
other income or cash flow data prepared in accordance with GAAP or as a
measure of a company's operating performance or liquidity. EBITDA as used in
this Prospectus is not the defined term used in the Indenture governing the
Notes.
(c) With respect to the three months ended March 31, 1995 and 1996, EBITDA and
capital expenditures have been annualized for comparative purposes.
(d) Pay-to-basic ratio measures premium units as a percentage of basic
subscribers and, as a result of the competitive pricing of premium service
packages, does not correspond to a proportionate increase in operating
income or EBITDA.
18
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Substantially all of the Company's revenue is earned from subscriber fees
for cable television programming services, the sale of advertising, commissions
for products sold through home shopping networks and fees for ancillary services
(such as rental of converters and remote control devices and installations).
Recent federal law and regulations, including re-regulation of certain aspects
of the cable television industry under the 1992 Cable Act, have affected the
Company's ability to increase or restructure its rates for certain services.
Re-regulation was intended to reduce customer rates for basic service and CPS
packages and to limit future rate increases. Such regulations have been
materially altered by the Telecommunications Act. See "Legislation and
Regulation."
The Company has generated increases in revenue and EBITDA in the
three-month period ended March 31, 1996 and in each of the past three years,
primarily as a result of acquisitions, internal subscriber growth, basic tier
rate increases and, to a lesser extent, through growth in advertising and
pay-per-view revenue. During the period from January 1, 1993 through March 31,
1996, revenue and EBITDA increased at average annual compound growth rates of
12.1% and 8.7%, respectively.
The Company experienced an increase in monthly revenue per average basic
subscriber in the three-month period ended March 31, 1996 and in each of the
years in the three-year period ended December 31, 1995. This increase was
achieved despite the rate freeze imposed by the FCC from October 5, 1992 to
September 1, 1993 and the implementation of rate regulation by the FCC on
September 1, 1993 and July 14, 1994. FCC regulation caused a decrease in the
Company's regulated revenue streams (revenue derived from basic service tiers,
"preferred basic" service tiers, equipment rental and installations) per average
basic subscriber for 1994 as compared to 1993. This decrease was not fully
recaptured by regulated rate increases in 1994 and 1995. The reduction in
regulated revenue per average basic subscriber for 1994 and 1995 as compared to
1993 was more than offset, however, by increases in non-regulated revenue
streams (revenue derived from premium services, advertising sales, pay-per-view
and home shopping revenue) per average basic subscriber.
The Company experienced increases in EBITDA in the three-month period ended
March 31, 1996 and in each of the years in the three-year period ended December
31, 1995. These increases occurred primarily as a result of subscriber growth,
through both internally generated growth and acquisitions, as well as new and
incremental revenue sources, such as premium services, advertising sales and
pay-per-view. During these periods, the Company's EBITDA margin generally
declined due to programming rate increases, an increase in the number of cable
televisions channels provided and lower margins associated with new and
incremental revenue sources. In addition, the Company experienced increases in
cost of service and selling, general and administrative expenses in connection
with the implementation of improved customer service standards and compliance
with FCC regulations. As a result of increases in operating costs and expenses
growing at a faster rate than increases in revenue, the Company has experienced
a decline in EBITDA margin, while at the same time experiencing growth in
EBITDA. Although no assurances can be given, management believes that EBITDA per
average basic subscriber and EBITDA margin will increase in 1996 as a result of
rate increases implemented on April 1, 1996.
The Company has invested significant amounts of capital in its cable
television systems, which has allowed the Company to offer subscribers
additional channels and programming. The Company significantly reduced capital
expenditures in 1994 so that it could review and analyze the impact of rate
regulation. In 1995, the Company increased capital spending in connection with
the Capital Improvement Program.
Operating income increased 4.0% to $1.7 million for the three months ended
March 31, 1996 as compared to the same period in 1995. Operating income declined
for the year ended December 31, 1995 as compared to the same period in 1994 due
to the Company's recognition of a full year of depreciation and amortization
related to cable television systems acquired in 1994 and a full year's impact of
rate
19
<PAGE> 22
regulation. Operating income declined for the year ended December 31, 1993 as
compared to the same period in 1992 due to the Company's write-off of obsolete
plant relating to the rebuild of certain of its cable television systems.
The high level of depreciation and amortization associated with the
Company's acquisitions and capital expenditures and the interest costs related
to its financing activities have caused the Company to report net losses.
Management believes that such net losses are common for cable television
companies and that the Company will continue to incur net losses in the future.
RESULTS OF OPERATIONS
The following table, which is derived from, and should be read in
conjunction with, the financial statements and related notes included elsewhere
in this Prospectus, sets forth the historical percentage relationship of the
components of operating income for the periods indicated.
<TABLE>
<CAPTION>
PERCENTAGE OF REVENUE
--------------------------------------------------
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------- ----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenue.................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of service.......................... 12.9 13.2 13.1 12.7 12.3
Programming expense...................... 19.6 21.2 22.6 23.1 23.6
Selling, general and administrative...... 23.3 23.6 23.7 23.0 23.7
Depreciation and amortization............ 28.6 27.4 31.2 31.7 30.5
Loss on disposal of obsolete plant....... 10.6 0.1 0.4 -- 0.9
----- ----- ----- ----- -----
95.0 85.5 91.0 90.5 91.0
----- ----- ----- ----- -----
Operating income......................... 5.0% 14.5% 9.0% 9.5% 9.0%
===== ===== ===== ===== =====
EBITDA................................... 44.2% 42.0% 40.6% 41.2% 40.4%
</TABLE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH
31, 1995
Revenue increased 9.6% to $18.3 million for the three months ended March
31, 1996 as compared to the same period in 1995, primarily as a result of a 2.5%
increase in the number of basic subscribers and rate increases implemented over
the course of 1995. This increase included regulated rate increases and other
revenue increases. Revenue from premium services grew by 4.8% to $2.5 million
due to a 1.7% increase in premium units. Advertising and home shopping revenue
grew by 13.4% to $1.0 million due to an increase in customer buy rates and
additional commercial advertising insertion.
Operating costs and expenses increased 10.2% to $16.6 million for the three
months ended March 31, 1996 as compared to the same period in 1995. In the
three-month period ended March 31, 1996, cost of service increased 6.1% to $2.3
million, programming expense increased 12.3% to $4.3 million and selling,
general and administration expense increased 13.2% to $4.3 million, in each case
as compared to the same period in 1995. All variable expenses increased as a
result of an increase in the number of basic subscribers served by the Company,
except for programming expense which increased as a result of programming rate
increases as well as subscriber growth. Depreciation and amortization increased
5.3% for the three months ended March 31, 1996 as compared to the same period in
1995, primarily as a result of increased capital expenditures.
Operating income increased 4.0% to $1.7 million for the three months ended
March 31, 1996 as compared to the same period in 1995 as a result of the changes
described above.
Interest decreased 7.5% to $3.8 million for the three months ended March
31, 1996 as compared to the same period in 1995. This decrease was primarily
related to a decrease in the effective interest rate on the Company's debt.
20
<PAGE> 23
Net loss increased 1.0% to $2.1 million for the three months ended March
31, 1996 as compared to the same period in 1995. Prior to recognizing a gain in
1995 relating to the sale of certain securities, net loss would have decreased
14.7% as the increase in revenue, coupled with the decrease in interest on the
Company's debt, more than offset the increase in operating costs and expenses
noted above.
EBITDA increased 7.3% to $7.4 million for the three months ended March 31,
1996 as compared to the same period in 1995. This increase was primarily the
result of internal subscriber growth. EBITDA margin declined from 41.2% to 40.4%
as a result of programming rate increases and lower margins associated with new
and incremental revenue sources.
YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994
Revenue increased 14.7% to $70.4 million for the year ended December 31,
1995 as compared to 1994, primarily as a result of a 3.4% increase in the number
of basic subscribers and the recognition of a full year of revenue from cable
television systems acquired by the Company in 1994. Revenue, without giving
effect to revenue recognized as a result of acquisitions, increased 8%. This
increase included regulated rate increases and other revenue increases. This
growth in revenue was limited by FCC regulations implemented on July 14, 1994.
The effect of these regulations was to cap the rates that the Company was
allowed to charge its basic subscribers. See "Legislation and Regulation."
Revenue from premium services grew by 14.2% to $9.5 million due to an increase
in premium units, including increases resulting from acquisitions. Revenue from
pay-per-view services increased 10.6% to $0.4 million as a result of increased
customer buy rates. Advertising and home shopping revenue grew by 22.1% to $4.4
million due to an increase in customer buy rates, increased channel capacity for
these services and the recognition of a full year of revenue from cable
television systems acquired by the Company in 1994.
Operating costs and expenses increased 22.0% to $64.0 million for the year
ended December 31, 1995 as compared to 1994, primarily due to the recognition of
a full year of costs and expenses related to cable television systems acquired
in 1994 (11.5% or $6.1 million) and an increase in operating expenses of the
Company's cable television systems (10.5% or $5.5 million). In 1995, cost of
service increased 13.5% to $9.2 million (10.5% or $8.5 million before
acquisitions), programming expense increased 22.2% to $15.9 million (16% to
$14.5 million before acquisitions) and selling, general and administrative
expense increased 15.6% to $16.7 million (12.3% or $15.8 million before
acquisitions), in each case as compared to 1994. All variable expenses increased
as a result of an increase in the number of basic subscribers served by the
Company, except for programming expense which increased as a result of an
increase in the number of cable television channels provided and programming
rate increases as well as subscriber growth. Depreciation and amortization
increased 30.2% to $21.9 million for the year ended December 31, 1995 as
compared to 1994, primarily as a result of increased capital expenditures and
acquisitions.
Operating income decreased 28.6% to $6.4 million for the year ended
December 31, 1995 as compared to 1994 as a result of the changes described above
and an increase in the loss on disposal of obsolete plant.
Interest increased 27.9% to $16.1 million for the year ended December 31,
1995 as compared to 1994. The increase was primarily the result of a 17.3%
increase in interest related to indebtedness incurred in connection with
acquisitions and also an increase in the effective interest rate on the
Company's debt.
Net loss increased by $5.7 million for the year ended December 31, 1995 to
a loss of $9.3 million as compared to 1994. This increase was the result of
increased operating costs and expenses, specifically the depreciation and
amortization charges described above, and increased interest, which, in the
aggregate, more than offset the 14.7% increase in revenue.
EBITDA increased 10.8% to $28.6 million for the year ended December 31,
1995 as compared to 1994. The increase was primarily the result of internal
subscriber growth and growth through acquisitions. EBITDA margin declined from
42.0% to 40.6% as a result of programming rate increases, an increase in
21
<PAGE> 24
the number of cable television channels provided and lower margins associated
with new and incremental revenue sources. In addition, the Company experienced
increases in cost of service and selling, general and administrative expenses in
connection with the implementation of improved customer service standards and
compliance with FCC regulations. See "Legislation and Regulation."
YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED DECEMBER 31, 1993
Revenue increased 18.3% to $61.4 million for the year ended December 31,
1994 as compared to 1993, primarily as a result of a 16.5% increase in the
number of basic subscribers served by the Company, approximately 83.6% of which
were the result of acquisitions of cable television systems during 1994. The
increase in revenue was offset in part by a full year's impact of FCC
regulations implemented on September 1, 1993 and a partial year's impact of
additional FCC regulations implemented on July 14, 1994. The effect of these
regulations was to reduce the rates that the Company was allowed to charge its
basic subscribers. See "Legislation and Regulation." Revenue from premium
services grew by 31.8% to $8.3 million due to an increase in premium units,
including increases resulting from acquisitions. Advertising and home shopping
revenue grew by 59.8% to $3.6 million due primarily to increased channel
capacity for these services. Equipment rental revenue decreased by 29.1% to $0.7
million primarily due to the effects of rate regulation on the prices charged
for the rental of converter boxes and remote controls.
Operating costs and expenses increased 6.4% to $52.5 million for the year
ended December 31, 1994 as compared to 1993, primarily due to the recognition of
costs and expenses related to cable television systems acquired (18.6% or $9.1
million) offset by a decrease in operating costs and expenses (primarily
amortization expense) of the Company's cable television systems ((1.1%) or $0.5
million). This increase in operating costs and expenses was offset by a writeoff
of obsolete plant recorded in 1993 as part of the rebuild of a cable television
system. In 1994, cost of service increased 21.6% to $8.1 million (2.4% or $0.2
million before acquisitions), programming expense increased 27.8% to $13.0
million (7.9% or $10.9 million before acquisitions) and selling, general and
administrative expense increased 19.4% to $14.5 million (10.7% or $13.3 million
before acquisitions), in each case as compared to 1993. All variable expenses
increased as a result of the increase in the number of basic subscribers served
by the Company, except for programming expense which increased as a result of an
increase in the number of cable television channels provided and programming
rate increases as well as subscriber growth. Depreciation and amortization
increased 13.5% to $16.8 million for the year ended December 31, 1994 as
compared to 1993, primarily as a result of increased capital expenditures and
acquisitions.
Operating income increased 243.7% to $8.9 million, primarily as a result of
a reduction in operating income recorded in 1993 relating to a write-off of
obsolete plant as part of the rebuild of certain cable television systems.
Operating income would have increased 10.1% prior to recognizing the write-off.
Interest increased 65.9% to $12.6 million for the year ended December 31,
1994 as compared to 1993. The increase was primarily the result of a 36.9%
increase in interest related to indebtedness incurred in connection with
acquisitions, higher interest rates and the Company's write-off of deferred
financing costs in connection with an amendment to the Bank Credit Facility in
1994.
Net loss decreased by $1.3 million for the year ended December 31, 1994 to
a loss of $3.7 million as compared to 1993, primarily due to a loss recorded in
1993 relating to the disposal of obsolete plant resulting from the rebuild of
certain cable television systems.
EBITDA increased $2.9 million to $25.8 million for the year ended December
31, 1994 as compared to 1993. The increase was primarily attributable to
internal subscriber growth and growth through acquisitions. EBITDA margin
declined from 1993 to 1994 from 44.2% to 42.0% as a result of programming rate
increases, an increase in the number of cable television channels provided and
lower margins associated with new and incremental revenue sources. In addition,
the Company experienced increases in cost of service and selling, general and
administrative expenses in connection with the
22
<PAGE> 25
implementation of improved customer service standards and compliance with FCC
regulations. See "Legislation and Regulation."
LIQUIDITY AND CAPITAL RESOURCES
The Company's business requires cash for operations and capital
expenditures. In addition, the Company has followed a strategy of expansion
through selective acquisitions of cable television systems. To date, cash
requirements have been funded by cash flow from operating activities and
borrowings. As of March 31, 1996, amounts outstanding under the Bank Credit
Facility and the TCID Note were approximately $164.1 million and approximately
$36.9 million, respectively, in each case including accrued interest. See
"Certain Relationships and Related Transactions" and "Description of Bank Credit
Facility." The net proceeds from the BCC Holding Offering will be contributed to
the Company by BCC Holding. The Company intends to use a portion of the net
proceeds of the Offerings to repay approximately $156.2 million, including
accrued interest, outstanding under the Bank Credit Facility and to repay the
TCID Note, including accrued interest. The Company may borrow up to $225.0
million under the Bank Credit Facility, subject to certain limitations.
Following the Offerings, the Company will have approximately $28.7 million of
available borrowings under the Bank Credit Facility, subject to the covenants
contained therein, and it expects to continue to borrow funds under such
facility. The Company may use such borrowings for general purposes, such as the
Capital Improvement Program, and to finance acquisitions. See "Risk
Factors -- Substantial Leverage" and "Use of Proceeds."
Cash provided by operating activities was approximately $2.8 million for
the three months ended March 31, 1996, a decrease of approximately $2.1 million
from the same period in 1995. This decrease was primarily a result of proceeds
received in 1995 in connection with the sale of certain securities and the
payment in 1996 of certain liabilities accrued in 1995. Cash provided by
operating activities was approximately $18.3 million for the year ended December
31, 1995, a decrease of approximately $0.4 million from 1994. This decrease was
primarily a result of increasing interest on the Company's bank debt due to
increasing interest rates and indebtedness incurred in connection with
acquisitions and capital expenditures, coupled with a full year's impact of rate
regulation.
During the year ended December 31, 1995, the Company made capital
expenditures of approximately $14.6 million. During the three months ended March
31, 1996, the Company made capital expenditures of approximately $3.1 million.
In 1996 and 1997, the Company expects to make capital expenditures of
approximately $61.9 million related to the Capital Improvement Program and
approximately $13.5 million of capital expenditures primarily for technical and
office equipment and other fixed assets. The Company significantly reduced
capital expenditures in 1994 so that it could review and analyze the impact of
rate regulation.
The Company has entered into several interest rate swap agreements to
effectively fix or set maximum interest rates on a portion of its floating rate
long-term debt. The Company is exposed to credit loss in the event of
nonperformance by the counterparties to the interest rate swap agreements. These
swap agreements have been entered into with certain of the institutions that are
lenders under the Bank Credit Facility. As of March 31, 1996, such interest rate
swap agreements effectively fix or set maximum interest rates on an aggregate
notional principal amount of $122.0 million with rates ranging from 6.1% to
9.3%, excluding the applicable margin required pursuant to the Bank Credit
Facility which was 1.6% for the three months ended March 31, 1996. The
expiration dates of the swap agreements range from June 5, 1996 to October 14,
1997. Following the Offerings and the application of the net proceeds thereof,
the Company intends to keep in place interest rate swap agreements relating to
an aggregate notional principal amount of $30.0 million to hedge interest rates
on amounts to be outstanding under the Bank Credit Facility at a cost to the
Company of approximately $0.7 million, based on current interest rates. In
addition, the Company intends to keep in place a hedging instrument pegged to
certain short-term interest rates relating to an aggregate notional principal
amount of $50.0 million. Management believes that the instrument will expire
without triggering an obligation to pay, although the Company would be obligated
to pay approximately $1.5 million, based on current interest rates, through the
instrument's expiration if the 90-day LIBOR rate reaches 7.0% and remains at
that amount until such
23
<PAGE> 26
expiration. All of the Company's other interest rate swap agreements will expire
prior to the completion of the Offerings.
Management believes that, after giving effect to the Offerings, cash flow
provided from operating activities, together with expected availability under
the Bank Credit Facility, subject to the covenants contained therein, will be
sufficient to enable the Company for the foreseeable future to service
indebtedness, to make capital expenditures, to meet operating costs and expenses
and to finance potential acquisitions. If and when appropriate, the Company or
its affiliates may elect to incur additional indebtedness or to raise equity in
the public or private markets. See "Risk Factors -- Substantial Leverage."
INFLATION
The net impact of inflation on the Company's results of operations has not
been material in the last three years due to the relatively low rates of
inflation during this period. If the rate of inflation increases, the Company
may increase subscriber rates to keep pace with the increase in inflation,
although there may be timing delays.
24
<PAGE> 27
BUSINESS
THE COMPANY
Bresnan owns, acquires, develops and operates cable television systems in
the Midwest and Southeast United States. The Company's focus is on operating
cable television systems in "classic" markets, where subscribers generally
require cable television to receive a broad array of broadcast television
signals. As of March 31, 1996, the Company's cable television systems passed
approximately 311,400 homes and served approximately 210,500 basic subscribers.
The total number of basic subscribers served by the Company includes
approximately 118,300 basic subscribers in the Michigan Region, approximately
61,000 basic subscribers in the Minnesota Region and approximately 31,200 basic
subscribers in the Southeast Region. The Company's cable television services are
marketed under the names "Bresnan Communications" and "Bresnan."
William J. Bresnan and TCI, through their respective affiliates,
effectively own approximately 20% and 78%, respectively, of the outstanding
partnership interests of the Company. Mr. Bresnan, a cable television pioneer
with nearly 40 years of industry experience, founded the Company in 1984 and, in
partnership with TCI, has developed the Company through internal growth and
acquisitions. TCI is the largest cable television operator in the United States,
with consolidated systems serving approximately 12.5 million domestic
subscribers. Management believes that its affiliation with TCI provides
substantial benefits to the Company, including (i) the ability to purchase
various programming and certain equipment at rates approximating those available
to TCI, (ii) access to technological developments and (iii) access to various
TCI alternative methods of distribution. See "Certain Relationships and Related
Transactions."
The Company has initiated the Capital Improvement Program, which continues
the planned upgrade of substantially all of its cable television plant to
high-capacity, broadband hybrid fiber optic/coaxial cable plant. Management
believes that the Capital Improvement Program will provide the Company with the
core platform to offer enhanced and new telecommunications services, including
additional channels and tiers, pay-per-view (including near video-on-demand),
high-speed data services and Internet access, digital advertisement insertion,
interactive services and telephony (including PCS). The Capital Improvement
Program is underway and is scheduled to be completed by the end of 1997.
Assuming no change in the Company's subscriber base and system composition
subsequent to March 31, 1996, following the completion of the Capital
Improvement Program, management believes that approximately 90% of the Company's
basic subscribers will be served by hybrid fiber optic/coaxial cable television
plant and approximately 79% will be served by plant with a bandwidth of 750 MHz
and will be able to receive the equivalent of 80 or more analog channels.
The Company is a part of a group of entities controlled primarily by
William J. Bresnan and TCI. This group of entities includes the BIPs, which
operate significant cable television systems in Chile and Poland. Neither the
Company nor BCC Holding holds any equity interest in either of the BIPs;
therefore, holders of the Notes cannot look to the BIPs to service the Notes.
William J. Bresnan, directly and indirectly, effectively owns a 20% interest in
each of the BIPs. TCI, directly and indirectly, effectively owns an 80% interest
in each of the BIPs. Corporations wholly owned by Mr. Bresnan act as the general
partners of the managing general partners of the BIPs.
BCI and BMSI, two affiliates of the Company wholly owned by William J.
Bresnan, perform substantially all of the management and administrative
functions of both the Company and BCC Holding and the BIPs. The Company pays BCI
and BMSI for expenses related to performing the management and administrative
functions of the Company and BCC Holding pursuant to an Amended and Restated
Management Agreement (the "Management Agreement") and an Amended and Restated
Administration Agreement (the "Administration Agreement"), each dated as of May
[ ], 1996. In 1995, the Company spent an aggregate of approximately $3.5
million for management and administrative services. The Company has budgeted
$4.5 million as its estimate of expenses for management and administrative
services to be rendered to the Company and BCC Holding in 1996. See "Risk
Factors -- Potential Conflicts of Interest" and "Certain Relationships and
Related Transactions -- Agreements with BCI and BMSI."
25
<PAGE> 28
The Company was formed in 1984 as a Michigan limited partnership. The
Company's principal executive offices are located at 709 Westchester Avenue,
White Plains, New York 10604-3023 and its telephone number is (914) 993-6600.
RELATIONSHIP WITH TCI
TCID, an indirect wholly owned subsidiary of TCI, owns approximately a
49.5% partnership interest (which is approximately equal to a 79.2% voting and
economic interest) in BCC Holding, the Company's general partner, and holds an
unexercised option to increase its partnership interest in BCC Holding to
approximately 79.2%. See "Certain Relationships and Related Transactions." The
option has a nominal exercise price, but would require various federal and local
license and franchise transfers to be effected. For tax, profit and loss
sharing, and financial accounting and consolidation purposes, BCC Holding and
TCI treat the option as if it were exercised. Neither TCID nor TCI are
guarantors of the Notes; therefore, holders of the Notes cannot look to either
of TCID or TCI to service the Notes.
Bresnan's relationship with TCI dates to the Company's inception in 1984
when TCID and William J. Bresnan first capitalized the Company. Final authority
with respect to certain management decisions and actions by or affecting the
Company is vested in an executive committee (the "Executive Committee"). The
Executive Committee is comprised of four representatives, two of whom are
designees of TCID or an affiliate thereof and two of whom are designees of an
affiliate of Mr. Bresnan. See "Management."
Pursuant to certain contractual arrangements with affiliates of TCI, the
Company has the right to purchase various programming services at a fixed rate
calculated as a percentage in excess of the rate available to TCI and the right
to receive the same discounts on purchases of certain equipment necessary to
construct and maintain cable television systems as are available to TCI. In
addition, the Company's affiliation with TCI provides access to technological
developments and access to various TCI alternative methods of distribution. The
Company's relationship with TCI affords it certain advantages in identifying
and, in certain instances, consummating, potential investment opportunities,
including system acquisitions. See "Risk Factors -- Loss of Favorable
Programming and Equipment Supply," "Risk Factors -- Potential Conflicts of
Interest" and "Certain Relationships and Related Transactions."
OPERATING STRATEGY
Management believes that the cable television industry has significant
growth potential both in providing television programming services and in
providing enhanced and new telecommunications services such as high-speed data
services and Internet access, interactive services and telephony (including
PCS). Management has followed a systematic approach to acquiring, developing and
operating cable television systems in small- and medium-sized cities and towns
and improving cash flow from operations by equipping its systems with proven
technological advances to expand the range of services that may be offered.
Management believes that its operating strategy will allow the Company to take
advantage of the industry's potential. This operating strategy includes the
following elements:
- Clustering in Targeted Markets. The Company seeks to operate cable
television systems in small- and medium-sized cities and towns that have
attractive competitive characteristics and that have residents who
management believes possess a strong sense of community. The Company's
primary focus is on operating in "classic" markets, where subscribers
generally require cable television to receive a broad array of broadcast
television signals. In addition, subscribers in small-and medium-sized
cities and towns may have fewer entertainment alternatives than urban
subscribers. Management believes that there are significant opportunities
to generate revenue by providing enhanced and new telecommunications
services in these markets due to the Company's high levels of penetration
and the limited number of competitors in these markets.
Within its targeted markets, the Company continues to seek to take
advantage of the strategic and operational benefits of having its
subscribers concentrated in regions and clusters. Management believes
that the Company can derive significant operating efficiencies and
revenue opportunities from the clustering of cable television systems.
These operating efficiencies may
26
<PAGE> 29
include centralized management, billing, marketing, customer service,
technical support and administrative functions. Management believes that
clustering will provide the Company with additional revenue
opportunities, including the ability to offer regional programming and
advertising. The Company intends to continue to acquire cable television
systems in markets that meet its target criteria and to cluster the
systems in such markets.
- Upgrading the Company's Cable Television Systems. Management believes
that adhering to high technical standards is integral to increasing
programming choices, improving customer satisfaction and developing
enhanced and new revenue sources. The Capital Improvement Program is
intended to create state-of-the-art systems that will afford the Company
opportunities to realize cash flow growth. Management believes that the
Capital Improvement Program will provide the Company with the core
platform to offer enhanced and new telecommunications services, including
additional channels and tiers, pay-per-view (including near
video-on-demand), high-speed data services and Internet access, digital
advertisement insertion, interactive services and telephony (including
PCS).
- Maintaining Strong Community Relations. Management believes that
maintaining strong community relations will continue to be important to
Bresnan's long-term success. The Company's community-oriented initiatives
include educational programs and the sponsorship of programs and events
recognizing outstanding local citizens. In addition, certain members of
the Company's management team, including William J. Bresnan, host
community events for political and business leaders as well as
representatives of the local media where they discuss the operations of
the Company and any recent developments in the telecommunications
industry which may have an impact on their communities. Management
believes that its ongoing community relations initiatives result in
consumer and governmental goodwill and name recognition, which have
increased customer loyalty and will likely facilitate future efforts to
provide new telecommunications services.
- Emphasizing Customer Satisfaction. The Company strives to provide
quality customer service and attractive programming choices at reasonable
rates. The Company has established stringent internal customer service
standards, which management believes meet and, in certain respects,
exceed those established by the NCTA. The Company has been repeatedly
recognized by the industry for its commitment to innovative customer
service programs. In March of 1996, the Company was the recipient of its
fourth Beacon Award from the CTPAA. This year's award recognized
Bresnan's "On Time Program" as the outstanding customer relations program
by an MSO in the United States. Management believes that its customer
service efforts have contributed to its subscriber growth and ongoing
patronage by existing subscribers.
- Emphasizing Sales and Marketing. The Company seeks to increase
penetration levels for its basic services, "preferred basic" services,
premium services and ancillary services through a variety of promotions
and marketing strategies. For example, the Company has recently
introduced a marketing campaign with Sprint Corporation to offer a
combination of cable television and long distance services. The Company
also intends to continue to offer periodically previews and promotional
pricing of premium services. In addition, the Company is able to market
its products and services to its customers at Company offices as a high
percentage of its customers, relative to the industry, pay their cable
television bills in person. Management believes that its experience in
sales and marketing will be valuable as the Company markets new products
and services in the future.
27
<PAGE> 30
OVERVIEW OF CABLE TELEVISION SYSTEMS
DEVELOPMENT OF THE SYSTEMS
The Company has grown both through the internal growth of its cable
television systems and through acquisitions. Since its inception, the Company
has acquired approximately 15 cable television systems. The following table
provides customer data for each of the years in the five-year period ended
December 31, 1995 and for the three-month period ended March 31, 1996 for the
Company's cable television systems and includes the customer data of cable
television systems acquired by the Company since the dates of their respective
acquisitions.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
HOMES PASSED:
Beginning of Period....... 211,305 224,078 231,710 267,096 297,763 310,093
Internal Growth........... 9,332 928 11,779 2,179 7,930 1,266
% Internal Growth(a)...... 4.4% 0.4% 5.1% 0.8% 2.7% 0.4%
Acquired.................. 3,441 6,704 23,607 28,488 4,400 --
% Acquired Growth......... 1.6% 3.0% 10.2% 10.7% 1.5% --
End of Period............. 224,078 231,710 267,096 297,763 310,093 311,359
BASIC SUBSCRIBERS:
Beginning of Period....... 143,636 148,201 157,553 174,009 202,636 209,459
Internal Growth........... 1,559 3,233 2,501 5,589 3,501 1,041
% Internal Growth(a)...... 1.1% 2.2% 1.6% 3.2% 1.7% 0.5%
Acquired.................. 3,006 6,119 13,955 23,038 3,322 --
% Acquired Growth......... 2.1% 4.1% 8.9% 13.2% 1.6% --
End of Period............. 148,201 157,553 174,009 202,636 209,459 210,500
</TABLE>
- ---------------
(a) With respect to the three months ended March 31, 1996, internal growth is
calculated from the year ended December 31, 1995.
OPERATING SYSTEMS
The following discussion provides certain subscriber, financial and
demographic information about the Company's cable television systems within the
Michigan Region, the Minnesota Region and the Southeast Region.
Michigan Region. As of March 31, 1996, the Company's cable television
systems within the Upper Peninsula of Michigan (including northeastern
Wisconsin) and central Michigan passed approximately 89,400 and 78,900 homes,
respectively, and served approximately 68,800 and 49,500 basic subscribers,
respectively.
The largest communities in which the Company operates in the Upper
Peninsula are Marquette, Escanaba and Houghton. Industry in the Upper Peninsula
includes tourism, retail sales, mining and manufacturing. Large employers in the
region include Mead Paper, Marquette General Hospital, Northern Michigan
University, Michigan Technological University and the Sault St. Marie Tribe of
the Chippewa Indians Hotel and Casino (Vegas Kewadian Casinos). Colleges and
universities within the region include Northern Michigan University, Michigan
Technological University and Lake Superior State. As of March 31, 1996, the
Company had approximately 2,085 miles of plant and 20 headend reception
facilities in the Upper Peninsula.
The largest communities in which the Company operates in central Michigan
are Bay City and Midland. Industry in central Michigan includes manufacturing,
health services and retail sales. The corporate headquarters for Dow Chemical
Company and Dow Corning are located in Midland. In addition to Dow Chemical
Company, large employers in the region include General Motors Powertrain,
Consumers Power, Pendell Printing, Northwood University and Mid-Michigan
Regional Hospital. Colleges and universities within the region include Northwood
University and Delta College. As of March 31, 1996, the Company had
approximately 1,543 miles of plant and 12 headend reception facilities in
central Michigan.
28
<PAGE> 31
The following table includes operating data for the Michigan Region as of
and for each of the years in the five-year period ended December 31, 1995 and
for the three-month period ended March 31, 1996, including the operating data of
the cable television system serving Ontonagon, Michigan, acquired by the Company
on December 31, 1991.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------------------------- MARCH 31,
MICHIGAN REGION: 1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY SUBSCRIBER DATA (end
of period):
Homes passed.................. 161,581 162,728 166,808 167,868 168,122 168,310
Basic subscribers............. 110,877 113,206 114,110 116,482 117,791 118,255
Basic penetration............. 68.6% 69.6% 68.4% 69.4% 70.1% 70.3%
Premium units................. 46,352 50,222 63,543 75,200 78,801 77,040
Pay-to-basic ratio(a)......... 41.8% 44.4% 55.7% 64.6% 66.9% 65.1%
OTHER DATA:
Monthly revenue per average
basic subscriber............ $ 23.62 $ 25.51 $ 26.82 $ 26.60 $ 27.76 $ 28.44
EBITDA per average basic
subscriber(b)............... $143.12 $159.10 $166.52 $155.62 $158.40 $ 161.41
</TABLE>
- ---------------
(a) Pay-to-basic ratio measures premium units as a percentage of basic
subscribers and, as a result of the competitive pricing of premium service
packages, does not correspond to a proportionate increase in operating
income or EBITDA.
(b) With respect to the three months ended March 31, 1996, EBITDA has been
annualized for comparative purposes.
Minnesota Region. As of March 31, 1996, the Company's cable television
systems within the Minnesota Region passed approximately 92,800 homes and served
approximately 61,000 basic subscribers. The largest communities in which the
Company operates in the Minnesota Region are Duluth and Mankato. Industry in the
Minnesota Region includes agribusiness, manufacturing, forest products, mining,
health care and related services and, in the case of Duluth, shipping. Large
employers in the Minnesota Region include Minnesota Power, University of
Minnesota-Duluth, Mankato State University, St. Mary's Medical Center, St.
Luke's Hospital and Burlington Northern. Universities within the Minnesota
Region include University of Minnesota-Duluth and Mankato State University. As
of March 31, 1996, the Company had approximately 1,132 miles of plant and seven
headend reception facilities in the Minnesota Region.
29
<PAGE> 32
The following table includes operating data for the Minnesota Region as of
and for each of the years in the five-year period ended December 31, 1995 and
for the three-month period ended March 31, 1996, including operating data of
cable television systems serving Mankato, Marshall and Montevideo, Minnesota and
Crosby, Minnesota, acquired by the Company on July 25, 1994 and August 1, 1995,
respectively.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------------- MARCH 31,
MINNESOTA REGION: 1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY SUBSCRIBER DATA
(end of period):
Homes passed............. 51,842 51,545 59,198 86,976 92,456 92,758
Basic subscribers........ 30,420 31,092 32,413 57,452 61,038 61,043
Basic penetration........ 58.7% 60.3% 54.8% 66.1% 66.0% 65.8%
Premium units............ 13,859 14,699 21,316 34,305 34,225 34,001
Pay-to-basic ratio(a).... 45.6% 47.3% 65.8% 59.7% 56.1% 55.7%
OTHER DATA:
Monthly revenue per
average basic
subscriber............. $ 24.75 $ 25.90 $ 27.33 $ 26.15 $ 28.23 $ 28.84
EBITDA per average basic
subscriber(b).......... $ 152.12 $ 161.35 $ 166.44 $ 156.55 $ 173.46 $ 171.19
</TABLE>
- ---------------
(a) Pay-to-basic ratio measures premium units as a percentage of basic
subscribers and, as a result of the competitive pricing of premium service
packages, does not correspond to a proportionate increase in operating
income or EBITDA.
(b) With respect to the three months ended March 31, 1996, EBITDA has been
annualized for comparative purposes.
Southeast Region. The Company's cable television systems within the
Southeast Region are located in Georgia and Mississippi. As of March 31, 1996,
the Company's cable television systems within the Southeast Region passed
approximately 50,300 homes and served approximately 31,200 basic subscribers. Of
the approximately 50,300 homes passed as of March 31, 1996, approximately 42,100
were located in Georgia and 8,200 were located in Mississippi. Of the
approximately 31,200 basic subscribers served as of March 31, 1996,
approximately 24,100 and 7,100 were located in Georgia and Mississippi,
respectively. The economic and industry profile of the area of Georgia in which
the Company operates is heavily influenced by the presence of the United States
Army (Ft. Stewart) and Navy (Kings Bay submarine base), which are the area's
largest employers. Large employers in the area of Georgia in which the Company
operates also include Rayonier Corporation, Georgia Pacific, Gilman Paper and
Hercules Paper. Other industry in the area includes forest products,
manufacturing and health care services. Industry in the area of Mississippi in
which the Company operates is primarily manufacturing. Large employers in the
area of Mississippi in which the Company operates include Heatcraft, Inc.,
Pennaco Hosiery, Georgia Pacific, Newsprint South, Inc. and Grenada Lake Medical
Center. As of March 31, 1996, the Company had approximately 1,151 miles of plant
and 12 headend reception facilities in the Southeast Region.
30
<PAGE> 33
The following table includes operating data for the Southeast Region as of
and for each of the years in the five-year period ended December 31, 1995 and
for the three-month period ended March 31, 1996, including operating data of
cable television systems serving Grenada, Mississippi; Hinesville, Georgia and
Bruce, Mississippi, acquired by the Company on December 3, 1992; December 1,
1993 and January 31, 1995, respectively.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------------------------- MARCH 31,
SOUTHEAST REGION: 1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
SUMMARY SUBSCRIBER DATA
(end of period):
Homes passed............. 10,655 17,437 41,090 42,919 49,515 50,291
Basic subscribers........ 6,904 13,255 27,486 28,702 30,630 31,202
Basic penetration........ 64.8% 76.0% 66.9% 66.9% 61.9% 62.0%
Premium units............ 3,434 8,092 24,591 26,674 29,273 29,571
Pay-to-basic ratio(a).... 49.7% 61.0% 89.5% 92.9% 95.6% 94.8%
OTHER DATA:
Monthly revenue per
average basic
subscriber............. $ 22.74 $ 18.60 $ 19.01 $ 30.15 $ 31.17 $ 30.96
EBITDA per average basic
subscriber(b).......... $ 79.61 $ 95.64 $ 89.42 $ 155.57 $ 140.45 $ 159.61
</TABLE>
- ---------------
(a) Pay-to-basic ratio measures premium units as a percentage of basic
subscribers and, as a result of the competitive pricing of premium service
packages, does not correspond to a proportionate increase in operating
income or EBITDA.
(b) With respect to the three months ended March 31, 1996, EBITDA has been
annualized for comparative purposes.
OTHER SERVICES
The Company has been appointed as a master agent of TCI Digital Satellite
Entertainment, Inc. d/b/a PrimeStar by TCI ("PrimeStar by TCI") to offer the
medium powered DBS services of PrimeStar Partners, L.P. ("PrimeStar") to
customers in the Company's markets in Georgia and in the majority of the
Company's markets located in the Michigan Region. In these markets, the
Company's principal objective in offering DBS services is to provide video
programming services to satisfy customer demand that cannot be met economically
by the Company's existing cable plant. In its role as master agent, the Company
is paid a percentage of revenue for a period of five years as a commission for
the sale of the service and is reimbursed for its expenses related to service
calls. In addition, the Company offers DBS services outside of the service area
of its cable television systems, but cannot offer such services in Mississippi,
certain parts of Minnesota and other areas in which other members of the
PrimeStar consortium have the right to provide such services.
THE CAPITAL IMPROVEMENT PROGRAM
TECHNICAL PROFILE
The Company aspires to high technical standards in the development of its
cable television systems. As of March 31, 1996, approximately 6% of the
Company's basic subscribers were able to receive the equivalent of 54 or more
analog channels. As of March 31, 1996, none of the Company's basic subscribers
received the equivalent of 80 or more analog channels. Assuming no change in the
Company's subscriber base and system composition subsequent to March 31, 1996,
following the completion of the Capital Improvement Program, the Company
believes that approximately 90% of its basic subscribers will be able to receive
the equivalent of 54 or more analog channels and approximately
31
<PAGE> 34
79% will be able to receive the equivalent of 80 or more analog channels. The
Capital Improvement Program is underway and is scheduled to be completed by the
end of 1997.
<TABLE>
<CAPTION>
SYSTEM ANALOG CHANNEL CAPACITY
AS A PERCENTAGE OF BASIC SUBSCRIBERS
--------------------------------------------------
BASIC 30-42 43-53 54-79 80+
REGION SUBSCRIBERS CHANNELS CHANNELS CHANNELS CHANNELS
------------------------ ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Michigan................ 118,300 4.6% 90.5% 4.9% --%
Minnesota............... 61,000 36.0 53.1 10.9 --
Southeast............... 31,200 71.3 28.7 -- --
-------
Total................... 210,500 23.6 70.5 5.9 --
=======
</TABLE>
The Company is currently able to offer premium services and a limited
number of pay-per-view events and films through trap technology and on a limited
basis through addressable technology.
Assuming no change in the Company's subscriber base and system composition
subsequent to March 31, 1996, following completion of the Capital Improvement
Program, the Company believes that its technical profile will be as follows:
<TABLE>
<CAPTION>
SYSTEM ANALOG CHANNEL CAPACITY
AS A PERCENTAGE OF BASIC SUBSCRIBERS
--------------------------------------------------
BASIC 30-42 43-53 54-79 80+
REGION SUBSCRIBERS CHANNELS CHANNELS CHANNELS CHANNELS
------------------------ ----------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Michigan................ 118,300 0.7% 7.7% 12.5% 79.1%
Minnesota............... 61,000 -- 12.3 14.4 73.3
Southeast............... 31,200 2.8 8.3 -- 88.9
-------
Total................... 210,500 0.8 9.1 11.2 78.9
=======
</TABLE>
Although no assurances can be given, following completion of the Capital
Improvement Program, the Company believes that it will be able to offer
addressable converters to all of its subscribers. Addressable converters allow
for remote authorization of premium services and pay-per-view events and films.
UPGRADE CHARACTERISTICS
The Company expects to upgrade the bandwidth in a majority of its cable
television systems to 750 MHz architecture with approximately 600 homes per node
(which can be further reduced to 150 homes). The architecture is expected to
possess the following characteristics:
- Extensive use of fiber optic technology to improve picture quality,
enhance reliability and reduce maintenance costs.
- The capacity and capability for enhanced and new telecommunications
services, including additional channels and tiers, pay-per-view
(including near video-on-demand), high-speed data services and Internet
access, digital advertisement insertion, interactive services and
telephony (including PCS), with a marginal incremental investment of
capital.
- Consolidated and upgraded headend reception facilities with backup power
and remote status monitoring.
- Addressable technology, including converters, that will broaden choices
for customers and develop new revenue streams.
- Two-way transmission capability for "impulse" pay-per-view, interactive,
data and voice services.
- The capability to carry a digital level of service while maintaining the
current analog offerings.
32
<PAGE> 35
NETWORK STANDARDS
The Capital Improvement Program continues the planned upgrade of
substantially all of the Company's cable television plant to high-capacity,
broadband hybrid fiber optic/coaxial cable ("HFC") plant. HFC is the recognized
state-of-the-art plant and is the architecture expected to be employed by the
Company for both cable television and future telecommunications services that
may be provided by the Company. HFC optimizes the use of fiber optic and coaxial
technology and plant segmentation to achieve enhanced reliability and
performance as compared to more traditional plant. In addition, HFC provides a
receptive platform for interactive services.
The primary advantages of HFC are the following:
- Reduces cascades of electronics, thereby improving signal quality and the
reliability of the network.
- Reduces node size, thus reducing the number of households affected by
service disruptions.
- Utilizes dedicated feeds to these small nodes to allow interactive
broadband and high-speed data services to be offered to individual
households.
- Provides sufficient dedicated reverse spectrum for interactive services,
thereby avoiding noise contribution problems.
As part of the Capital Improvement Program, certain of the Company's
clustered systems will be interlinked by a redundant fiber ring and served by a
single headend reception facility. In regions where this approach is employed,
many individual headend reception facilities and programming and advertising
insertion points can be replaced with a single facility. As a result, management
believes that maintenance expenses and the costs associated with future internal
growth can be significantly reduced.
POTENTIAL ENHANCED AND NEW REVENUE SOURCES
The Capital Improvement Program is expected to benefit the Company by
creating the opportunity to develop potential enhanced and new revenue sources
and increasing the reliability of its systems. The Capital Improvement Program
is expected to provide the Company with the core platform to offer additional
programming variety and new telecommunications services to subscribers as well
as provide the opportunity to garner increased revenue through existing services
which the Company, due to limited channel capacity in some of its systems, has
been unable to exploit fully. Selected opportunities for revenue growth include:
- Additional Channels and Tiers. The Company anticipates that after the
completion of the Capital Improvement Program it will have sufficient
channel capacity to offer additional channels and tiers. Additional tiers
may include regional sports packages, multiplexing of premium channels
and special interest tiers. Management believes that these additional
offerings will enhance the entertainment alternatives available to the
Company's subscribers and contribute to improvements in the Company's
cash flows from operating activities.
- Pay-Per-View. The Company currently offers pay-per-view programming on a
per-event basis. These services include feature films, special events and
sporting events. Pay-per-view buy rates have been limited due to the lack
of addressability and channel capacity in many of the Company's cable
television systems. As the Company continues to upgrade its systems and
increases addressability and as digital compression technology becomes
available, the Company intends to market a near video-on-demand service
which will offer current top video releases at 15- to 30-minute intervals
to provide a convenient viewing schedule for its subscribers.
- High-Speed Data Services and Internet Access. As a broadband network,
cable has the ability to deliver data at a rate substantially faster than
the rate currently available over telephone network connections. Upon the
commercial availability of cable modems and the completion of the Capital
33
<PAGE> 36
Improvement Program, the Company intends to provide high-speed Internet
access through services such as @Home. @Home, a joint venture between TCI
and Kleiner Perkins Caulfield & Byers, has stated its intent to provide,
in conjunction with Netscape Communications Corporation, high-speed data
services with superior graphics, original local content, audio and video
capability, and a rapid response time, to homes, businesses and schools
via an HFC connection to personal computers. Many organizations are
developing content which could take advantage of higher speed access and
provide improved functionality and graphics, as well as incorporate audio
and video content. The Company is actively exploring data transmission
opportunities with colleges and universities within its markets and
franchise areas. Other data transmission applications include local area
network interconnections for businesses, government offices and schools
with multiple locations. A potential local area network application would
be the interconnection of a hospital to its affiliated physicians and
clinics, which could allow for near-instantaneous sharing of images and
patient records.
- Digital Advertisement Insertion. The Company expects to be able to sell
more targeted advertising in the future because management believes that
advertisers will take advantage of the geographic clustering of the
Company's cable television systems, the picture quality of the
advertising and the Company's high penetration rates and favorable
demographic profiles once the Company is able to digitally insert
advertisements and target advertising to individual nodes.
- Interactive Services. Interactive shopping, additional video games
through services such as The SEGA Channel (which is currently offered in
all of the Company's systems) and classified advertising are other
services which the Company expects to be able to offer following the
completion of the Capital Improvement Program. With increased two-way
transmission capability, the Company will be able to offer interactive
shopping on shop-at-home channels, allowing the subscriber to buy on
impulse, which management believes may increase the revenue earned by the
Company through commissions on products sold through such channels.
- Telephony Services. Following completion of the Capital Improvement
Program, the Company will be positioned to provide voice services.
Potential telephony applications include PCS, residential toll bypass,
shared tenant services and local telephony services. Certain of such
applications will require a marginal incremental investment of capital by
the Company. The Company is exploring opportunities to provide PCS
utilizing its broadband network. While the marketing and technical
elements of PCS are not well defined, the Company anticipates that PCS
will provide customers with mobile voice and data communications.
BRESNAN'S COMMITMENT TO COMMUNITY RELATIONS
Management believes that maintaining strong community relations will
continue to be important to the Company's long-term success. The Company's
community-oriented initiatives include educational programs and the sponsorship
of programs and events recognizing outstanding local citizens. In addition,
certain members of the Company's management team, including William J. Bresnan,
host community events for political and business leaders as well as
representatives of the local media where they discuss the operations of the
Company and any recent developments in the telecommunications industry which may
have an impact on their communities. Management believes that its ongoing
community relations initiatives result in consumer and governmental goodwill and
name recognition, which have increased customer loyalty and will likely
facilitate any future efforts to provide new telecommunications services.
34
<PAGE> 37
The Company encourages local management to take a leadership role in
community and civic activities. The success of the Company's local initiatives
was cited in 1992 when the Company received the industry's CTPAA President's
Award for excellence in public affairs. Other examples of the Company's
community relations activities are as follows:
- Local Origination Programs. In Midland and Bay City, Michigan, the
Company produces local origination programs, including Government Update
and Hometown News. Government Update is an interview program with
political leaders, including local, state and national government
officials, which reinforces the Company's relationship with these
important members of the community. Hometown News, which airs in
conjunction with CNN Headline News, features local news on people and
events. Hometown News has won several awards for programming excellence
from the CTPAA and the Michigan Cable Television Association (the
"MCTA"). Orchids and Onions, also honored by the MCTA, is a series of
editorial opinion spots produced by the Company running in many of the
Company's cable television systems in the Michigan Region. The series
highlights local people and organizations and serves as a vehicle for the
Company to comment on programs and issues that concern the public
interest. Certain of the Company's cable television systems televise
local sports programs, telethons for the arts, cultural and community
activities and governmental public meetings, including City Council
sessions and voter forums and debates.
- Community Relations Programs. Six years ago, the Company created an
annual award program in the Upper Peninsula of Michigan to enhance its
relationship with the senior citizen community, a significant demographic
segment in that market. The Super Senior Award honors senior citizens who
have made significant contributions to their communities. Honorees are
selected from a pool of senior citizens nominated by local civic
organizations, churches, senior centers and friends. The program received
statewide attention when Hillary Rodham Clinton and Congressman Bart
Stupak presented the Super Senior Awards in June of 1995.
- Educational and Family Viewing Programs. The Company's Education Program
provides certain public and private schools in its franchised areas with
free installation and monthly cable service and 500 hours per month of
commercial-free educational programming and data services (known as
Ingenius-Xchange). The Company recently began a series of community
workshops for parents and family members on media literacy skills. The
Critical Viewing, or "Take Charge of Your TV," workshops are designed to
teach parents and teachers how to critically select programming
appropriate for their children to watch. The Company has recently
undertaken a partnership with The Discovery Networks to co-sponsor a
series of Critical Viewing workshops in all of the communities served by
the Company.
Bresnan has made a commitment to the development of fiber optic distance
learning, a method for the delivery of educational and training programs
to people located at sites remote from the point of instruction ("Distance
Learning"). The objective of this concept is to bring educational equality
to all students served by the Company's Distance Learning networks,
regardless of how isolated the school or how small the class. Distance
Learning provides expanded access to teachers, courses and educational
resources. The Company's Distance Learning networks, featuring full-motion
video and complete interactive capabilities, currently connect students to
approximately 30 educational sites in four major school districts in
Michigan's Upper Peninsula. Each school is connected by Bresnan's fiber
optic cable and together the four networks contain approximately 260 miles
of fiber. The availability of Distance Learning technology enables high
schools with as few as 100 students to offer advanced courses, such as
Finnish, Japanese, Shakespeare, Advanced Placement Math, Economics and
Accounting.
CUSTOMER SATISFACTION
Bresnan has a long-standing commitment to providing quality customer
service. The Company has established stringent internal customer standards,
which management believes meet and, in certain respects, exceed those
established by the NCTA. The Company offers 24-hour service and 30-day trial
35
<PAGE> 38
periods for new customers, with a money-back guarantee for customers who are not
completely satisfied with their cable television service. The Company has been
repeatedly recognized by the industry for its commitment to innovative customer
service programs. In March of 1996, the Company was the recipient of its fourth
Beacon Award from the CTPAA. This year's award recognized Bresnan's "On Time
Program" as the outstanding customer relations program by an MSO in the United
States.
In addition to these initiatives, management seeks to serve customers by
offering attractive programming choices at reasonable rates and by offering
enhanced and new services. Management believes that its customer service efforts
have contributed to subscriber growth and ongoing patronage by existing
customers.
SALES AND MARKETING
The Company seeks to increase penetration levels for its basic services,
"preferred basic" services, premium services and ancillary services through a
variety of promotions and marketing strategies. The Company periodically offers
previews and promotional pricing of premium services. Bresnan also seeks to
maximize its revenue per subscriber through the use of "tiered" packaging
strategies for marketing premium services and developing and promoting niche
programming services. The Company telemarkets these tiers and services to its
existing subscriber base on a regular basis.
The Company also promotes its services through a number of innovative
programs. Bresnan has recently introduced a marketing campaign with Sprint
Corporation to offer a combination of cable television and long distance
services. The Company has also used in-store promotions at local retailers to
sell The SEGA Channel service. The Company regularly uses advertisements on
broadcast channels, with advertising time acquired on a barter basis, to promote
its services to the entire community, including to residents who are not cable
television subscribers. The Company also promotes its offerings in a quarterly
newsletter sent to its subscribers.
Due to the nature of the communities it serves, Bresnan is able to market
its services in ways not typically pursued by urban cable operators. Bresnan is
able to market its products and services to its customers at Company offices as
a high percentage of the Company's customers, relative to the industry, pay
their cable bills in person. Examples of the Company's "in-store marketing"
include previews of premium services offered by the Company, posters, brochures
and display stands advertising the Company's channels and tiers, display stands
that allow customers to try the DMX product and promotional items, such as
buttons worn by the Company's customer sales and service representatives, that
promote Bresnan's latest marketing initiatives. Bresnan's customer sales and
service representatives are encouraged to promote actively all of the Company's
product offerings. Bresnan also seeks to generate new subscribers through direct
marketing campaigns, with its direct-sales force visiting households that do not
subscribe to cable television to market the Company's services. Management
believes that its experience in sales and marketing will be valuable as the
Company markets new products and services in the future.
PROGRAMMING AND EQUIPMENT SUPPLY
Many cable television companies enter into contracts to obtain basic and
premium programming from program suppliers whose compensation typically is based
on a fixed fee per subscriber. Some program suppliers provide volume discount
pricing structures or offer marketing support to operators of cable television
systems.
Pursuant to an agreement with SSI, a wholly owned subsidiary of TCI, the
Company is able to purchase various programming services at a fixed rate
calculated as a percentage in excess of the rate available to TCI, although the
Company retains the option to purchase programming directly from other parties
in certain limited circumstances. Management believes that these rates are
significantly lower than the rates the Company could obtain independently. There
can be no assurance that the Company will be able to purchase programming
services at these rates in the future. See "Risk Factors -- Loss of
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Favorable Programming and Equipment Supply." Programming is the Company's
largest single expense item, accounting for approximately 24.9% of total
operating costs and expenses during 1995.
Pursuant to an agreement with CTCI, an affiliate of TCI that negotiates
equipment purchase prices on behalf of TCI and its affiliates, CTCI has agreed
to make its discounts on purchases of certain equipment necessary to construct
and maintain cable television systems available to the Company. Management
believes that the rates at which the Company purchases equipment through CTCI
are significantly lower than the rates it could obtain independently. There can
be no assurance that the Company will continue to receive these equipment
discounts in the future. See "Risk Factors -- Loss of Favorable Programming and
Equipment Supply."
RATES
The Company's cable television systems typically offer four levels of
programming services: a basic service, a "preferred basic" service, premium
services and pay-per-view. As of February 1996, the basic service package
consisted of local off-air broadcast channels, regional superstations such as
WTBS and public access channels. The number of satellite services offered with
the basic service package varies among the Company's cable television systems.
As of February 1996, the monthly rate charged for the basic service package
averaged $9.80. The "preferred basic" service package consists of satellite-
delivered services such as ESPN, MTV, CNN, The Discovery Channel and USA
Network, in addition to regional sports services like PASS and Mid-West Sports.
As of February 1996, the monthly rate charged for the "preferred basic" service
package averaged $12.93 in addition to the monthly rate charged for the basic
service package. Effective April 1, 1996, the Company raised its rates on its
basic and "preferred basic" service packages which resulted in an average
increase of $1.82 per basic subscriber per month, subject to FCC approval. Rates
for the "preferred basic" service packages and certain of the basic service
packages are currently subject to government regulation. See "Legislation and
Regulation."
The Company's cable television systems also offer premium services, which
include HBO, Cinemax, Showtime, The Disney Channel, The Movie Channel and The
SEGA Channel. The Company also offers residential DMX as a premium service.
While all premium services are not available in all markets, some combination of
these services is available in each of the Company's cable television systems.
As of February 1996, the individual retail rates for these services ranged from
$7.00 to $12.95 per month. Premium service packages, such as Showtime/The Movie
Channel/Encore for $11.95 per month and Showtime/The Movie Channel/Encore plus
any additional premium service for $18.95 per month, are available in certain of
the Company's markets. Rates for premium services are currently exempt from
governmental regulation. See "Legislation and Regulation."
The Company's cable television systems typically offer pay-per-view special
events programming and certain of the Company's cable television systems offer
two to three channels of pay-per-view feature films. Prices for films range from
$2.95 to $5.95. Special event prices vary considerably based on market demand
and programming charges.
COMPETITION
Overbuilds. Operators of cable television systems, including the Company,
face competition on a number of fronts, including from other such operators.
Under the 1992 Cable Act, franchising authorities are prohibited from granting
exclusive cable television franchises and from unreasonably refusing to award
additional competitive franchises. As a result, the Company's cable television
systems are operated under non-exclusive franchises granted by local
authorities. Such franchises are subject to renewal and renegotiation from time
to time. Operators of cable television systems, including the Company, may
therefore experience competition from other operators that overbuild. Municipal
authorities, which are permitted under the 1992 Cable Act to operate cable
television systems in their communities without franchises, may also seek to
compete with the Company by overbuilding. A portion of the Company's Marquette
system, which serves Negaunee, Michigan, is overbuilt by the City of
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Negaunee, which operates a cable system it had built prior to the Company's
acquisition in 1984 of its system in that community. The Company's Negaunee
system passes 1,619 homes and has 351 subscribers. The Company estimates that
the City of Negaunee's system has approximately 1,000 subscribers. Management
cannot predict the extent to which additional competition from overbuilds will
materialize or, if such competition materializes, the extent of its effect on
the Company.
Constructing a competing cable television system is a capital intensive
process for which the Company believes there can be no assurance of realizing a
return on investment within an acceptable time period. The Company believes
that, to be successful, a competitor's overbuild would be required to serve a
distinct and/or significant portion of the cable television market in the
overbuild area on a more cost-efficient basis than the Company, as the existing
cable operator, and that any such overbuild operator would require facilities
then in place capable of transmitting cable television programming, or have
significant access to capital.
Broadcast Television. In most of the areas served by the Company's cable
television systems, a variety of terrestrial broadcast television programming
can be received off-air. Typically, there are three to ten VHF/UHF broadcast
channels that provide local, network and syndicated programming free of charge.
However, the quality of the reception is often poor and the selection of
programming generally quite limited. As such, management does not believe that
off-air broadcast television has a material impact on the operation of the
Company's cable television systems. In addition, certain of the Company's cable
television systems in Marshall, Montevideo, and Duluth, Minnesota face
competition from UHF low power television service operators that provide
services for approximately $30 per month.
Alternative Video Distribution Systems. Cable television operators,
including the Company, also face competition from companies that provide video
programming using alternative technologies for receiving and distributing
television signals. Such current and potential competitors include operators of
DBS, MMDS, and MATV and SMATV systems.
DBS systems, which distribute programming to home satellite dishes, and
MMDS systems, which distribute programming via microwave, currently constitute
the most prevalent form of competition for traditional cable television systems.
Establishing a DBS or MMDS network is less capital intensive than building a
traditional cable television system, primarily due to the lack of reliance on
cable television plant. DBS systems typically have an advantage in areas of
lower population density. Providers of programming via these non-cable
technologies have the potential to compete directly with cable television
systems in urban areas as well, and in some areas of the country, DBS systems
are in direct competition with cable television systems.
DBS. Currently, there are three DBS providers that have launched services
that compete, in certain instances, with the cable television services provided
by the Company in its service areas: PrimeStar (except as described below),
DirecTV Inc. and United States Satellite Broadcasting Co., Inc. ("USSB").
AlphaStar, EchoStar and MCI/News Corp. have announced, and others may announce,
intentions to enter into the DBS market and may offer DBS services within the
Company's service areas. Competitors providing DBS services carry approximately
the same number of channels that the Company does on its "preferred basic" tier,
which is the comparable service offering, excluding local off-air signals,
except that USSB carries only a basic tier and premium services. Programming
channel packages offered by DBS providers are generally more expensive than the
Company's "preferred basic" tier. The Company believes that its "preferred
basic" services will continue to have a competitive advantage over DBS because:
(i) the up-front equipment and installation costs to the subscriber associated
with DBS technology have traditionally been significantly higher than the
installation of cable, ranging from approximately $300 to $900 (depending upon
the provider and excluding PrimeStar, which leases equipment to its customers)
per installation as opposed to an average of approximately $27 for the Company's
cable installation; (ii) within the Company's service areas, DBS providers
cannot broadcast any local off-air signals; and (iii) without a significant
investment in additional equipment, subscribers for DBS services may receive
only one channel on all television sets in the same house at any one time, while
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cable service subscribers' access to programming on more than one television set
at any one time is not so limited.
The Company has been appointed as a master agent of PrimeStar by TCI to
offer PrimeStar's medium powered DBS services to customers in the Company's
markets in Georgia and in the majority of the Company's markets located in the
Michigan Region. In these markets, the Company's principal objective in offering
DBS services is to provide video programming services to satisfy customer demand
that cannot be met economically by the Company's existing cable plant. In its
role as master agent, the Company is paid a percentage of revenue for a period
of five years as a commission for the sale of the service and is reimbursed for
its expenses related to service calls. In addition, the Company offers DBS
services outside of the service area of its cable television systems, but cannot
offer such services in Mississippi, certain parts of Minnesota and other areas
in which other members of the PrimeStar consortium have the right to provide
such services.
MMDS. The Company also faces competition from Microcom Corporation
("Microcom"), a corporation that provides MMDS services. Microcom's maximum
potential service area covers a portion of the Company's cable television system
in Bay City, Michigan. Management believes, however, that a number of households
in Microcom's service area cannot be reached because of terrain and elevation
obstructions. Microcom currently offers one package of service consisting of
approximately 33 channels with no off-air broadcast channels.
MMDS generally is less expensive for subscribers than cable television due
in large part to the fewer number of channels it offers. Recent amendments to
FCC regulations enable MMDS systems to compete more effectively with cable
television systems by making available additional channels to the MMDS industry
and by refining the procedures through which MMDS licenses are granted. In
addition, the 1992 Cable Act generally prohibited an operator of a cable
television system from holding an FCC MMDS license in its franchised cable
service area. The Telecommunications Act allows such common ownership where the
cable operator is subject to "effective competition."
At this time, the Company does not view MMDS as a significant competitive
service, although it expects that this could change if advances in digital
wireless technology significantly expand MMDS channel capacity and quality of
service. Although the channel capacity of MMDS systems is limited, it is
expected that developments in compression technology will enable MMDS operators
to provide a sufficient number of channels that, while fewer than the number of
channels that are expected to be provided by cable television systems using HFC
technology, may nevertheless be attractive to subscribers. However, a
digitally-compressed MMDS service will require hardware similar to that
currently used by DBS providers, necessitating a significant up-front
expenditure on the part of the subscriber. MMDS services are subject to other
limitations similar to those affecting DBS services as a result of which cable
television systems currently enjoy certain competitive advantages over non-cable
providers.
To date, the Company believes that it has not lost a significant number of
subscribers, nor a significant amount of revenue, to DBS or MMDS operators
competing with the Company's systems. There can be no assurance, however, that
competition from these technologies will not have a negative impact on the
Company's business in the future. See "Risk Factors -- Competition."
MATV and SMATV. MATV and SMATV systems are essentially small, closed cable
television systems which operate within hotels, apartment complexes, 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.
By reducing the regulations affecting the cable television industry, the
Telecommunications Act may reduce some of the advantages that have previously
been enjoyed by MATV and SMATV providers.
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However, since MATV and SMATV systems generally do not fall within the 1992
Cable Act's definition of a "cable system," such services may be exempt from
other requirements of the 1992 Cable Act that were not amended by the
Telecommunications Act and which therefore still impact cable television
operators. Furthermore, it is possible that as a result of the expansion under
the Telecommunications Act of the scope of entities which are exempt from
regulation as "cable systems," MATV and SMATV systems currently regulated as
"cable systems" may become exempt from regulation under the Communications Act
(including regulation under the 1984 and 1992 Cable Acts). Exemption from
regulation may provide a competitive advantage to certain of the Company's
current and potential competitors.
Telephone Companies. A number of RBOCs and other telephone companies in
the United States are in the process of entering the cable television business.
On a limited basis, certain RBOCs have already purchased or built, and are
operating, cable television systems. The RBOCs have significant access to
capital and several have expressed their intention to enter the video-to-home
business as an adjunct to their existing voice and data transmission businesses.
In addition, RBOCs and other telephone companies are exploring ways to deliver
video programming over their existing plant. See "Risk Factors -- Competition."
The Telecommunications Act allows LECs to provide a wide variety of video
services competitive with services provided by cable television systems and, in
contrast with previously existing restrictions, to provide video programming
directly to customers in their local telephone service areas, with some
regulatory safeguards. See "Legislation and Regulation." Moreover, some video
programming services which LECs are authorized to provide, such as "open video
systems," do not require local franchises. The Telecommunications Act permits
telephone companies to provide competitive video programming through several
means. See "Legislation and Regulation."
Most of the Company's cable television assets are located in the operating
areas of three of the RBOCs. It is not clear at this time whether any of such
RBOCs intend to compete with the Company directly or by constructing hardwired
broadband systems within the Company's area of operation. The Company is unable
to predict whether and to what extent any of such RBOCs, or any other telephone
company, will seek to compete directly with the Company, or the effect that any
such competition will have on the Company's business.
Public Utility Holding Companies. 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 "Legislation and Regulation."
Other Competition. In addition to the competition described above, cable
television operators, including the Company, face competition from other
communications and entertainment media, including conventional off-air radio
broadcasting services, newspapers, movie theaters, live sports events and home
video products. Other new technologies may soon compete with the
non-entertainment services that cable television systems now or will soon be
able to offer, as well as with cable television services. Advances in
communications technology as well as changes in the marketplace and the
regulatory and legislative environment are constantly occurring. The Company
cannot predict the effect that ongoing or future developments might have on the
cable television industry generally or on the Company specifically.
FRANCHISES
As of March 31, 1996, the Company held 217 cable television franchises.
These franchises often provide for the payment of fees to the issuing authority,
which is usually a local government. The Cable Communications Policy Act of 1984
(the "1984 Cable Act") prohibits franchising authorities from imposing annual
franchise fees in excess of 5% of the gross revenues attributable to subscribers
located in the franchise area and also permits the operator of a cable
television system to seek renegotiation and modification of franchise
requirements if warranted by changed circumstances. For the three years ended
December 31, 1995, franchise fee payments made by the Company have averaged
approximately 2.8% of gross cable television revenues.
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The 1984 Cable Act provides for an orderly franchise renewal process, and
it establishes comprehensive renewal procedures which require that an incumbent
franchisee's renewal application be assessed on its own merit and not as part of
a comparative process with competing applications. A franchising authority may
not unreasonably withhold the renewal of a franchise. If a franchise renewal is
denied and the system is acquired by the franchising authority or a third party,
then such franchising authority or other purchaser must pay the operator the
"fair market value" for the system covered by the franchise. See "Legislation
and Regulation."
The Company has never had a franchise revoked and management believes that
its franchise relationships are satisfactory.
PROPERTIES
The Company's principal physical assets consist of cable television plant
and equipment, including signal receiving, encoding and decoding devices,
headend reception facilities, distribution systems and customer drop equipment
for each of its cable television systems. The Company's cable television plant
and related equipment are generally attached to utility poles under pole rental
agreements with local public utilities and telephone companies, and in certain
locations are buried in underground ducts or trenches. The physical components
of the Company's system require maintenance and periodic upgrading to keep pace
with technological advances.
The Company owns or leases real property for signal reception sites and
business offices in many of the communities served by its systems and for its
principal executive offices. The Company owns most of its service vehicles.
Management believes that its properties are in good operating condition and
are suitable and adequate for the Company's business operations.
LEGAL PROCEEDINGS
The Company is involved in various legal proceedings, all of which have
arisen in the ordinary course of business. Management does not believe that any
of such proceedings will have a material adverse effect on the financial
condition or results of operations of the Company. See "Legislation and
Regulation -- Federal Regulation -- Other Matters."
EMPLOYEES
As of May 1, 1996, the Company had 438 employees (including employees
compensated by BCI and BMSI) at 22 locations, 396 of which were full-time. Of
the 438 employees, 40 were covered by collective bargaining agreements at three
locations. The collective bargaining agreements expire on September 15, 1996,
February 28, 1997 and July 31, 1997. Additionally, the Company is in the process
of negotiating a collective bargaining agreement at three additional locations
which will cover 47 employees. The Company considers its relationship with its
employees to be satisfactory.
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LEGISLATION AND REGULATION
The cable television industry is subject to extensive regulation under
federal law by Congress and the FCC, and is additionally regulated by some state
governments and substantially all local governments. Various legislative and
regulatory proposals under consideration from time to time by Congress and
various federal agencies may in the future materially affect regulation of the
cable television industry.
The four most significant pieces of federal legislation that affect the
cable television industry are the Communications Act, the 1984 Cable Act, the
1992 Cable Act and the Telecommunications Act. The following is a summary of
these laws and other significant federal laws and regulations which affect the
growth and operation of the cable television industry, as well as a description
of certain state and local laws.
FEDERAL STATUTORY LAW
The 1984 Cable Act became effective on December 29, 1984. This federal
statute, which amended the Communications Act, created uniform national
standards and guidelines for the regulation of cable television systems. The
1984 Cable Act was amended in many respects by the 1992 Cable Act, which was
enacted by Congress on October 5, 1992. The 1992 Cable Act significantly changed
the regulatory environment in which participants in the cable industry operate.
Principal responsibility for implementing the policies of the 1984 Cable Act and
the 1992 Cable Act is allocated between the FCC and state or local franchising
authorities. The 1992 Cable Act and the FCC's implementing regulations allowed
for a greater degree of regulation of the cable television industry than had
previously been in effect with respect to, among other things: (i) cable
television system rates for both basic and certain non-basic services; (ii)
program access and exclusivity arrangements; (iii) access to cable channels by
unaffiliated programming services; (iv) leased access terms and conditions; (v)
horizontal and vertical ownership of cable television systems; (vi) customer
service requirements; (vii) franchise renewals; (viii) television broadcast
signal carriage and retransmission consent; (ix) technical standards; (x)
customer privacy; (xi) consumer protection matters; (xii) cable equipment
compatibility; (xiii) obscene or indecent programming; and (xiv) requirements
that subscribers subscribe to tiers of service other than the basic service tier
as a condition of purchasing premium services.
Additionally, the 1992 Cable Act and the FCC's implementing regulations
encouraged competition with existing cable television systems by allowing
municipalities to own and operate their own cable television systems without
having to obtain a franchise, preventing franchising authorities from granting
exclusive franchises or unreasonably refusing to award additional franchises
covering an existing cable television system's service area and prohibiting,
with certain exceptions, the common ownership of cable television systems and
MMDS or SMATV systems located in the same service areas. The Telecommunications
Act modified the cross-ownership restrictions. See "-- Recent Telecommunications
Legislation -- Cross Ownership; Reduced Regulations." The 1992 Cable Act and the
FCC's implementing regulations also precluded operators of cable television
systems affiliated with video programmers from favoring such programmers in
determining carriage on their cable systems or from unreasonably restricting the
sale of their programming to other multichannel video distributors.
In a significant recent development, the Telecommunications Act of 1996
became law on February 8, 1996. The Telecommunications Act materially alters
federal, state and local laws pertaining to cable television, telecommunications
and other services. The new legislation generally deregulates rates for CPS
packages within three years, and in less than three years with respect to
certain small cable operators and cable operators that face video competition
from LECs. The Company's "preferred basic" services are classified as CPS
packages. The Telecommunications Act encourages additional competition in the
video programming industry by, among other things, allowing LECs, including the
RBOCs and their subsidiaries, to provide video programming in their own
telephone service areas, in competition with operators of cable television
systems.
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FEDERAL REGULATION
The FCC, the principal federal regulatory agency with jurisdiction over the
cable television industry, has promulgated regulations covering a number of
matters relevant to the cable industry. The FCC has the authority to enforce
these regulations through the imposition of substantial fines, the issuance of
cease and desist orders and/or the imposition of other administrative sanctions,
such as the revocation of FCC licenses needed to operate certain transmission
facilities frequently used in connection with cable operations. A brief summary
of the most significant of these federal regulations and, where applicable, the
effect of the Telecommunications Act on such regulations follows.
RATE REGULATION
The 1984 Cable Act codified existing FCC preemption of rate regulation for
premium channels and optional nonbasic service packages. The 1984 Cable Act also
deregulated basic service rates for cable television systems determined by the
FCC to be subject to "effective competition." The 1992 Cable Act replaced the
FCC's old standard for determining "effective competition," under which most
cable television systems were exempt from local rate regulation, with a
statutory provision that subjected nearly all cable television systems to local
regulation of basic service rates. The Telecommunications Act expands the
definition of "effective competition" to include any franchise area in which an
LEC (or an affiliate thereof) provides video programming services to subscribers
by any means, other than through DBS services. In order to qualify as "effective
competition," such LEC must provide programming services "comparable" to
services provided by operators of cable television systems in the franchise
area.
Additionally, the 1992 Cable Act: (i) authorized the FCC to adopt a formula
to be applied by franchising authorities to ensure that basic service rates are
reasonable; (ii) allowed the FCC to review rates for CPS packages (other than
per-channel or per-program services) in response to complaints filed by
franchising authorities and/or cable customers; (iii) prohibited cable
television systems from requiring subscribers to purchase service tiers above
the basic service tier in order to purchase premium services where the relevant
system is technically capable of providing such services; (iv) required the FCC
to adopt regulations to establish, on the basis of actual costs, prices for the
installation of cable service, remote controls, converter boxes and additional
outlets; and (v) allowed the FCC to impose restrictions on the retiering and
rearrangement of cable services under certain limited circumstances.
Notwithstanding the enactment of the Telecommunications Act, certain rate
regulation provisions under the 1992 Cable Act remain in effect for operators of
cable television systems subject to rate regulation, such that basic service
rates remain subject to regulation by local franchising authorities, except, in
certain instances, with respect to certain small cable operators. The
Telecommunications Act immediately eliminates regulation of rates for CPS
packages for a defined class of "small cable operators." Rates for the basic
service tiers of small cable operators are deregulated if their systems offered
only a single tier of services as of December 31, 1994. To qualify as a "small
cable operator," the operator (including affiliates) must serve in the aggregate
fewer than one percent of all subscribers located in the United States and have
affiliate gross revenues not exceeding $250.0 million. The exception applies in
any franchise area in which the operator serves 50,000 or fewer subscribers. The
Company does not believe that it would qualify as a "small cable operator" under
the Telecommunications Act due to the fact that it would likely be deemed to
have "affiliate gross revenues" exceeding $250.0 million as a result of its
affiliation with TCI. Therefore, under the Telecommunications Act, the Company's
systems continue to be subject to basic service rate regulation in jurisdictions
where the local franchising authorities have been certified to regulate rates.
The Company's systems are also subject to regulation of rates for CPS packages
until the statutory repeal of such regulation on March 31, 1999, as described
below.
The Telecommunications Act eliminates regulation of rates for CPS packages
for all cable operators as of March 31, 1999. In the interim, regulation of
rates for CPS packages can only be triggered if a franchising authority
complaint based on more than one subscriber complaint is made with the FCC
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within 90 days after a rate increase. These Telecommunications Act provisions
should materially alter the applicability of FCC rate regulations adopted under
the 1992 Cable Act.
The Telecommunications Act relaxes the uniform rate requirements of the
1992 Cable Act, which required an operator of cable television systems to have a
uniform rate structure for the provision of cable services throughout the
geographic area in which the operator provides cable service. Specifically, the
new legislation clarifies that the uniform rate provision does not apply where
an operator of a cable television system faces "effective competition." In
addition, bulk discounts to multiple dwelling units are exempted from the
uniform rate requirements. However, complaints may be made to the FCC against
operators of cable television systems not subject to effective competition for
"predatory" pricing (including with respect to bulk discounts to multiple
dwelling units). The Telecommunications Act also permits operators of cable
television systems to aggregate, on a franchise, system, regional or company
level, its equipment costs in broad categories. The Telecommunications Act is
also expected to 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 service. The
FCC is engaged in a rulemaking proceeding to implement the cost-aggregation
provisions.
The FCC has adopted rules designed to implement the 1992 Cable Act's rate
regulation provisions. The FCC's revised regulations contain standards for the
regulation of basic service rates and rates for CPS packages (other than
per-channel or per-program services). The revised rate regulations adopt a
benchmark price cap system for measuring whether existing basic service rates
and rates for CPS packages are reasonable, and provide a formula for evaluating
future rate increases. Alternatively, operators of cable television systems have
the opportunity to make cost-of-service showings which, in some cases, can
justify rates above the applicable benchmarks. The rules also require that
charges for cable-related equipment (e.g., converter boxes and remote control
devices) and installation services be unbundled from the provision of cable
service, and that charges for such equipment be based instead upon actual cost
thereof plus a reasonable profit. The FCC's regulations require that charges for
equipment and installation services be recalculated annually and adjusted
accordingly.
Under the 1992 Cable Act and the FCC's implementing regulations, local
franchising authorities and/or the FCC were empowered, where appropriate, to
order a reduction of existing rates which exceed the maximum permitted level for
either basic services and/or CPS packages and associated equipment. In addition,
refunds could be required. In general, the reduction of existing basic service
rates and rates for CPS packages under the original rate regulations would be an
amount equal to the greater of (i) the applicable benchmark level or (ii) the
rates in force as of September 30, 1992, minus 10%; in both cases an adjustment
forward was allowed for inflation. The March 1994 regulations required an
aggregate reduction of as much as 17%, adjusted forward for inflation, from the
rates in force as of September 30, 1992. The regulations also provided that
future rate increases may not exceed an inflation-indexed amount, plus increases
in certain costs beyond the cable operator's control, such as taxes, franchise
fees and increased programming costs. These regulations went into effect in July
1994. Cost-based adjustments to these capped rates may also be made in the event
an operator of cable television systems adds or deletes channels. The November
10, 1994 amendments to FCC regulations incorporated an alternative method for
adjusting the rates charged for regulated CPS packages when new services are
added. This method allowed operators of cable television systems to increase the
monthly rate to each subscriber by as much as $1.50 over a two-year period to
reflect the addition of up to six new channels of service on regulated CPS
packages (an additional increase of $0.25 was permitted in the third year if a
seventh channel was added). In addition, new product tiers consisting of
services new to the cable television system could be created free of rate
regulation as long as certain conditions were met, including a prohibition
against moving services from existing tiers to the new tier.
Some FCC actions initiated after the 1992 Cable Act and prior to the
Telecommunications Act may have had a beneficial effect on the revenue and cash
flow of operators of cable television systems. First, the FCC adopted a
procedure under which operators of cable television systems can file abbreviated
cost-of-service showings for system rebuilds and upgrades, the result of which
can be a permitted increase in regulated rates to allow recovery of those costs.
Second, the FCC adopted a new procedure
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for the annual pass-through of increases in certain external costs, such as
programming costs, under which operators of cable television systems can
increase rates based on actual and anticipated cost increases for the coming
year. This procedure is an alternative to the previous methodology, which
permitted only those cost increases already incurred to be passed through on a
quarterly basis.
In November 1995, the FCC proposed to provide operators of cable television
systems 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, operators of cable televisions systems subject to rate
regulation are required to establish rates on a franchise-specific basis. The
proposed rules could lower such operators' marketing costs and also allow
operators to respond better to competition from alternative providers. The
Company is unable to predict if these proposed rules will ultimately be
promulgated by the FCC and, if they are promulgated, their effect on the
Company.
"ANTI-BUY THROUGH" PROVISIONS
The 1992 Cable Act and corresponding FCC regulations allow customers to
purchase video programming which is offered on a per channel or per program
basis without having to subscribe to any service other than the basic service,
subject to available technology. The available technology exception sunsets on
October 5, 2002. Most of the Company's cable television systems do not have the
technological capability to offer programming in the manner required by the 1992
Cable Act and currently are exempt from complying with the requirement.
Management cannot predict the extent to which this provision of the 1992 Cable
Act and the corresponding FCC rules may cause customers to discontinue their
subscriptions for optional CPS packages in favor of the less expensive basic
cable service.
CARRIAGE OF BROADCAST TELEVISION SIGNALS
The 1992 Cable Act allows commercial television broadcast stations which
are "local" to a cable television system to elect every three years either (i)
to require the cable television system to carry the station, subject to certain
exceptions (known as the "must carry" requirement), or (ii) to deny the cable
television system the right to carry the station without the station's express
consent (known as "retransmission consent"). Local noncommercial television
stations are also given mandatory carriage rights, subject to certain
exceptions, but are not given the option to negotiate retransmission consent for
the carriage of their signal. In addition, cable television systems must obtain
retransmission consent for the carriage of all "distant" commercial broadcast
stations, except for certain "superstations," i.e., commercial
satellite-delivered independent stations such as WTBS, WGN, and WWOR-TV. The
legality of these "must-carry" provisions is currently under judicial review.
Invalidation of the "must-carry" provisions would enable operators of cable
television systems, subject to contractual commitments, to replace the carriage
of any or all local broadcast stations with other programming. However, the
outcome of the pending judicial review cannot be predicted.
DELETION OF CERTAIN PROGRAMMING
Cable television systems that have 1,000 or more customers must, upon the
appropriate request of a local television station, delete the simultaneous or
nonsimultaneous network programming of a distant station when such programming
has also been contracted for by the local station on an exclusive basis. FCC
regulations also enable television stations that have obtained exclusive
distribution rights for syndicated programming in their market to require a
cable television system to delete or "black out" such programming from other
television stations which are carried by the cable television system.
RENEWAL OF FRANCHISES
The 1984 Cable Act established renewal procedures and criteria designed to
protect incumbent franchisees against arbitrary denials of renewal. While these
formal procedures are not mandatory unless timely invoked by either the operator
of the cable television system or the franchising authority, they can provide
substantial protection to incumbent franchisees. Notwithstanding the renewal
process, franchis-
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ing authorities and operators of cable television systems remain free to
negotiate a renewal outside the formal process. Nevertheless, renewal is by no
means assured, as the franchisee must meet certain statutory standards if the
formal renewal procedures are invoked. Even if a franchise is renewed, a
franchising authority may impose new and more onerous requirements, such as
requiring upgrades to facilities and equipment, although the municipality must
take into account the cost of meeting such requirements.
The 1992 Cable Act made several changes to the process under which an
operator of cable television systems may seek to enforce its renewal rights.
These changes could make it easier in some cases for a franchising authority to
deny renewal. Under the 1992 Cable Act, franchising authorities may consider the
"level" of programming service provided by an operator of cable television
systems in deciding whether to renew. For alleged franchise violations occurring
after December 29, 1984, franchising authorities are no longer precluded from
denying renewal based on failure to substantially comply with the material terms
of the franchise where the franchising authority has "effectively acquiesced" to
such past violations. Rather, the franchising authority is estopped if, after
giving the operator notice and opportunity to cure, it fails to respond to a
written notice from the operator of its failure or inability to cure. Courts may
not reverse a denial of renewal based on procedural violations found to be
"harmless error."
CHANNEL SET-ASIDES
The 1984 Cable Act permits local franchising authorities to require
operators of cable television systems to set aside certain channels for public,
educational and governmental access programming. The 1984 Cable Act further
requires cable television systems with thirty-six or more activated channels to
designate a portion of their channel capacity for commercial leased access by
unaffiliated third parties. The channels set aside may be utilized for other
activities until utilized for such programming. While operators of cable
television systems are permitted to set reasonable leased access rates, the FCC
has established a formula for determining maximum reasonable rates, as required
under the 1992 Cable Act. The FCC is presently engaged in a proceeding in which
it may alter the leased access rate formula. The FCC has tentatively concluded
that the current formula overcompensates operators of cable television systems.
Therefore, the FCC is considering changes in its leased access rate rules that
may result in operators of cable television systems being compensated less for
leased access. In this proceeding, the FCC is also considering requiring
operators of cable television systems to reserve a portion of their leased
access capacity for not-for-profit programmers and/or establishing special
preferential rates for such programmers. The Company cannot predict the outcome
of this proceeding or its effect on the Company.
EQUAL EMPLOYMENT OPPORTUNITY
The 1984 Cable Act includes provisions to ensure that minorities and women
are provided equal employment opportunities within the cable television
industry. The statute requires the FCC to adopt reporting and certification
rules that apply to all operators of cable television systems with more than
five full-time employees. Pursuant to the requirements of the 1992 Cable Act,
the FCC has imposed more detailed annual Equal Employment Opportunity ("EEO")
reporting requirements on operators of cable television systems and has expanded
those requirements to all multichannel video service distributors. Failure to
comply with the EEO requirements can result in the imposition of fines and/or
other administrative sanctions, or may, in certain circumstances, be cited by a
franchising authority as a reason for denying a franchisee's renewal request.
TECHNICAL REQUIREMENTS
The FCC has imposed technical standards applicable to all channels on which
downstream video programming is carried, and has prohibited franchising
authorities from adopting standards which are in conflict with or more
restrictive than those established by the FCC. The Telecommunications Act
provides that local and state authorities may not prohibit, restrict or
condition a cable television system's use of any transmission technology or
subscriber equipment. In order to prevent harmful interference with
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aeronautical navigation and safety radio services, the FCC also has adopted
additional standards applicable to cable television systems using frequencies in
the 108-137 MHz and 225-400 MHz bands and established limits on cable television
system signal leakage. Periodic testing by cable operators for compliance with
these technical standards and signal leakage limits is required.
The FCC has adopted regulations to implement the requirements of the 1992
Cable Act designed to improve the compatibility of cable television systems and
consumer electronics equipment. These regulations, inter alia, generally
prohibit operators of cable television systems from scrambling their basic
service.
OTHER MATTERS
FCC regulations also address numerous other matters, including a cable
television system's carriage of local sports programming, franchise fees, pole
attachments, home wiring, customer service, rules applicable to origination
cablecasts governing political programming, rates charged to political
candidates, personal attacks, sponsorship identification, lottery information
and limitations on advertising contained in children's programming.
The Company is presently the subject of various proceedings before the FCC
regarding rates charged to subscribers for both basic service and CPS packages,
none of which management believes to be material to the Company's operations.
From time to time, the Company may be the subject of other proceedings before
the FCC. The Company cannot predict the outcome of any pending proceedings or
any other proceeding that may be before the FCC in the future.
RECENT TELECOMMUNICATIONS LEGISLATION
The Telecommunications Act materially alters federal, state and local laws
and regulations pertaining to cable television, telecommunications and other
services. In addition to the amendments previously discussed herein, the
legislation also allows additional competition in video programming by telephone
companies and public utility companies, and makes other revisions to the
Communications Act, including to amendments made to the Communications Act by
the 1984 and the 1992 Cable Acts.
TELEPHONE COMPANY PROVISION OF VIDEO PROGRAMMING
The Telecommunications Act repeals the statutory ban against telephone
companies providing video programming services in their telephone service areas.
Therefore, the Telecommunications Act permits telephone companies to compete
directly with operators of cable television systems. The FCC's video dialtone
regulations have also been repealed. However, such repeal does not affect the
status of video dialtone services offered prior to the effective date of the
Telecommunications Act. Under the new legislation, LECs, including the RBOCs and
their subsidiaries, will be allowed to compete with operators of cable
television systems, including the Company, both inside and outside the LECs'
telephone service areas. The new legislation recognizes several means by which
telephone companies may opt to provide competitive video programming, each of
which may subject the telephone company to different regulation.
If a telephone company provides video programming services via radio
communications, it will be regulated under Title III of the Communications Act
(the general sections governing use of the airwaves), rather than under Title VI
(cable regulation). 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. 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.
The Telecommunications Act replaces the FCC's video dialtone rules (which
allowed LECs to provide an electronic, common carrier platform permitting
consumer access to video programs, information services and other communications
services made available by a multiplicity of competitive service
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providers) with an "open video system" plan by which telephone companies can
provide video programming service in their telephone service areas. 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. In particular, the open video system requirements will
replace regulation under Title II of the Communications Act.
The FCC is directed to prescribe 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 not unjustly or unreasonably discriminatory. The FCC must
also adopt 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 open video system regulations that (i) permit the operator to use
channel-sharing arrangements, (ii) extend to open video systems the FCC's sports
exclusivity, network non-duplication and syndicated exclusivity regulations and
(iii) prohibit the operator from unreasonably discriminating in its own favor in
the way information about programming is presented or provided to subscribers.
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 operator of cable television systems
in the corresponding franchise area. The FCC is presently engaged in a
rulemaking proceeding regarding open video system regulations.
BUYOUTS
The Telecommunications Act generally prohibits buyouts of cable television
systems (including any ownership interest of such systems exceeding 10%) by LECs
within an LEC's telephone service area, buyouts by operators of cable television
systems of LEC systems within a cable operator's franchise area, and joint
ventures between operators of cable television systems and LECs in the same
markets. There are some statutory exceptions, including a rural exemption which
permits buyouts in which the purchased system serves a non-urban area with fewer
than 35,000 inhabitants. Also, the FCC may grant waivers of the buyout
provisions in cases where (i) the operator of a cable television system or the
LEC would be subject to undue economic distress if such provisions were
enforced, (ii) the system or facilities would not be economically viable in the
absence of a buyout or a joint venture or (iii) the anticompetitive effects of
the proposed transaction are clearly outweighed by the transaction's effect in
light of community needs. The respective local franchising authority must
approve any such waiver.
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. In order to take
advantage of the new legislation, public utilities must establish separate
subsidiaries through which to operate any cable operations. Such utility
companies must also apply to the FCC for operating authority.
CROSS-OWNERSHIP; REDUCED REGULATIONS
The Telecommunications Act makes several other changes to relax ownership
restrictions and regulation of cable television systems. The Telecommunications
Act repeals the 1992 Cable Act's three-year holding requirement pertaining to
sales of cable television systems. The statutory broadcast/cable cross-ownership
restrictions imposed under the 1984 Cable Act have been eliminated, although the
FCC's regulations prohibiting broadcast/cable common-ownership currently remain
in effect. The SMATV/cable cross-ownership and the MMDS/cable cross-ownership
restrictions have been eliminated for operators of cable television systems
subject to "effective competition."
The Telecommunications Act may also exempt certain of the Company's
competitors from regulation as cable systems. The new legislation amends the
definition of a "cable system" under the Communica-
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tions Act so that competitive providers of video services will be regulated and
franchised as "cable systems" only if they use public rights-of-way. Thus, a
broader class of entities (including some entities which may be in competition
with the Company) providing video programming may be exempt from regulation as
cable television 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 usage of
their poles in the delivery of cable and non-cable services). Under the new
legislation, the current method for determining such rates will continue to be
applicable for a period of five years. The FCC will establish a new formula for
rates charged with respect to poles that are used by operators of cable
television systems for non-cable telecommunications services, which could result
in higher pole attachment rates for such operators, including the Company. Any
increases pursuant to this new formula may not begin for five years, and will be
phased in by equal increments over years five through ten. However, the new FCC
formula will not apply in states which certify that they regulate pole
attachment rates.
MISCELLANEOUS REQUIREMENTS
The Telecommunications Act also imposes new requirements on operators of
cable television systems, including an obligation, upon request, 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, it requires that
sexually explicit programming be scrambled, blocked or restricted to those hours
of the day when children are unlikely to view the programming, as determined by
the FCC. A federal court has temporarily stayed enforcement of this provision
pending further consideration of a constitutional challenge. If the provision is
held to be constitutional, it could increase operating expenses for operators of
cable television systems, including the Company, and provide a competitive
advantage to less regulated providers of video programming services. The
Telecommunications Act also directs the FCC to adopt regulations that ensure,
with certain exceptions, that video programming is fully accessible through
closed captioning. The FCC is presently engaged in a proceeding to establish
regulations to implement such closed captioning requirements.
FCC IMPLEMENTATION OF THE TELECOMMUNICATIONS ACT
The FCC is presently, and will be, engaged in numerous proceedings to
implement various provisions of the Telecommunications Act. In addition to the
proceedings previously discussed herein, the FCC has recently initiated a
proceeding to implement most of the cable-related 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 cable-related reform
provisions of Telecommunications Act. Among other things, the FCC is requiring
on an interim basis that for an LEC to be deemed to be offering "comparable"
programming, such programming must include the signals of local broadcasters.
Cable television systems that meet all of the relevant criteria of 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 television systems may file a petition with the FCC at any time
for a determination as to whether "effective competition" exists.
The FCC has also established interim rules governing the filing of rate
complaints regarding CPS packages 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 within 90 days of the date such increase becomes
effective. If the local franchising authority receives more than one such
subscriber complaint and decides to file its own complaint with the FCC, it must
do so within 180 days of the date the rate increase becomes effective. Before
filing a complaint with the FCC, the local franchising authority must first
provide the operator of the
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cable television system written notice of its intent to do so and must give the
operator a minimum of 30 days to file the relevant FCC forms used to justify a
rate increase with the local franchising authority. 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 of
the date it receives a local franchising authority complaint.
In addition to the interim rules discussed above and other miscellaneous
interim rules, the FCC is also engaged in a rulemaking proceeding to create and
implement final rules relating to the cable-related reform provisions of the
Telecommunications Act. Among other issues, the FCC is considering whether to
establish the LEC market share that must be satisfied before such LEC will be
deemed to constitute "effective competition" to an incumbent operator of cable
television systems, which would free the operator from rate regulation. The
Company cannot predict the outcome of this FCC proceeding or its ultimate effect
on the Company.
In a significant recent development, in April 1996, the FCC adopted an
order affirming that for the purpose of calculating the amount of franchise fees
(which are limited to 5% of an operator's gross revenues derived from the
operation of the cable television system), a franchising authority may not
include in the calculation the franchise fees an operator of cable television
systems collects from its subscribers.
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 Company. Although the new legislation may substantially lessen
regulatory burdens, the cable television industry may be subject to additional
competition as a result thereof. See "Business -- Competition." There are
numerous rulemakings to be undertaken by the FCC which will interpret and
implement the provisions of the Telecommunications Act. In addition, certain
provisions of the new legislation (such as the deregulation of rates for CPS
packages) will not immediately be effective. Furthermore, certain provisions of
the Telecommunications Act have been, and likely will continue to be, subject to
judicial challenge. The Company is unable at this time to predict the outcome of
such rulemakings or litigation or the short and long-term effect (financial or
otherwise) of the Telecommunications Act and the FCC rulemakings on the Company.
COPYRIGHT
Cable television systems are subject to federal copyright licensing
requirements covering carriage of broadcast signals. In exchange for making
semi-annual payments to a federal copyright royalty pool and meeting certain
other obligations, operators of cable television systems obtain a statutory
license to retransmit broadcast signals. The amount of this royalty payment
varies, depending on the amount of system revenues from certain sources, the
number of distant signals carried and the location of the cable television
system with respect to over-the-air television stations. Operators of cable
television systems are liable for interest on underpaid and unpaid royalty fees,
but are not entitled to collect interest on refunds received for overpayment of
copyright fees.
The Copyright Office has commenced a proceeding aimed at examining its
policies governing the consolidated reporting of commonly owned and contiguous
cable television systems. The present policies governing the consolidated
reporting of certain cable television systems have often led to substantial
increases in the amount of copyright fees owed by the systems affected. These
situations have most frequently arisen in the context of cable television system
mergers and acquisitions. While it is not possible to predict the outcome of
this continuing proceeding, any changes adopted by the Copyright Office in its
current policies may have the effect of reducing the copyright impact of certain
transactions involving cable company mergers and cable television system
acquisitions.
STATE AND LOCAL REGULATION
Because a cable television system uses local streets and rights-of-way,
cable television systems are subject to state and local regulation, typically
imposed through the franchising process. Local and/or
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state officials are usually involved in franchise selection, system design and
construction, safety, service rates, consumer relations, billing practices and
community-related programming and services.
Cable television systems are generally 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 franchise operator fails to comply with
material provisions. Although the 1984 Cable Act provides for certain procedural
protections, there can be no assurance that renewals of such franchises will be
granted or that renewals will be made on similar terms and conditions.
Franchises usually call for the payment of fees (which are limited to 5% of the
system's gross revenues for cable services under the Communications Act) to the
granting authority. Upon receipt of a franchise, the cable television system
owner is usually subject to a broad range of obligations to the issuing
authority directly affecting the business of the system. Franchises generally
contain provisions governing charges for basic cable television services, fees
to be paid to the franchising authority, length of the franchise term, renewal,
sale or transfer of the franchise, territory of the franchise, design and
technical performance of the system, use and occupancy of public streets and
number and types of cable services provided. The terms and conditions of
franchises vary materially from jurisdiction to jurisdiction, and even from city
to city within the same state, historically ranging from reasonable to highly
restrictive or burdensome.
The 1992 Cable Act prohibits exclusive franchises, and allows franchising
authorities to exercise greater control over the operation of franchised cable
television systems than the 1984 Cable Act did, especially in the area of
customer service and basic service rate regulation. The 1992 Cable Act also
allows franchising authorities to operate their own multichannel video
distribution system without having to obtain a franchise. Moreover, franchising
authorities are immunized from monetary damage awards arising from regulation of
cable television systems or decisions made on franchise grants, renewals,
transfers and amendments.
Various proposals have been introduced at the state and local levels with
regard to the regulation of cable television systems, and a number of states
have adopted legislation subjecting cable television systems to the jurisdiction
of centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. Although the state and local
jurisdictions in which the Company's systems are located are not among those
which have adopted legislation centralizing the regulation of cable television
systems, there are no assurances that such legislation may not be considered or
adopted in the future by states and local jurisdictions in which the Company
operates.
The foregoing does not purport to describe all present and proposed
federal, state and local regulations and legislation relating to the cable
television industry. Other existing federal regulations, copyright licensing
and, in many jurisdictions, state and local franchise requirements, currently
are the subject of a variety of judicial proceedings, legislative hearings and
administrative and legislative proposals which could change, in varying degrees,
the manner in which cable television systems operate. Neither the outcome of
these proceedings nor their short- or long-term impact upon the cable television
industry can be predicted at this time.
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MANAGEMENT
The business and operations of the Company are managed by BCC Holding, the
Company's general partner, except that final authority with respect to certain
management decisions and actions by or affecting the Company, including the
approval of and changes to the Company's capital and operating budgets, is
vested in the Executive Committee. The Executive Committee is comprised of four
representatives, two of whom are designees of BCI (USA), L.P. and two of whom
are designees of TCID or an affiliate thereof.
Certain management services have in the past been provided to the Company
by BCI pursuant to the Cable Television Management Agreement dated October 31,
1984. Since January 1, 1996, certain management and administrative services have
been provided to the Company by BCI and BMSI pursuant to the Management
Agreement and the Administration Agreement, respectively. See "Risk Factors --
Potential Conflicts of Interest" and "Certain Relationships and Related
Transactions."
EXECUTIVE COMMITTEE MEMBERS, DIRECTORS AND EXECUTIVE OFFICERS
The Company. The following table sets forth certain information with
respect to the members of the Executive Committee and the executive officers of
BCI who are responsible for providing significant services with respect to the
management and operations of the Company. Prior to January 1, 1996, the
individuals listed below functioned effectively as executive officers of the
Company, and were compensated for their service as such by the Company (other
than William J. Bresnan, who was compensated by BCI). All such "executive
officers" of the Company who were not previously employed by BCI were
transferred to BCI and, in certain instances, BMSI on January 1, 1996. At the
time of such transfer all such individuals became executive officers of BCI and,
in certain instances, BMSI. As a limited partnership, the Company has no Board
of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH BCI
- --------------------- --- --------------------------------------------------------------
<S> <C> <C>
William J. Bresnan 62 President, Chief Executive Officer, Secretary and Director
Jeffrey S. DeMond 40 Senior Vice President, Chief Financial Officer, Treasurer and
Assistant Secretary; Member of the Executive Committee of the
Company
Michael W. Bresnan 37 Senior Vice President - Operations; Member of the Executive
Committee of the Company
Daniel J. Bresnan 33 Senior Vice President - Business Development
Patrick J. Bresnan 59 Vice President - Marketing
Eric D. Cunningham 38 Vice President - Finance
Andrew C. Kober 33 Vice President and Controller
Gareth P. McIntosh 53 Vice President - Engineering
Roger D. Worboys 48 Vice President - Operations
Marvin L. Jones 58 Member of the Executive Committee of the Company
William R. 38 Member of the Executive Committee of the Company
Fitzgerald
</TABLE>
WILLIAM J. BRESNAN has been the President and Chief Executive Officer of
BCI since its inception in 1984. Mr. Bresnan is also the Secretary and the sole
director of BCI, and has served in such capacities since BCI's inception. Mr.
Bresnan has been the President, Secretary and sole director of BMSI since its
inception. Prior to founding BCI and the Company, Mr. Bresnan served as Chairman
and Chief Executive Officer of Group W Cable, Inc. from 1981 to 1984. Mr.
Bresnan served as President of the Cable Television Division of Teleprompter
Corporation from 1974 to 1981. Mr. Bresnan has served on the Board of Directors
of the NCTA for 30 non-consecutive years and as a member of its Executive
Committee for nonconsecutive terms aggregating 15 years. In addition, Mr.
Bresnan is a director of each of Cable in the Classroom, Cable Television
Laboratories, the Foundation for Minority Interests in Media, the National Cable
Television Center and Museum, the Cable Television Advertising Bureau and
C-SPAN, and is currently Chairman of CablePAC. Mr. Bresnan is also a director of
Brooks Telecommunications Interna-
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tional, Inc. and United Video Satellite Group, Inc. Mr. Bresnan has nearly 40
years of experience in the cable television industry.
JEFFREY S. DEMOND, C.P.A., is Senior Vice President and Chief Financial
Officer of BCI and Vice President of BMSI. Mr. DeMond has been Treasurer and
Assistant Secretary of BCI since November 1985. Mr. DeMond was appointed by BCI
(USA), L.P. to serve as a member of the Executive Committee effective as of
January 1, 1996. Mr. DeMond served as Vice President of BCI from December 1986
through December 1995. In addition, Mr. DeMond served as the Company's Director
of Finance from November 1985 through November 1986 and as its Vice
President-Finance and Chief Financial Officer from November 1986 through
December 1995. Before joining the Company, Mr. DeMond worked at Peat, Marwick,
Mitchell & Co. (now KPMG Peat Marwick LLP) from 1979 through 1985, where he
worked with clients in a variety of industries, including radio broadcasting and
film syndication. Mr. DeMond is currently an active member of the Accounting
Committee of the NCTA.
MICHAEL W. BRESNAN is Senior Vice President-Operations of BCI. Mr. Bresnan
was appointed by BCI (USA), L.P. to serve as a member of the Executive Committee
effective as of January 1, 1996. Mr. Bresnan served as General Manager of the
Company's Marquette, Michigan system from October 1985 through August 1987 and
as the Company's Director of Operations from August 1987 through December 1995.
Mr. Bresnan joined the Company in July 1985 as its Project Manager. Before
joining the Company, Mr. Bresnan was a design engineer at TRW, Inc., where he
was responsible for the design and development of state-of-the-art microwave
electronics for use in communications satellites. Mr. Bresnan is a member of the
NCTA's Coalition Opposing Signal Theft.
DANIEL J. BRESNAN is Senior Vice President-Business Development of BCI. Mr.
Bresnan served as the Company's Executive Director of Business Planning from
July 1994 through December 1995. Mr. Bresnan joined the Company in 1988 as its
Manager of Information Services and in 1990 was named Manager of Planning. In
July 1992, Mr. Bresnan was appointed Director of Business Planning of the
Company, serving as such until July 1994.
PATRICK J. BRESNAN is Vice President-Marketing of BCI. Mr. Bresnan served
as District Manager of the Company's Great Lakes District systems from August
1986 until October 1988 and as the Company's Director of Marketing from October
1988 through December 1995. Before joining the Company, Mr. Bresnan served as
both General Manager and District Manager at Teleprompter Corporation. Mr.
Bresnan is a member of the Cable TV Pioneers. Mr. Bresnan has over 30 years of
experience in the cable television industry.
ERIC D. CUNNINGHAM is Vice President-Finance of BCI. Mr. Cunningham served
as the Company's Director of Finance from February 1994 through December 1995.
Before joining the Company, Mr. Cunningham served as Manager of Communications
Finance at The Toronto-Dominion Bank, USA Division, in New York from 1988 to
1994, prior to which he held a series of financial management posts with such
bank. In his capacity as Manager of Communications Finance at Toronto-Dominion,
Mr. Cunningham was responsible for developing new business opportunities in the
communications industry, with emphasis on cable television, publishing and radio
and television broadcasting.
ANDREW C. KOBER, C.P.A., is Vice President and Controller of BCI and BMSI.
Mr. Kober served as Controller of the Company from August 1990 through December
1995. Before joining the Company, Mr. Kober worked at Arthur Young & Company
(now Ernst & Young LLP) from 1984 through 1990, becoming a Manager in October
1989. At Arthur Young & Company, Mr. Kober worked with clients in the
broadcasting, cable and cable programming industries, as well as with clients in
the manufacturing and legal services industries. Mr. Kober is a member of the
New York State Society of Certified Public Accountants, the American Institute
of Certified Public Accountants and the Cable Television Tax Professionals
Institute.
GARETH P. MCINTOSH is Vice President-Engineering of BCI. Mr. McIntosh
served as the Company's Director of Engineering from November 1994 through
December 1995. Before joining the Company, Mr. McIntosh served as Vice President
of Engineering of Fundy Cable Ltd. in Canada from April 1990 to
53
<PAGE> 56
November 1994. At Fundy Cable Ltd., Mr. McIntosh played an instrumental role in
developing its joint cable-telephony system in the United Kingdom. From 1980 to
1990, Mr. McIntosh served as Vice President of Engineering for the
Canadian-based Rogers Cablesystems Limited, where he was responsible for its
cable television systems and was involved in the initial stages of the
development of a national Canadian cellular communications system.
ROGER D. WORBOYS is Vice President-Operations of BCI. Before joining BCI in
January 1996, Mr. Worboys was Vice President of Operations for Insight
Communications in New York from 1988 to December 1995, where he was responsible
for cable television systems located in six states and for the development of
such company's one million subscriber operations in the United Kingdom. Mr.
Worboys joined Insight Communications after serving as Vice President of
Operations of Simmons Communications from 1986 to 1988, where he supervised its
five operating regions which served 330,000 customers in 17 states. Mr. Worboys
has over 20 years of experience in the cable television industry.
MARVIN L. JONES is President of Marvin Jones Assoc., Inc. Mr. Jones was
appointed by TCID to serve as a member of the Executive Committee effective as
of January 1, 1996. Mr. Jones has been providing consulting services in the
cable television industry since December 1991. From 1988 to 1991 Mr. Jones was
Director and Executive Vice President of United Artists Entertainment Company
("UAE"). Prior to that time Mr. Jones held various positions at United Artists
Cablesystems Corporation, a wholly owned subsidiary of UAE which operates UAE's
cable television systems, serving as President and Chief Executive Officer from
July 1984 to 1988 and Senior Vice President from 1978 to 1984.
WILLIAM R. FITZGERALD has served as Senior Vice President of Corporate
Development of TCI Communications, Inc. ("TCICI") since March 1996. Mr.
Fitzgerald is responsible for managing acquisitions, divestitures, and system
trading activities and strategies at TCICI. Mr. Fitzgerald was appointed by TCID
to serve as a member of the Executive Committee as of May 1996. Before joining
TCICI in March 1996, Mr. Fitzgerald was a Senior Vice President and Partner with
Daniels & Associates, a brokerage and investment banking firm to the
communications industry. Mr. Fitzgerald joined Daniels & Associates after
serving as a Vice President of The First National Bank of Chicago.
All members of the Executive Committee serve at the discretion of the
parties who have appointed them. All executive officers of BCI serve at the
discretion of William J. Bresnan, the sole director of BCI.
William J. and Patrick J. Bresnan are brothers. William J. Bresnan is the
father and Patrick J. Bresnan is an uncle of Michael W. and Daniel J. Bresnan.
BCC. BCC is a newly formed Delaware corporation that is wholly owned by
the Company. The sole director of BCC is William J. Bresnan. Mr. Bresnan serves
as President and Secretary of BCC, and Jeffrey S. DeMond serves as BCC's Vice
President and Assistant Secretary. BCC has nominal assets and does not conduct
any operations.
EXECUTIVE COMPENSATION
As of January 1, 1996, all of the executive officers identified above
(other than William J. Bresnan) were removed from the Company's payroll and were
placed on either BCI's or, in certain instances, BMSI's payroll. The following
table sets forth certain information for the year ended December 31, 1995
concerning the cash and noncash compensation earned by the Chief Executive
Officer and the five other most highly compensated persons functioning
effectively as executive officers of the Company whose combined salary and bonus
exceeded $100,000 during such period. The Company had no long-term compensation
plans in the year ended December 31, 1995.
BCI, which served as managing general partner of the Company during the
year ended December 31, 1995, received payments from the Company to compensate
William J. Bresnan. Members of the Executive Committee receive no compensation
for their service on the Executive Committee.
54
<PAGE> 57
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND -------------------- ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION(a)
- ---------------------------------------------------- -------- ------- ---------------
<S> <C> <C> <C>
William J. Bresnan
President and Chief Executive Officer $200,000 -- $10,710
Jeffrey S. DeMond
Senior Vice President and Chief Financial Officer 191,667 25,000 12,970
Michael W. Bresnan
Senior Vice President-Operations 182,500 25,000 9,449
Daniel J. Bresnan
Senior Vice President-Business Planning 135,000 25,000 11,001
Patrick J. Bresnan
Vice President-Marketing 151,875 20,000 11,689
Gareth P. McIntosh
Vice President-Engineering 120,000 30,000 6,594
</TABLE>
- ---------------
(a) Includes the following: (i) matching contributions made by the Company to a
defined contribution plan offered on a voluntary basis to all eligible
employees of the Company, BCI and BMSI on behalf of William J. Bresnan,
Jeffrey S. DeMond, Michael W. Bresnan, Daniel J. Bresnan, Patrick J. Bresnan
and Gareth P. McIntosh aggregating $0, $4,620, $4,620, $4,620, $4,620 and
$0, respectively; (ii) amounts paid by the Company for automobile allowances
or amounts relating to the use of a Company automobile, as the case may be,
to William J. Bresnan, Jeffrey S. DeMond, Michael W. Bresnan, Daniel J.
Bresnan, Patrick J. Bresnan and Gareth P. McIntosh aggregating $7,200,
$7,600, $4,350, $6,100, $4,350 and $5,500, respectively; and (iii) amounts
paid by the Company for premiums for life insurance in excess of $50,000 on
behalf of William J. Bresnan, Jeffrey S. DeMond, Michael W. Bresnan, Daniel
J. Bresnan, Patrick J. Bresnan and Gareth P. McIntosh aggregating $3,510,
$750, $479, $281, $2,719 and $1,094, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has no compensation committee. Jeffrey S. DeMond has
participated with William J. Bresnan in the past in deliberations concerning the
compensation of executive officers of the Company. Additionally, Daniel J.
Bresnan, Jeffrey S. DeMond and Michael W. Bresnan participate in the
compensation decisions of each of the BIPs, for which Mr. DeMond and Mr. D.
Bresnan serve on the executive committee.
Jeffrey S. DeMond and William J. Bresnan are both directors and
shareholders of, and have participated in deliberations concerning the
compensation of executive officers of, each of Atlantic Imports, Inc., The
Irving Corporation, Current Auto Resales & Service, Inc. and CNI, Inc. and its
subsidiaries. Except with respect to CNI, Inc., neither Mr. DeMond nor Mr.
Bresnan is compensated for his service as a director of these entities. Jeffrey
S. DeMond and William J. Bresnan both serve on the compensation committee of
Restaurant Property Management, Inc., for which Mr. DeMond was also an executive
officer. See "Certain Relationships and Related Transactions."
55
<PAGE> 58
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AGREEMENTS WITH BCI AND BMSI
Prior to January 1, 1996, all of the overhead expenses of the Company
(other than the salary and related benefits of the President of BCI) were paid
directly by the Company. Currently, substantially all of the management and
administrative functions of both the Company and the BIPs are performed by BCI
and BMSI. See "Risk Factors -- Potential Conflicts of Interest." The Company
pays its portion of the expenses related to such functions pursuant to the
Management Agreement and the Administration Agreement.
MANAGEMENT AGREEMENT
The Company and BCC Holding entered into the Management Agreement with BCI
on May [ ], 1996. BCI is a corporation wholly owned by William J. Bresnan.
Certain of the executive officers of BCI function as executive officers of the
Company, including those executive officers that serve on the Executive
Committee. The Management Agreement supersedes a Cable Television Management
Agreement, dated October 31, 1984 (the "Cable Television Management Agreement")
and a Management Agreement, dated December 31, 1995, between the Company and
BCI. Pursuant to the Management Agreement, BCI provides certain services to the
Company in connection with the management and operation of the Company's cable
television systems, related businesses, projects and investments. Management
services provided by BCI pursuant to the Management Agreement include (i)
providing the Company with financial, development, acquisition, marketing,
construction, engineering, technical and operational guidance; (ii) preparing,
or having its affiliate, BMSI, prepare, for use by the Company, monthly
financial statements, quarterly status reports, quarterly financial reports,
annual tax reports and such other reports as may be required by the Company;
(iii) preparing, or having BMSI prepare, and monitoring annual operating
budgets; (iv) advising and consulting with the Company in connection with any
and all aspects of the Company's business, including with respect to the
development of additional lines of business; (v) assisting the Company in
selecting and consulting with professional advisors; and (vi) providing the
services of such BCI personnel as may be required by the Company, including with
respect to the negotiation of documents in connection with financings by the
Company. BCI provides similar services to BCC Holding pursuant to the Management
Agreement.
In consideration of the services to be provided to the Company and BCC
Holding pursuant to the Management Agreement, the Company has agreed to pay to
BCI a management fee in the amount annually budgeted therefor by the Company.
The management fee is payable in cash in quarterly installments. Payments by the
Company under the Cable Television Management Agreement aggregated approximately
$213,000, $214,000 and $214,000 for the years ended December 31, 1993, 1994 and
1995, respectively. Amounts paid to BCI in these years did not include amounts
attributable to overhead expenses incurred by the Company, including executives'
salaries and related benefits (other than the salary and related benefits of the
President of BCI) which the Company has historically paid directly. BCI has,
effective as of January 1, 1996, assumed a substantial portion of the Company's
obligations to pay overhead expenses for which the Company had previously been
directly responsible (including, without limitation, BCI-related salaries,
insurance, executive office rental and travel expenses). Accordingly, the
Company has budgeted $1.5 million for the management fee in fiscal year 1996, to
account for its payment to BCI, rather than to the ultimate payees thereof, of
amounts payable for such overhead expenses and the overhead expenses of BCC
Holding. Amounts accrued and paid to BCI as a management fee for the three
months ended March 31, 1996 totalled approximately $198,000.
Pursuant to the Management Agreement, the Company indemnifies BCI, its
officers, directors, employees and control persons against all claims, damages,
liabilities, costs and expenses (including reasonable attorneys' fees and court
costs) which they may incur by reason of BCI's duties or obligations thereunder.
The Company's indemnification obligations do not cover acts constituting gross
negligence or willful misconduct.
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<PAGE> 59
The Management Agreement is to continue until the earlier to occur of (i)
the complete dissolution and liquidation of the Company or (ii) the date the
Management Agreement is terminated by either party. The Management Agreement may
be terminated at the option of the Company at any time in the event (i) BCI or
any director, officer or other management level employee thereof is convicted of
a felony involving the Company or its property and such conviction becomes final
and non-appealable; (ii) BCI files a voluntary petition in bankruptcy, is
adjudicated to be bankrupt, files a petition or answer seeking or acquiescing in
any reorganization, arrangement, composition, liquidation, dissolution or
similar relief, seeks to consent to or acquiesce in the appointment of any
trustee, receiver or liquidator, makes any general assignment for the benefit of
creditors, or admits in writing its inability to pay its debts generally as they
become due; (iii) BCI engages in an act of gross negligence or willful
misconduct resulting in (or which is reasonably likely to result in) a
materially adverse impact on the Company; (iv) BCI experiences a "Change of
Control" (as defined in the Company's Amended and Restated Partnership
Agreement); (v) the managing general partner of BCC Holding is removed from its
position as managing general partner following the determination by an
arbitrator selected in accordance with the terms of the Agreement of Limited
Partnership of BCC Holding that the managing general partner breached a material
provision of the Agreement of Limited Partnership of BCC Holding, the Management
Agreement or the Administration Agreement and has failed to timely cure such
breach; (vi) the managing general partner and the other partners who are its
affiliates cease to be partners of BCC Holding; or (vii) BCI breaches such
agreement in any material respect and fails to timely cure such breach. BCI may
terminate the Management Agreement at any time upon sixty days prior written
notice delivered to the Company.
ADMINISTRATION AGREEMENT
The Company and BCC Holding entered into the Administration Agreement with
BMSI on May [ ], 1996, pursuant to which BMSI provides to the Company certain
administrative services in connection with the administration and operation of
the Company's cable television systems, businesses, projects and investments.
BMSI is a corporation wholly owned by William J. Bresnan. The Administration
Agreement supersedes an Administration Agreement, dated December 31, 1995,
between the Company and BMSI. Certain of the executive officers of BMSI function
as executive officers of the Company. The Administration Agreement requires BMSI
to provide administrative services until the earlier to occur of (i) the
complete dissolution and liquidation of the Company and (ii) the date the
Administration Agreement is terminated by either party. Administrative services
to be provided by BMSI pursuant to the Administration Agreement include (i)
establishing and maintaining all accounting, bookkeeping, billing, collections
and other financial systems and records and preparing appropriate financial
reports to be furnished to the partners of the Company; (ii) preparing and
filing, or causing to be prepared and filed, all periodic reports to
governmental and regulatory agencies by the Company, and preparing and
maintaining, or causing to be prepared and maintained, all of the Company's
records, documents and reports of operations in compliance with applicable laws
and regulations, including but not limited to any Equal Employment Opportunity
Compliance reporting; (iii) establishing and maintaining all other records of
the Company; (iv) insuring compliance with applicable laws governing the
administration and operation of the Company's employee benefit plans, if any;
and (v) to the extent required by the Company, facilitating the Company's
requirements for cash management, banking services, audit and tax services and
consulting services. BMSI provides similar services to BCC Holding pursuant to
the Administration Agreement.
In consideration of the services to be provided to the Company and BCC
Holding pursuant to the Administration Agreement, the Company has agreed to pay
to BMSI an administration fee in the amount annually budgeted therefor by the
Company. Fees payable to BMSI under the Administration Agreement are to be paid
in cash in quarterly installments and are to be a reasonable estimate of those
that would be incurred on a stand-alone basis. BMSI has, effective as of January
1, 1996, assumed all of the Company's obligations to pay certain administration
expenses for which the Company had previously been directly responsible
(including, without limitation, costs of accounting and administration and
expenses relating to headquarters operations, excluding BCI-related expenses).
The Company has budgeted $3.0 million for the administration fee in fiscal year
1996, which amount includes both the Company's and BCC
57
<PAGE> 60
Holding's administration expenses. Amounts accrued and paid to BMSI as
administration fees for the three months ended March 31, 1996 totalled
approximately $728,000.
An indemnity substantially identical to that provided to BCI under the
Management Agreement is provided by the Company to BMSI, its officers,
directors, employees and control persons pursuant to the Administration
Agreement. In addition, the Administration Agreement is subject to the same
termination rights of the Company and of BMSI as are applicable under the
Management Agreement with respect to the Company and BCI, respectively.
AGREEMENTS WITH AND PURCHASES FROM TCI AND ITS AFFILIATES
The Company purchases various programming services from TCI and its
affiliates in the ordinary course and pursuant to a Supply Agreement (the
"Supply Agreement") with SSI, an affiliate of TCI. TCI and SSI are affiliates of
TCID. These purchases are made in the normal course of business and at rates
which the Company's management believes are at least as favorable as those the
Company could obtain from third parties and for the years ended December 31,
1993, 1994 and 1995 and for the three months ended March 31, 1996, respectively,
aggregated approximately $8,440,000, $10,945,000, $13,298,000 and $3,490,000,
respectively. See "Risk Factors -- Loss of Favorable Programming and Equipment
Supply."
TCID holds an unexercised option pursuant to which TCID may purchase from
William J. Bresnan a portion of his interests in BCC Holding, which prior to the
reorganization of the ownership of the Company related to interests in the
Company. The exercise of the option would increase TCID's partnership interest
in BCC Holding to approximately 79.2%. The option has a nominal exercise price.
See "Business -- Relationship with TCI" and "Principal Partners."
Pursuant to the Company's prior partnership agreement and prior to the
reorganization of the ownership of the Company, BCI Management, L.P. required
TCID to transfer to BCI Management, L.P. approximately 1.6% of TCID's economic
and voting interest in the Company. The transfer occurred as of May [ ], 1996.
Marvin L. Jones and William R. Fitzgerald were appointed as members of the
Executive Committee by TCID or an affiliate thereof. In addition, Mr. Fitzgerald
is the Senior Vice President of Corporate Development of TCICI. TCICI is a
majority owned subsidiary of TCI.
TCID NOTE
The Company has issued to TCID, as lender, the TCID Note dated May 12, 1988
in the principal amount of $25.0 million, of which $22.1 million was borrowed.
Interest accrues on the TCID Note at a per annum rate (based on a 360-day year)
equal to the prime rate of The Toronto-Dominion Bank's New York branch. Pursuant
to an agreement dated as of October 10, 1994, the term of the TCID Note was
extended from April 30, 1998 to April 30, 2001. All amounts (including principal
and interest) unpaid and outstanding under the TCID Note become due and payable
on the earlier of April 30, 2001 or the first business day following the full
repayment of all amounts outstanding under the Bank Credit Facility. As of March
31, 1996, the aggregate amount of indebtedness outstanding under the TCID Note
was $22.1 million, plus accrued interest. No payments have been made on the TCID
Note since its issuance.
The Company's obligations under the TCID Note are subordinate and junior in
right of payment to all of the Company's obligations under the Bank Credit
Facility and may be prepaid by the Company without penalty, subject to the terms
of the Bank Credit Facility. TCID is an indirect wholly owned subsidiary of TCI.
Marvin L. Jones and William R. Fitzgerald were appointed as members of the
Executive Committee by TCID or an affiliate thereof. In addition, Mr. Fitzgerald
is the Senior Vice President of Corporate Development of TCICI. TCICI is a
majority owned subsidiary of TCI. The TCID Note will be repaid with a portion of
the net proceeds of the Offerings and will be cancelled at that time. See "Use
of Proceeds."
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<PAGE> 61
SUBORDINATED PROMISSORY NOTE
The Company executed a Subordinated Promissory Note dated July 22, 1994
(the "Subordinated Note") in favor of TCID for a maximum principal amount of
$2.9 million with interest thereon to be computed at a rate of 12% per year,
compounded quarterly, based on a 365-day year. The Subordinated Note was
cancelled in May 1996. No amounts were ever drawn under the Subordinated Note.
TCID is an indirect wholly owned subsidiary of TCI. Marvin L. Jones and William
R. Fitzgerald were appointed as members of the Executive Committee by TCID or an
affiliate thereof. In addition, Mr. Fitzgerald is the Senior Vice President of
Corporate Development of TCICI. TCICI is a majority owned subsidiary of TCI.
OTHER LOANS AND ADVANCES TO OR FROM AFFILIATES
During the normal course of business, the Company incurred management costs
and made and received advances on behalf of the BIPs, who have invested in new
cable television operations in Chile and Poland. These costs totalled
approximately $242,000 and $995,000 for the years ended December 31, 1994 and
1995, respectively, and approximately $249,000 and $0 for the three months ended
March 31, 1995 and 1996, respectively, and are reflected as a reduction of
selling, general and administrative expenses. There were no such costs for the
year ended December 31, 1993. The entire amount outstanding as of December 31,
1994 was repaid to the Company during 1995 and advances made by the BIPs to the
Company resulted in a net amount payable to the BIPs at December 31, 1995 and
March 31, 1996 of approximately $892,000 and $6,000, respectively. All amounts
due affiliates as of March 31, 1996 have been repaid in full. During the period
from January 1, 1993 through March 31, 1996, the largest amount of indebtedness
of the BIPs owed to the Company outstanding at any time was $6.0 million. The
Company has no current commitment to make any loan or advance to, nor any
obligation to repay any amounts advanced by, either of the BIPs or (except
pursuant to the TCID Note) any other affiliate. The BIPs are effectively
controlled by William J. Bresnan and TCI. Certain of the persons that function
effectively as executive officers of the Company function as such for the BIPs.
GUARANTEE
A guarantee of borrowings made by the Company under the Bank Credit
Facility in the amount of $3.0 million has been provided by William J. Bresnan.
PURCHASES FROM OTHER AFFILIATES
During the normal course of business, the Company purchases automobiles and
airline transportation services at amounts no less favorable than those the
Company could obtain from third parties from The Irving Corporation, Atlantic
Imports, Inc. and Bresnan Aviation, Inc. William J. Bresnan, Jeffrey S. DeMond
and Patrick J. Bresnan are shareholders of The Irving Corporation and Atlantic
Imports, Inc. and Mr. Wm. Bresnan and Mr. DeMond are directors. Bresnan
Aviation, Inc. is a corporation wholly owned by Mr. Wm. Bresnan. Payments made
by the Company to The Irving Corporation and Atlantic Imports, Inc. aggregated
approximately $57,000, $49,000, $0 and $0 for the years ended December 31, 1993,
1994 and 1995 and the three months ended March 31, 1996, respectively. Payments
made by the Company to Bresnan Aviation, Inc. aggregated approximately $151,000,
$276,000, $172,000 and $11,000 for the years ended December 31, 1993, 1994 and
1995 and the three months ended March 31, 1996, respectively.
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<PAGE> 62
THE REORGANIZATION
As part of a reorganization of the ownership of the Company, the former
partners of the Company contributed all, or substantially all, of their
interests in the Company to BCC Holding. As a result, BCC Holding holds a 99%
general partner interest in the Company and William J. Bresnan holds the
remaining 1% limited partner interest.
Prior to the reorganization of the ownership of the Company, the business
and operations of the Company were managed by BCI (USA), L.P. acting as the
managing general partner of the Company, subject to Executive Committee review
and approval of certain management decisions and actions by or affecting the
Company. All of the issued and outstanding partnership interests in BCI (USA),
L.P. are owned directly or indirectly by William J. Bresnan. See "Organization."
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<PAGE> 63
PRINCIPAL PARTNERS
The following table sets forth certain information with respect to the
beneficial ownership of (i) partnership interests of BCC Holding, (ii)
partnership interests of the Company and (iii) equity interests owned by all
persons that function effectively as executive officers of the Company and BCC
Holding and all members of their respective executive committees as a group.
Unless otherwise noted, the individuals have sole voting and investment power.
The Company owns all of the outstanding capital stock of BCC. BCC Holding owns
all of the outstanding capital stock of BCC Holding Capital Corporation. See
"Organization."
<TABLE>
<CAPTION>
INTEREST
OF ECONOMIC AND VOTING
NAME AND ADDRESS TYPE OF INTEREST CLASS INTEREST OF CLASS
- -------------------------------------- ------------------------- ------ -------------------
<S> <C> <C> <C>
BCC HOLDING
TCID of Michigan, Inc. General Partner Interest 49.495%(a) 79.192%
5619 DTC Parkway
Englewood, CO 80111
BCI (USA), L.P. General Partner Interest 0.505% 0.505%(b)
709 Westchester Avenue
White Plains, NY 10604
BCI Management, L.P. Limited Partner Interest 0.505% 2.121%(c)
709 Westchester Avenue
White Plains, NY 10604
William J. Bresnan Limited Partner Interest 49.495% 18.182%
c/o Bresnan Communications, Inc.
709 Westchester Avenue
White Plains, NY 10604
Jeffrey S. DeMond Limited Partner Interest * *
Michael W. Bresnan Limited Partner Interest * *
Daniel J. Bresnan Limited Partner Interest * *
Patrick J. Bresnan Limited Partner Interest * *
Eric D. Cunningham Limited Partner Interest * *
Andrew C. Kober Limited Partner Interest * *
Gareth P. McIntosh Limited Partner Interest * *
Roger D. Worboys Limited Partner Interest * *
All executive officers and [ ]%(b)(c)(d)
executive committee members of BCC
Holding as a group (11 persons)
THE COMPANY
Bresnan Communications Company General Partner Interest 99.000% 99.000%
Holding, L.P.
709 Westchester Avenue
White Plains, NY 10604
William J. Bresnan Limited Partner Interest 1.000% 1.000%(e)
c/o Bresnan Communications, Inc.
709 Westchester Avenue
White Plains, NY 10604
Jeffrey S. DeMond Limited Partner Interest * *
Michael W. Bresnan Limited Partner Interest * *
Daniel J. Bresnan Limited Partner Interest * *
Patrick J. Bresnan Limited Partner Interest * *
Eric D. Cunningham Limited Partner Interest * *
</TABLE>
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<PAGE> 64
<TABLE>
<CAPTION>
INTEREST
OF ECONOMIC AND VOTING
NAME AND ADDRESS TYPE OF INTEREST CLASS INTEREST OF CLASS
- -------------------------------------- ------------------------- ------ -------------------
<S> <C> <C> <C>
Andrew C. Kober Limited Partner Interest * *
Gareth P. McIntosh Limited Partner Interest * *
Roger D. Worboys Limited Partner Interest * *
All executive officers and [ ]%(e)(f)
Executive Committee members of the
Company as a group (11 persons)
</TABLE>
- ---------------
* Represents less than 1%.
(a) TCID holds an unexercised option to increase its partnership interest in BCC
Holding to approximately 79.192%. The option has a nominal exercise price.
TCID is an indirect wholly owned subsidiary of TCI.
(b) William J. Bresnan holds a 1.000% limited partner interest in BCI (USA),
L.P. and BCI holds a 99.000% general partner interest. BCI is wholly owned
by William J. Bresnan.
(c) BCI holds a 4.762% general partner interest in BCI Management, L.P. The
remainder of BCI Management, L.P. is held by certain members of the
Company's management team.
(d) Jeffrey S. DeMond, Michael W. Bresnan, Daniel J. Bresnan, Patrick J.
Bresnan, Eric D. Cunningham, Andrew C. Kober and Gareth P. McIntosh are each
limited partners of BCI Management, L.P. and may be deemed to own
beneficially corresponding interests in BCC Holding. The above individuals
disclaim any such beneficial interest. The limited partner interests were
granted as of May [ ], 1996 and may represent interests in either the
capital or profits and losses of BCI Management, L.P.
(e) In addition to the 18.182% interest he holds in BCC Holding, by virtue of
his ownership interests in the Company, BCI (USA), L.P. and BCI Management,
L.P., Mr. Bresnan's beneficial ownership of the Company equals approximately
19.600% in the aggregate.
(f) Jeffrey S. DeMond, Michael W. Bresnan, Daniel J. Bresnan, Patrick J.
Bresnan, Eric D. Cunningham, Andrew C. Kober and Gareth P. McIntosh are each
limited partners of BCI Management, L.P. and may be deemed to own
beneficially corresponding interests in the Company. The above individuals
disclaim any such beneficial interest. The limited partner interests were
granted as of May [ ], 1996 and may represent interests in either the
capital or profits and losses of BCI Management, L.P.
RIGHTS OF FIRST REFUSAL
In general, the Agreement of Limited Partnership of BCC Holding provides
that if any limited partner desires to transfer (other than by gift, will or
pursuant to the laws of descent and distribution) all or any part of its limited
partner interest in BCC Holding to any person other than to certain permitted
transferees specified in the agreement, then such selling limited partner must
first offer to sell such limited partnership interest to the other partners in
BCC Holding on the same terms as the proposed transfer. In addition, in the
event William J. Bresnan desires to effect such a transfer of his entire limited
partner interest in each of BCC Holding and the Company, each of BCI (USA), L.P.
and BCI Management, L.P. are obligated to offer to TCID its entire interest in
BCC Holding on the same terms as the proposed transfer by William J. Bresnan and
to sell such interests to TCID if TCID exercises its right to purchase William
J. Bresnan's aggregate interest in BCC Holding and the Company. See "Description
of Partnership Agreements -- BCC Holding's Partnership Agreement -- Rights of
First Refusal."
In general, the Amended and Restated Agreement of Limited Partnership of
the Company provides that if any limited partner desires to transfer (other than
by gift, will or pursuant to the laws of descent and distribution) all or any
part of its limited partner interest in the Company to any person other than
certain permitted transferees specified in the agreement, then such selling
limited partner must first offer to sell such limited partnership interest to
the other partners in the Company on the same terms as the proposed transfer.
See "Description of Partnership Agreements -- The Company's Partnership
Agreement -- Rights of First Refusal."
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DESCRIPTION OF PARTNERSHIP AGREEMENTS
BCC HOLDING'S PARTNERSHIP AGREEMENT
Organization and Duration. BCC Holding was formed as a limited partnership
pursuant to the provisions of the Delaware Revised Uniform Limited Partnership
Act (the "Partnership Act"), and a Certificate of Limited Partnership of BCC
Holding was filed with the Secretary of State of the State of Delaware on April
23, 1996. The purposes of BCC Holding as set forth in the Agreement of Limited
Partnership of Bresnan Communications Company Holding, L.P. (the "Partnership
Agreement") are to develop, acquire, finance, own, maintain, manage, operate and
otherwise participate in cable television, telephony-related and other
telecommunications opportunities in the United States of America, and any
products and services emanating from new technologies relating thereto (or to
hold, own or manage interests in the Company or other entities formed to carry
out such purposes). The Partnership Agreement further provides, without limiting
the foregoing, that BCC Holding's business is to include expressly (i) the
financing, ownership, maintenance, management and operation of one or more cable
television systems or properties used to receive and transmit television signals
in the United States of America (each, a "CATV System"); (ii) owning and
operating any other business relating to or servicing the cable television
industry, or otherwise relating to any telecommunications business and all
things reasonably incident thereto; and (iii) investing in the development of
telecommunications projects in the United States of America including as joint
venturers or through operating partnerships or subsidiaries and holding
companies and including investments as a partner, shareholder or otherwise with
respect to partnerships and corporate ventures with companies in the United
States of America (BCC Holding's interest in any business as described under
clause (ii) above and BCC Holding's investment in projects and other companies
described under clause (iii) above each being an "Investment").
Pursuant to the Partnership Agreement, BCC Holding is to continue in
existence until the earliest to occur of (i) the expiration of BCC Holding's
term on December 31, 2014; (ii) the election by its executive committee, with
the consent of the holders of not less than 75% of the Percentage Interests
(i.e., the economic and voting interests) of the limited partners of BCC Holding
(as defined in the Partnership Agreement), to dissolve BCC Holding; (iii) the
sale, exchange or other disposition of all or substantially all of the property
of BCC Holding; (iv) except as provided in the Partnership Act, the bankruptcy,
dissolution, liquidation, death, disability, legal incapacity, removal or
withdrawal of the managing general partner of BCC Holding (the "MGP") or the
sale, transfer or assignment by the MGP of its interest in BCC Holding, except
where the remaining general partners, or at least the remaining partners holding
a majority of the profits and a majority of the capital interests owned by all
of the remaining partners, agree to continue BCC Holding and appoint a new
managing general partner; or (v) any other event causing dissolution of the
partnership under the Partnership Act.
Allocations and Distributions. The Partnership Agreement provides that
Profit (as defined in the Partnership Agreement) is to be allocated among the
partners of BCC Holding (i) first, to offset previously allocated Loss (as
defined in the Partnership Agreement), and (ii) second, in accordance with the
partners' Percentage Interests. Subject to the provisions of any instrument
evidencing indebtedness of BCC Holding, BCC Holding may make distributions to
its partners out of funds which the MGP determines in good faith to be
available. Such discretionary distributions may be made at such times and in
such amounts as BCC Holding's general partners may determine in their sole
discretion. Subject to the provisions of any instrument evidencing indebtedness
of BCC Holding, BCC Holding is required to distribute to each partner within 90
days after the end of each year an amount equal to 45.0% of the net taxable
income of such partner which is attributable to such partner's allocations from
BCC Holding for the immediately preceding year, less the amount of any tax
credits or tax recapture allocable to such partner with respect to its income
for such year (the "Tax Amount"). Mandatory distributions for purposes of a
partner's Tax Amount are to be made out of BCC Holding's available funds.
Distributions other than upon liquidation of BCC Holding are to be made
pursuant to the Partnership Agreement with respect to any fiscal year to the
partners in accordance with the partners' Percentage Interests.
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Control of Operations. The business and operations of BCC Holding are
managed by BCI (USA), L.P., its MGP, subject to its executive committee's final
review and approval with respect to certain management decisions and actions by
or affecting BCC Holding, including, but not limited to, the approval of and
changes to BCC Holding's capital and operating budgets. The executive committee
of BCC Holding is comprised of four representatives, two of whom are designees
of BCI (USA), L.P. and two of whom are designees of TCID or an affiliate
thereof. The executive committee acts by the unanimous vote of its members. See
"-- Consent Rights of Partners and the Executive Committee."
The Partnership Agreement contemplates that the certain management and
administrative services will be provided to BCC Holding by BCI and BMSI pursuant
to the Management Agreement and the Administration Agreement. William J. Bresnan
controls both BCI and BMSI.
Consent Rights of Partners and the Executive Committee.
Matters Subject to Partner Consent. Certain matters are subject to receipt
of the requisite consent of the partners of BCC Holding, as follows: (i) the
requirement or right of any partner to contribute additional capital to BCC
Holding, as to which the consent of all of the partners is required; (ii) any
dissolution of BCC Holding following an election made by its executive committee
to do so, as to which the consent of holders of not less than 75% of the
Percentage Interests of the limited partners is required; and (iii) the adoption
and effectiveness of any amendment of the Partnership Agreement, as to which the
consent of the holders of not less than a majority of the Percentage Interests
held by the limited partners is required, provided that the general partners
must also consent to any proposed amendments to the Partnership Agreement, and
provided, further, that the unanimous consent of all partners is required to
amend provisions of the Partnership Agreement pertaining to (a) amendment
procedure, (b) increasing the liability of or changing the capital contributions
required to be made by any partner, (c) changing the rights and interests of a
partner in a taxable income or loss, (d) distributions of BCC Holding, (e) the
voting rights of any partner, (f) the rights of any partner respecting
reconstitution or liquidation of BCC Holding or (g) any action directly or
indirectly affecting or jeopardizing the status of BCC Holding as a partnership
for federal income tax purposes.
Matters Subject to Executive Committee Approval. The unanimous vote of the
members of the executive committee of BCC Holding is required with respect to
each of the following actions by or affecting BCC Holding, unless such actions
are specifically provided for in a budget that has been previously approved by
the executive committee of BCC Holding: (i) the sale, pledge or encumbrance of
any significant assets of BCC Holding; (ii) any distributions to the partners
pursuant to the Partnership Agreement; (iii) the borrowing of any money, the
creation or grant of any mortgage, charge, use, hypothecation, lien (other than
a lien arising by operation of law), or other similar security involving any
material property or assets of BCC Holding, a CATV System, or any Investment, or
any interest in such property or assets, including goodwill and uncalled
capital, where the total liability of BCC Holding, any CATV System or any
Investment under such arrangement exceeds or could exceed $10.0 million; (iv)
the adoption of annual operating and capital budgets of BCC Holding; (v) any
material change in the nature of BCC Holding or its business; (vi) the
acquisition, purchase or subscription (or agreement to do any of the foregoing)
by BCC Holding, of or for any shares, debentures, mortgages or securities in any
corporation, joint venture, trust or other entity; (vii) the termination and
dissolution or liquidation of BCC Holding or any company which is an Investment,
or of any material part thereof; (viii) material revisions to any approved
budgets and the payment of any material unbudgeted amounts in any calendar year;
(ix) proposed acquisitions, dispositions, investments and joint ventures by BCC
Holding; (x) the admission of new partners into BCC Holding and the amount of
any such partner's contribution and Percentage Interest; (xi) the disposition,
directly or indirectly, of any material interest in a license, franchise or
similar rights with respect to any CATV System or Investment having a value of
$10.0 million or more; (xii) any transfer of a material interest in a CATV
System or Investment, or any sale, transfer, lease, license or other disposal by
BCC Holding or a CATV System or a company which is an Investment, of material
assets, whether in a single transaction or series of transactions, having a
value of $10.0 million or more; (xiii) any changes to or termination of the
Partnership Agreement, the management agreement
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or the administration agreement (except termination in accordance with their
respective terms); (xiv) the execution or conclusion of any material agreement
with any partner or any affiliate of a partner (other than the management
agreement or the administration agreement); (xv) the giving of any credit to any
person in excess of $100,000 at any time outstanding; (xvi) except in connection
with an approved acquisition or investment approved by the Executive Committee,
the giving of any guarantee or indemnity on behalf of BCC Holding, or any CATV
System or Investment regarding any aggregate amount in excess of $5.0 million;
and (xvii) the entering into by BCC Holding or by any company which is an
Investment of any material contract, including any joint venture, partnership or
profit-sharing arrangement with any person.
Buy-Sell Procedure. The Partnership Agreement sets forth a "buy-sell"
procedure which may be commenced at any time after December 31, 2000 by either
general partner of BCC Holding. Pursuant to the buy-sell procedure either of BCI
(USA), L.P. or TCID could be required to sell its own or to purchase from the
other (or to cause its designee to so purchase) the Percentage Interest held
thereby: either such party may elect to purchase the other's entire interest in
BCC Holding, in which event the other has the option to sell such other party's
entire interest in BCC Holding, or to purchase from the initiating party its
entire interest in BCC Holding. The buy-sell procedure is automatically deemed
triggered in the event of an unresolved deadlock of the executive committee of
BCC Holding involving disagreements over matters other than the parties' rights
and obligations under the Partnership Agreement (such as unresolved deadlocks
regarding BCC Holding's business strategy or disagreements regarding capital
contributions to BCC Holding). Unresolved deadlocks involving disagreements over
the parties' rights and obligations under the Partnership Agreement shall be
submitted to arbitration pursuant to the terms of the Partnership Agreement.
Rights of First Refusal. In general, the Partnership Agreement provides
that if any limited partner desires to transfer (other than by gift, will or
pursuant to the laws of descent and distribution) all or any part of its limited
partner interest in BCC Holding to any person other than to certain permitted
transferees specified in the Partnership Agreement, then such selling limited
partner must first offer to sell such limited partnership interest to the other
partners in BCC Holding on the same terms as the proposed transfer. In addition,
in the event William J. Bresnan desires to effect such a transfer of his entire
limited partner interest in each of BCC Holding and the Company, each of BCI
(USA), L.P. and BCI Management, L.P. are obligated to offer to TCID its entire
interest in BCC Holding on the same terms as the proposed transfer by William J.
Bresnan and to sell such interests to TCID if TCID exercises its right to
purchase William J. Bresnan's aggregate interest in BCC Holding and the Company.
Transfer Restrictions. In general, (i) a limited partner may transfer all
or any part of its interest in BCC Holding to certain affiliates only with the
consent of the general partners owning a majority of the Percentage Interests in
BCC Holding, (ii) subject to the rights of first refusal discussed above (and
subject to certain special rights afforded William J. Bresnan which are
described below), a limited partner may transfer all or any part of its interest
in BCC Holding to non-affiliates only with the consent of the general partners
owning a majority of the Percentage Interests in BCC Holding and provided that
such transfer would not result in the termination or revocation of any franchise
in which BCC Holding directly or indirectly owns an interest, (iii) William J.
Bresnan may transfer to certain permitted transferees, without the consent of
any other partners, all or any part of a portion of his Percentage Interest in
BCC Holding equal to an amount not to exceed, in the aggregate, 10.10% of the
total Percentage Interests held by all partners, and (iv) subject to the
buy-sell procedures discussed above, a general partner may transfer all or any
part of its Percentage Interest in BCC Holding to certain affiliates without the
consent of the other partners, provided, that, TCID may not transfer all or any
part of a portion of its Percentage Interest equal to 11.11% of the total
Percentage Interests held by all partners.
THE COMPANY'S PARTNERSHIP AGREEMENT
Organization and Duration. The Company was formed as a limited partnership
pursuant to the provisions of the Michigan Revised Uniform Limited Partnership
Act (the "Michigan Partnership Act"), and a Certificate of Limited Partnership
of the Company was filed with the Michigan Department of
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Commerce on October 31, 1984. The purposes of the Company as set forth in the
Amended and Restated Agreement of Limited Partnership of Bresnan Communications
Company Limited Partnership (the "Company Partnership Agreement") are to
develop, acquire, finance, own, maintain, manage, operate and otherwise
participate in cable television, telephony-related and other telecommunications
opportunities in the United States of America, and any products and services
emanating from new technologies relating thereto (or to hold, own or mange
interests in other entities formed to carry out such purposes). The Company
Partnership Agreement further provides, without limiting the foregoing, that the
Company's business is to include expressly (i) the financing, ownership,
maintenance, management and operation of one or more CATV Systems, (ii) owning
and operating any other business relating to or servicing the cable television
industry, or otherwise relating to any telecommunications business and all
things reasonably incident thereto, and (iii) investing in the development of
telecommunications projects in the United States of America including as joint
venturers or through operating partnerships or subsidiaries and holding
companies and including investments as a partner, shareholder or otherwise with
respect to partnerships and corporate ventures with companies in the United
States of America (the Company's interest in any business as described under
clause (ii) above and the Company's investment in projects and other companies
described under clause (iii) above each being a "Company Investment").
Pursuant to the Company Partnership Agreement, the Company is to continue
in existence until the earliest to occur of (i) the expiration of the Company's
term on December 31, 2014; (ii) the election by the Executive Committee, with
the consent of the sole general partner of the Company (the "GP"), to dissolve
the Company; (iii) the sale, exchange or other disposition of all or
substantially all of the property of the Company; (iv) except as provided in the
Michigan Partnership Act, the bankruptcy, dissolution, liquidation, death,
disability, legal incapacity, removal or withdrawal of the GP or the sale,
transfer or assignment by the GP of its interest in the Company, except where
the remaining partners, or at least the remaining partners holding a majority of
the profits and a majority of the capital interests owned by all of the
remaining partners, agree to continue the Company and appoint a new GP; or (v)
any other event causing dissolution of the Company under the Michigan
Partnership Act.
Allocations and Distributions. The Company Partnership Agreement provides
that Profit (as defined in the Company Partnership Agreement) is to be allocated
among the partners of the Company (i) first, to offset previously allocated Loss
(as defined in the Company Partnership Agreement), and (ii) second, in
accordance with the Percentage Interests (i.e., the economic and voting
interests) of the partners (as defined in the Company Partnership Agreement).
Subject to the provisions of any instrument evidencing indebtedness of the
Company, the Company may make distributions to its partners out of funds which
the GP determines in good faith to be available. Such discretionary
distributions may be made at such times and in such amounts as the GP may
determine in its sole discretion. Subject to the provisions of any instrument
evidencing indebtedness of the Company, the Company is required to distribute to
each partner within 90 days after the end of each year an amount equal to 45.0%
of the net taxable income of such partner which is attributable to such
partner's allocations from the Company for the immediately preceding year, less
the amount of any tax credits or tax recapture allocable to such partner with
respect to its income for such year (the "Company Tax Amount"). Mandatory
distributions for purposes of a partner's Company Tax Amount are to be made out
of the Company's available funds. Under the Company Partnership Agreement, TCID
may elect to waive any mandatory distributions payable to it in respect of its
Company Tax Amount and instead to receive such amounts in partial repayment of
any TCID subordinated debt, including any accrued but unpaid interest thereon.
Distributions other than upon liquidation of the Company are to be made
pursuant to the Company Partnership Agreement with respect to any fiscal year to
the partners in the following manner: (i) first, after payment of any amounts
payable pursuant to the foregoing paragraph, by payment of the remaining
available funds to TCID to reduce the outstanding principal amount of and any
accrued interest on any TCID subordinated debt, and (ii) thereafter, in
accordance with the partners' Percentage Interests.
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Control of Operations. The business and operations of the Company are
managed by BCC Holding, its GP, subject to the Executive Committee's final
review and approval with respect to certain management decisions and actions by
or affecting the Company, including, but not limited to, the approval of and
changes to the Company's capital and operating budgets. The Executive Committee
is comprised of four representatives, two of whom are designees of BCI (USA),
L.P. and two of whom are designees of TCID or an affiliate thereof. The
Executive Committee acts by the unanimous vote of its members. Prior to the
reorganization of the ownership of the Company, the business and operations of
the Company were managed by BCI (USA), L.P. acting as managing general partner
of the Company, subject to Executive Committee review and approval of certain
management decisions and actions affecting the Company. See "-- Consent Rights
of Partners and the Executive Committee."
The Company Partnership Agreement contemplates that certain management and
administrative services will be provided to the Company by BCI and BMSI pursuant
to the Management Agreement and the Administration Agreement. William J. Bresnan
controls both BCI and BMSI. See "Certain Relationships and Related
Transactions."
Consent Rights of Partners and the Executive Committee.
Matters Subject to Partner Consent. Certain matters are subject to receipt
of the requisite consent of the partners of the Company, as follows: (i) the
requirement or right of any partner to contribute additional capital to the
Company, as to which the consent of all of the partners is required; (ii) any
dissolution of the Company following an election made by the Executive Committee
to do so, as to which the consent of the GP is required; and (iii) the adoption
and effectiveness of any amendment of the Company Partnership Agreement, as to
which the consent of the GP is required.
Matters Subject to Executive Committee Approval. The unanimous vote of the
members of the Executive Committee is required with respect to each of the
following actions by or affecting the Company, unless such actions are
specifically provided for in a budget that has been previously approved by the
Executive Committee: (i) the sale, pledge or encumbrance of any significant
assets of the Company; (ii) any distributions to the partners pursuant to the
Company Partnership Agreement; (iii) the borrowing of any money, the creation or
grant of any mortgage, charge, use, hypothecation, lien (other than a lien
arising by operation of law), or other similar security involving any material
property or assets of the Company, a CATV System, or any Company Investment, or
any interest in such property or assets, including goodwill and uncalled
capital, where the total liability of the Company, any CATV System or any
Company Investment under such arrangement exceeds or could exceed $10.0 million;
(iv) the adoption of annual operating and capital budgets of the Company; (v)
any material change in the nature of the Company or its business; (vi) the
acquisition, purchase or subscription (or agreement to do any of the foregoing)
by the Company, of or for any shares, debentures, mortgages or securities in any
corporation, joint venture, trust or other entity; (vii) the termination and
dissolution or liquidation of the Company or any company which is a Company
Investment, or of any material part thereof; (viii) material revisions to any
approved budgets and the payment of any material unbudgeted amounts in any
calendar year; (ix) proposed acquisitions, dispositions, investments and joint
ventures by the Company; (x) the admission of new partners into the Company and
the amount of any such partner's contribution and Percentage Interest; (xi) the
disposition, directly or indirectly, of any material interest in a license,
franchise or similar rights with respect to any CATV System or Company
Investment having a value of $10.0 million or more; (xii) any transfer of a
material interest in a CATV System or Company Investment, or any sale, transfer,
lease, license or other disposal by the Company or a CATV System or a company
which is a Company Investment, of material assets, whether in a single
transaction or series of transactions, having a value of $10.0 million or more;
(xiii) any changes to or termination of the Company Partnership Agreement, the
Management Agreement or the Administration Agreement (except termination in
accordance with their respective terms); (xiv) the execution or conclusion of
any material agreement with any partner or any affiliate of a partner (other
than the Management Agreement or the Administration Agreement); (xv) the giving
of any credit to any person in excess of $100,000 at any time outstanding; (xvi)
except in connection with an approved acquisition or investment approved by the
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Executive Committee, the giving of any guarantee or indemnity on behalf of the
Company, or any CATV System or Company Investment regarding any aggregate amount
in excess of $5.0 million; and (xvii) the entering into by the Company or by any
company which is a Company Investment of any material contract, including any
joint venture, partnership or profit-sharing arrangement with any person.
Rights of First Refusal. In general, the Company Partnership Agreement
provides that if any limited partner desires to transfer (other than by gift,
will or pursuant to the laws of descent and distribution) all or any part of its
limited partner interest in the Company to any person other than certain
permitted transferees specified in the Company Partnership Agreement, then such
selling limited partner must first offer to sell such limited partnership
interest to the other partners in the Company on the same terms as the proposed
transfer.
Transfer Restrictions. In general, (i) a limited partner may transfer all
or any part of its interests in the Company to certain affiliates only with the
consent of the GP, (ii) subject to the rights of first refusal discussed above,
a limited partner may transfer all or any part of its interest in the Company to
non-affiliates only with the consent of the GP and provided that such transfer
would not result in the termination or revocation of any franchise in which the
Company directly or indirectly owns an interest, and (iii) the GP may transfer
all or any part of its interest in the Company to certain affiliates only with
the consent of William J. Bresnan or certain permitted transferees.
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DESCRIPTION OF BANK CREDIT FACILITY
As of July 25, 1994, the Company and a group of banks entered into the Bank
Credit Facility pursuant to which such banks committed to lend to the Company up
to $225.0 million. The Bank Credit Facility provides for a revolving credit
facility through January 25, 1997. The Bank Credit Facility converts into a term
loan on January 25, 1997 and amounts outstanding at such time are then payable
in quarterly installments through June 30, 2003. Advances under the Bank Credit
Facility bear interest at either LIBOR plus 1.75% or the prime rate plus 0.75%,
with provision for certain performance-based interest-rate reductions during the
term of the agreement. Advances can be prepaid at any time upon prior written
notice, without penalty or premium. The aggregate amounts outstanding under the
Bank Credit Facility, excluding accrued interest, are expected to be
approximately $19.8 million as of the closing of the Offerings. The Company pays
commitment fees of .375% per annum on the unused principal amounts of the
Available Commitment under the Bank Credit Facility, as well as an annual agency
fee. A guarantee of borrowings made by the Company under the Bank Credit
Facility in the amount of $3.0 million has been provided by William J. Bresnan.
The commitment given by the lenders pursuant to the Bank Credit Facility will be
permanently reduced by the amount of the proceeds of any permitted sale of
assets of the Company, excluding the first $10.0 million of such sales so long
as the proceeds thereof are used for acquisitions within one year of the date of
such sales.
The Bank Credit Facility prohibits the Company from (i) having a Funded
Debt to Annualized Operating Cash Flow ratio in excess of 5.75:1 through
December 31, 1996, and declining thereafter to 4.00:1 beginning on January 1,
2000; (ii) having an Annualized Operating Cash Flow to Pro Forma Interest
Expense ratio of less than 1.75:1; (iii) having an Annualized Operating Cash
Flow to Fixed Charges Ratio of less than 1.00:1 commencing January 1, 1997; (iv)
having an Annualized Operating Cash Flow to Pro Forma Debt Service ratio of less
than 1.10:1; and (v) making capital expenditures in excess of $20.0 million plus
certain amounts carried over from the previous year in calendar year 1996. In
addition, the Bank Credit Facility contains restrictions on the Company with
respect to the ability of the Company to pledge its assets, dispose of assets or
merge, incur indebtedness, pay dividends, repurchase or redeem equity interests
and indebtedness, create liens and make certain investments or acquisitions. The
Bank Credit Facility requires the consent of the lenders thereunder whose
aggregate commitment equals at least 66 2/3% of the total commitment to make
acquisitions in excess of $10.0 million. Pursuant to the Bank Credit Facility,
the Company may only pay dividends or make distributions out of Excess Cash Flow
on its securities so long as it makes an equal prepayment under the Bank Credit
Facility. In addition, it is an event of default under the Bank Credit Facility
if any entity effectively controlled by William J. Bresnan or TCI ceases to be a
general partner of the Company or if the Company loses any franchise or
franchises that account for 10% or more of Annualized Operating Cash Flow. See
"Risk Factors -- Bank Credit Facility; Change of Control." Terms capitalized but
not defined above have the meanings assigned to them in the Bank Credit
Facility.
In connection with the Offerings, the Company will enter into an agreement
with its lenders amending certain of the covenants contained in the Bank Credit
Facility. Following such amendment, BCC Holding's ability to incur additional
indebtedness will also be restricted by the Bank Credit Facility.
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DESCRIPTION OF NOTES
The Notes will be issued under an indenture to be dated as
of , 1996 (the "Indenture"), among the Company and Bresnan
Capital Corporation ("BCC," and together with the Company, the "Issuers") and
, as Trustee (the "Trustee"). A copy of the form of Indenture has
been filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. The Indenture is subject to and is governed by the Trust Indenture
Act of 1939, as amended (the "1939 Act"). The following summaries of certain
provisions of the Notes and the Indenture do not purport to be complete and are
subject, and are qualified in their entirety by reference, to the 1939 Act and
to all the provisions of the Notes and the Indenture, including the definitions
therein of certain terms. Wherever particular sections or defined terms of the
Notes or the Indenture are referred to herein, such sections or defined terms
are incorporated by reference herein. Certain terms used in this section are
defined under "-- Certain Definitions."
GENERAL
The Notes will be the joint and several obligations of the Company and BCC.
BCC is a Wholly Owned Subsidiary of the Company, has nominal assets and does not
conduct any operations. The Company is a Subsidiary of Bresnan Communications
Company Holding, L.P. ("BCC Holding").
The Notes will mature on , 2006, and will be limited to an
aggregate principal amount of $100.0 million. The Notes will bear interest at
the rate per annum set forth on the cover page of this Prospectus from the date
of issuance, or from the most recent interest payment date to which interest has
been paid, payable semiannually on and of each year,
beginning on , 1996, to the persons who are registered holders
of the Notes (or any predecessor Notes) at the close of business on the
preceding or , as the case may be.
Principal of, premium, if any, and interest on the Notes will be payable in
immediately available funds, and the Notes will be exchangeable and
transferable, at an office or agency of the Issuers, one of which will be
maintained for such purpose in The City of New York (which initially will be the
corporate trust office of the Trustee) or such other office or agency permitted
under the Indenture; provided, however, that payment of interest may be made at
the option of the Issuers by check mailed to the person entitled thereto as
shown on the security register. The Notes will be issued only in fully
registered form without coupons, in denominations of $1,000 or any integral
multiple thereof. No service charge will be made for any registration of
transfer or exchange of Notes, except for any tax or other governmental charge
that may be imposed in connection therewith.
Settlement for the Notes will be made by the Underwriters in immediately
available funds. The Notes will trade in The Depository Trust Company's Same-Day
Funds Settlement System until maturity, and secondary market trading activity in
the Notes will therefore settle in immediately available funds on trading
activity in the Notes.
RANKING
The Notes will be senior unsecured, joint and several obligations of the
Issuers, will rank pari passu in right of payment with all existing and future
senior indebtedness of the Issuers, including indebtedness pursuant to the Bank
Credit Facility, and will be senior in right of payment to any future
subordinated indebtedness of the Issuers. BCC has no, and the terms of the
Indenture prohibit it from having any, obligations other than the Notes. As of
March 31, 1996, after giving effect to the Offerings and the application of the
net proceeds thereof, the total indebtedness of the Company would have been
approximately $109.7 million. At such date, after giving effect to the Offerings
and the application of the net proceeds thereof, the Company would have had
approximately $2.2 million of indebtedness subordinated to the Notes.
In addition, all existing and future indebtedness and other liabilities of
the Company's Subsidiaries will be effectively senior in right of payment to the
Notes. Other than BCC, the Company has no
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Subsidiaries. The Company has, and in the future its Subsidiaries may have,
other liabilities, including contingent liabilities, which may be significant.
Although the Indenture contains limitations on the amount of additional
Indebtedness which the Company and its Restricted Subsidiaries may Incur, the
amounts of such Indebtedness could be substantial and, in any case, all of such
Indebtedness may be Indebtedness of Subsidiaries of the Company (which will be
effectively senior in right of payment to the Notes). See "-- Certain
Covenants". Moreover, claims of creditors of the Company's Subsidiaries,
including trade creditors, and holders of Preferred Equity Interests in the
Company's Subsidiaries, if any, will generally have a priority as to the assets
of such Subsidiaries over the claims of the Company.
The Notes are obligations exclusively of the Issuers. In the event that the
operations of the Company are in the future conducted through Subsidiaries, the
Company's cash flow and the consequent ability to service its debt, including
the Notes, will be dependent upon the earnings of its Subsidiaries and the
distribution of those earnings to, or upon loans or other payments of funds by
those Subsidiaries to, the Company. The payment of dividends and the making of
loans and advances to the Company by its Subsidiaries may be subject to
statutory or contractual restrictions, will be dependent upon the earnings of
those Subsidiaries and will be subject to various business considerations.
OPTIONAL REDEMPTION
The Notes will not be redeemable prior to , . At
any time on or after , , and prior to maturity, the
Notes will be redeemable at the option of the Issuers, in whole or in part, on
not less than 30 nor more than 60 days' notice, at the following redemption
prices (expressed as percentages of principal amount), plus accrued and unpaid
interest, if any, to the date of redemption:
If redeemed during the 12-month period commencing of the
year indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
--------------------------------------------------------------- ----------
<S> <C>
... %
... %
... %
</TABLE>
and thereafter, beginning , , at 100% of the principal amount of
the Notes.
In the event of redemption of fewer than all the Notes, the Trustee shall
select by lot or in such manner as it shall deem fair and equitable the Notes to
be redeemed. On and after any redemption date, interest will cease to accrue on
the Notes or portions thereof called for redemption unless the Company shall
fail to redeem any such Notes.
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
PURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Notes shall have
the right to require the Issuers to purchase all or any part (equal to $1,000 or
an integral multiple thereof) of such holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at a purchase price equal to
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the purchase date (the "Change of Control Payment").
Within 30 days following any Change of Control, the Issuers shall (i) cause
a notice of the Change of Control Offer to be sent at least once to the Dow
Jones News Service or similar business news service in the United States and
(ii) mail a notice to each holder of Notes stating: (1) that a Change of Control
has occurred and a Change of Control Offer is being made pursuant to the
covenant entitled "Purchase at the
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Option of Holders Upon a Change of Control" and that, subject to the terms and
conditions set forth herein, all Notes timely tendered will be accepted for
payment; (2) the purchase price and the purchase date, which shall be, subject
to any contrary requirements of applicable law, no earlier than 30 days nor
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"); (3) that any Note (or portion thereof) accepted for payment (and
duly paid on the Change of Control Payment Date) pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control Payment
Date; (4) that any Notes (or portions thereof) not tendered will continue to
accrue interest; (5) a description of the transaction or transactions
constituting the Change of Control; and (6) the procedures that holders of Notes
must follow in order to tender their Notes (or portions thereof) for payment and
the procedures that holders of Notes must follow in order to withdraw an
election to tender Notes (or portions thereof) for payment.
The Issuers will comply, to the extent applicable, with the requirements of
Rule 14e-1 under the Exchange Act, and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the purchase of Notes in connection with a Change of Control. To the extent
that the provisions of any securities laws or regulations conflict with the
provisions relating to the Change of Control Offer, the Issuers will comply with
the applicable securities laws and regulations and will not be deemed to have
breached their obligations described above by virtue thereof.
Except as described herein with respect to a Change of Control, the
Indenture does not contain any provisions that permit the holders of the Notes
to require that the Issuers purchase or redeem the Notes in the event of a
takeover, recapitalization or similar restructuring.
The Change of Control purchase feature is the result of negotiations among
the Issuers and the Underwriters. Management has no present intention to engage
in a transaction involving a Change of Control, although it is possible that the
Company or BCC Holding could decide to do so in the future. Subject to the
limitations discussed below, the Company or BCC Holding could, in the future,
enter into certain transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control under the
Indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect the Company's capital structure or credit ratings.
Restrictions on the ability of the Company and its Restricted Subsidiaries to
Incur additional Indebtedness are contained in the covenants described under
"-- Certain Covenants -- Limitation on Indebtedness" and "-- Certain
Covenants -- Limitation on Liens." Such restrictions can only be waived with the
consent of the registered holders of a majority in principal amount of the Notes
then outstanding. Except for the limitations contained in such covenants,
however, the Indenture will not contain any covenants or provisions that may
afford holders of the Notes protection in the event of a highly leveraged
transaction.
There can be no assurance that the Issuers will be able to fund any
purchase of the Notes upon a Change of Control.
"Change of Control" means either of (i) such time as Tele-Communications,
Inc. ceases, directly or indirectly, including by way of a consolidation or
merger involving the Company or BCC Holding (a) either (1) to have the
contractual right to designate at least 50% of the members of the Executive
Committee or (2) to be the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of a majority of the Voting Equity Interests in the Company or
(b) to be the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act) of more than 66 2/3% of the total Equity Interests in the Company, such
Equity Interests to be calculated without giving effect to dilution caused by
the issuance of Equity Interests pursuant to underwritten public offerings by
the Company or the General Partner registered under the Securities Act;
provided, however, that a Change of Control shall in any event be deemed to have
occurred if Tele-Communications, Inc. for any reason ceases, directly or
indirectly, to be the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of a majority of the total Equity Interests in the Company or (ii)
such time as the Company sells, conveys, transfers or leases, directly or
indirectly, including through a liquidation or dissolution, all or substantially
all of its Property (other than a transfer of such Property as an entirety or
virtually as an entirety to one or more of (1) Tele-
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Communications, Inc., (2) any Subsidiary of Tele-Communications, Inc., (3) BCC
Holding or (4) a Wholly Owned Subsidiary of the Company).
BOOK-ENTRY SYSTEM
The Notes will initially be issued in the form of a Global Security (as
defined in the Indenture). Accordingly, The Depository Trust Company ("DTC") or
its nominee will initially be the sole registered holder of the Notes for all
purposes under the Indenture.
Upon the issuance of a Global Security, DTC or its nominee will credit the
accounts of persons holding through it with the respective principal amounts of
the Notes represented by such Global Security purchased by such persons in the
Offering. Such accounts shall be designated by the Underwriters with respect to
Notes placed by the Underwriters for the Company. Ownership of beneficial
interests in a Global Security will be limited to persons that have accounts
with DTC ("participants") or persons that may hold interests through
participants. Ownership of beneficial interests by participants in a Global
Security will be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by DTC for such Global Security.
Ownership of beneficial interests in such Global Security by persons that hold
through participants will be shown on, and the transfer of that ownership
interest within such participant will be effected only through, records
maintained by such participant. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security.
Payment of principal and interest on Notes represented by any such Global
Security will be made to DTC or its nominee, as the case may be, as the sole
registered owner and the sole holder of the Notes represented thereby for all
purposes under the Indenture. None of the Issuers, the Trustee, any agent of the
Issuers, or the Underwriters will have any responsibility or liability for any
aspect of DTC's records relating to or payments made on account of beneficial
ownership interests in a Global Security representing any Notes or for
maintaining, supervising, or reviewing any of DTC's records relating to such
beneficial ownership interests.
The Issuers have been advised by DTC that upon receipt of any payment of
principal of, or interest on, any Global Security, DTC will immediately credit,
on its book-entry registration and transfer system, the accounts of participants
with payments in amounts proportionate to their respective beneficial interests
in the principal or face amount of such Global Security as shown on the records
of DTC. Payments by participants to owners of beneficial interests in a Global
Security held through such participants will be governed by standing
instructions and customary practices as is now the case with securities held for
customer accounts registered in "street name" and will be the sole
responsibility of such participants.
A Global Security may not be transferred except as a whole by DTC or a
nominee of DTC to a nominee of DTC. A Global Security is exchangeable for
certificated Notes only if (i) DTC notifies the Issuers that it is unwilling or
unable to continue as a depositary for such Global Security or if at any time
DTC ceases to be a clearing agency registered under the Exchange Act, (ii) the
Issuers execute and deliver to the Trustee a notice that such Global Security
shall be so transferable, registrable, and exchangeable, and such transfers
shall be registrable or (iii) there shall have occurred and be continuing a
Default or an Event of Default with respect to the Notes represented by such
Global Security. Any Global Security that is exchangeable for certificated Notes
pursuant to the preceding sentence will be transferred to, and registered and
exchanged for, certificated Notes in authorized denominations and registered in
such names as DTC or any successor depositary holding such Global Security may
direct. Subject to the foregoing, a Global Security is not exchangeable, except
for a Global Security of like denomination to be registered in the name of DTC
or any successor depositary or its nominee. In the event that a Global Security
becomes exchangeable for certificated Notes, (i) certificated Notes will be
issued only in fully registered form in denominations of $1,000 or integral
multiples thereof, (ii) payment of principal, any repurchase price, and interest
on the certificated Notes will be payable, and the transfer
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<PAGE> 76
of the certificated Notes will be registerable, at the office or agency of the
Issuers maintained for such purposes and (iii) no service charge will be made
for any registration of transfer or exchange of the certificated Notes, although
the Issuers may require payment of a sum sufficient to cover any tax or
governmental charge imposed in connection therewith.
So long as DTC or any successor depositary for a Global Security, or any
nominee, is the registered owner of such Global Security, DTC or such successor
depositary or nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by such Global Security for the purposes of
receiving payment on the Notes, receiving notices, and for all other purposes
under the Indenture and the Notes. Beneficial interests in Notes will be
evidenced only by, and transfers thereof will be effected only through, records
maintained by DTC or any successor depositary and its participants. Cede & Co.
has been appointed as the nominee of DTC. Except as provided above, owners of
beneficial interests in a Global Security will not be entitled to and will not
be considered the holders thereof for any purposes under the Indenture.
Accordingly, each person owning a beneficial interest in a Global Security must
rely on the procedures of DTC or any successor depositary, and, if such person
is not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a holder under the
Indenture. The Issuers understand that under existing industry practices, in the
event that the Issuers request any action of holders or that an owner of a
beneficial interest in a Global Security desires to give or take any action
which a holder is entitled to give or take under the Indenture, DTC or any
successor depositary would authorize the participants holding the relevant
beneficial interest to give or take such action and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
DTC has advised the Issuers that DTC is a limited-purpose trust company
organized under the Banking Law of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered under the
Exchange Act. DTC was created to hold the securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. DTC's participants include securities brokers and
dealers (including the Underwriters), banks, trust companies, clearing
corporations, and certain other organizations some of whom (and/or their
representatives) own DTC. Access to DTC's book-entry system is also available to
others, such as banks, brokers, dealers, and trust companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly.
CERTAIN COVENANTS
Set forth below are certain covenants contained in the Indenture. During
any period of time that (i) the ratings assigned to the Notes by both of the
Rating Agencies are Investment Grade Ratings and (ii) no Default or Event of
Default has occurred and is continuing under the Indenture, the Company and its
Restricted Subsidiaries will not be subject to the provisions of the Indenture
applicable to them described under "-- Limitation on Indebtedness,"
"-- Limitation on Restricted Payments," "-- Limitation on Restrictions on
Distributions from Restricted Subsidiaries," "-- Limitation on Transactions with
Affiliates," clauses (iii) and (iv) of "-- Designation of Restricted and
Unrestricted Subsidiaries" and clause (v) of "-- Merger, Consolidation and Sale
of Assets" (collectively, the "Suspended Covenants"). In the event that the
Company and its Restricted Subsidiaries are not subject to the Suspended
Covenants with respect to the Notes for any period of time as a result of the
preceding sentence and, subsequently, one or both Rating Agencies withdraws its
ratings or downgrades the ratings assigned to the Notes below the required
Investment Grade Ratings, then the Company and its Restricted Subsidiaries will
thereafter again be subject to the Suspended Covenants and compliance with the
Suspended Covenants with respect to Restricted Payments made after the time of
such withdrawal or downgrade will be calculated in accordance with the terms of
the covenant described below under
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"-- Limitation on Restricted Payments" as if such covenant had been in effect
during the entire period of time from the Issue Date.
Limitation on Indebtedness. The Company shall not, and shall not permit
any Restricted Subsidiary to, directly or indirectly, Incur any Indebtedness
unless, after giving effect to the Incurrence on a pro forma basis (a) the
Company's Leverage Ratio would not exceed 8.0 or (b) such Indebtedness is
Permitted Indebtedness.
Permitted Indebtedness is defined to include any and all of the following:
(i) the Notes; (ii) Indebtedness outstanding on the Issue Date; (iii) Permitted
Refinancing Indebtedness Incurred in respect of Indebtedness Incurred pursuant
to the provisions of clause (a) of the immediately preceding paragraph or
clauses (i) and (ii) of this paragraph; (iv) Indebtedness of the Company owing
to and held by a Restricted Subsidiary and Indebtedness of a Restricted
Subsidiary owing to and held by the Company or any other Restricted Subsidiary;
provided, however, that any event that results in any such Restricted Subsidiary
holding such Indebtedness ceasing to be a Restricted Subsidiary, or any
subsequent transfer of any such Indebtedness (except to the Company or a
Restricted Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the issuer thereof; (v) Indebtedness under
Interest Rate Agreements entered into for the purpose of limiting risk in the
ordinary course of the financial management of the Company or any of its
Restricted Subsidiaries and not for speculative purposes; provided, however,
that the obligations under such agreements are related to payment obligations on
Indebtedness otherwise permitted by the terms of the Indenture; (vi)
Indebtedness in connection with one or more standby letters of credit or
performance bonds issued in the ordinary course of business or pursuant to
self-insurance obligations and, in each case, not in connection with the
borrowing of money or the obtaining of advances or credit (other than the
extension of credit represented by the issuance for the account of the Company
or any of its Restricted Subsidiaries of such letter of credit or performance
bond itself) and (vii) Indebtedness not otherwise permitted hereunder in an
amount outstanding at any time not to exceed $15.0 million.
Limitation on Restricted Payments. The Company shall not make, and shall
not permit any Restricted Subsidiary to make, any Restricted Payment if at the
time of, and after giving effect to, such proposed Restricted Payment, (a) a
Default or Event of Default shall have occurred and be continuing, (b) the
Company could not Incur at least $1.00 of additional Indebtedness pursuant to
clause (a) of the first paragraph of "-- Limitation on Indebtedness" or (c) the
aggregate amount of such Restricted Payment and all other Restricted Payments
made since the Issue Date (the amount of any Restricted Payment, if made other
than in cash, to be based upon Fair Market Value) would exceed an amount equal
to the sum of (i) the result of (A) Cumulative EBITDA minus (B) the product of
1.2 and Cumulative Interest Expense, (ii) Equity Interest Sale Proceeds, (iii)
the amount by which Indebtedness of the Company or any Restricted Subsidiary is
reduced on the Company's balance sheet upon the conversion or exchange (other
than by a Subsidiary of the Company) subsequent to the Issue Date of any
Indebtedness of the Company or any Restricted Subsidiary convertible or
exchangeable for Equity Interests (other than Disqualified Equity Interests) in
the Company (less the amount of any cash or other Property distributed by the
Company or any Restricted Subsidiary upon conversion or exchange), (iv) an
amount equal to the net reduction in Investments made by the Company and its
Restricted Subsidiaries subsequent to the Issue Date in any Person resulting
from (A) dividends, repayment of loans or advances, or other transfers or
distributions of Property (but only to the extent the Company excludes such
transfers or distributions from the calculation of EBITDA for purposes of clause
(c)(i)(A) above), in each case to the Company or any Restricted Subsidiary from
any Person or (B) the redesignation of any Unrestricted Subsidiary as a
Restricted Subsidiary, not to exceed, in the case of (A) or (B), the amount of
such Investments previously made by the Company and its Restricted Subsidiaries
in such Person or such Unrestricted Subsidiary, as the case may be, which were
treated as Restricted Payments and (v) $10.0 million.
Notwithstanding the foregoing limitation, the Company or any Restricted
Subsidiary (as the case may be) may (a) pay dividends on or make distributions
in respect of Equity Interests in the Company within 60 days of the declaration
thereof if, on the declaration date, such dividends or distributions could
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have been paid in compliance with the foregoing limitation; (b) redeem,
repurchase, defease, acquire or retire for value, any Indebtedness subordinate
(whether pursuant to its terms or by operation of law) in right of payment to
the Notes with the proceeds of any Permitted Refinancing Indebtedness; (c)
acquire, redeem or retire Equity Interests in the Company or Indebtedness of the
Company subordinate (whether pursuant to its terms or by operation of law) in
right of payment to the Notes in exchange for, or in connection with a
substantially concurrent issuance of, Equity Interests in the Company (other
than Disqualified Equity Interests); (d) with respect to any taxable year that
the Company is a Pass-Through Entity, pay any dividend or other distribution on
Equity Interests in the Company in an amount equal to the sum of (i) any
aggregate tax liability of BCC Holding with respect to such taxable year, plus
(ii) the greater of (1) the aggregate amount necessary to permit each Relevant
Taxpayer to pay the Incremental Tax Liability of such Relevant Taxpayer with
respect to such taxable year (less any amount described in clause (i) above),
and (2) the amount equal to the Hypothetical Tax Liability of the Company with
respect to such taxable year (less any amount described in clause (i) above);
(e) so long as the Debenture Contribution shall have been received by the
Company and no Default or Event of Default shall have occurred and be
continuing, make Debenture Distributions; (f) pay any dividend or other
distribution on Equity Interests in the Company, or make loans to BCI
Management, L.P., in each case to allow BCI Management, L.P. to acquire, redeem
or retire Equity Interests in BCI Management, L.P. held by an employee of the
Company, any Restricted Subsidiary, BCC Holding, BCI or BMSI (or such employee's
estate, as the case may be) upon such employee's death, disability, retirement
or termination of employment with the Company, any Restricted Subsidiary, BCC
Holding, BCI and BMSI in an aggregate amount not to exceed $3.0 million per year
and (g) make Investments in Persons the primary businesses of which are Cable
Businesses, Cable Programming Businesses or Related Businesses (other than
Investments in Equity Interests in the Company, the General Partner or
Tele-Communications, Inc.) in an aggregate amount at any time outstanding (based
on the amount actually invested) for all such Investments made pursuant to this
clause (g) not to exceed the sum of (i) $15.0 million, (ii) an amount equal to
the net reduction in Investments made by the Company and its Restricted
Subsidiaries subsequent to the Issue Date in any Person resulting from payment
of dividends, repayment of loans or advances, or other transfers or
distributions of Property to the Company or any Restricted Subsidiary from any
Person (but only to the extent such net reduction has not been utilized to
increase the amount of Restricted Payments permissible pursuant to clauses
(c)(i) or (c)(iv) in the immediately preceding paragraph), and not to exceed, in
the case of this clause (g)(ii), the amount of such Investments previously made
by the Company and its Restricted Subsidiaries in such Person which were made in
reliance on this clause (g) and (iii) Equity Interest Sale Proceeds to the
extent such Proceeds have not been treated as Equity Interest Sale Proceeds for
purposes of clause (c)(ii) in the immediately preceding paragraph.
Notwithstanding anything in clause (d)(1) of this paragraph to the contrary, any
Excess Tax Amount (as defined in the following sentence) paid by the Company
shall not be excluded from the calculation of the aggregate amount of Restricted
Payments made after the Issue Date. "Excess Tax Amount" shall mean the excess,
if any, of (i) the amount of the aggregate Incremental Tax Liability of all
Relevant Taxpayers with respect to any taxable year, over (ii) the amount of the
aggregate hypothetical Incremental Tax Liability of all such Relevant Taxpayers
with respect to such taxable year assuming that the Incremental Tax Liability of
each direct holder of an interest in BCC Holding that is a Pass-Through Entity,
trust or estate and the direct or indirect beneficial owners of interests in
such Pass-Through Entity, trust or estate and the direct or indirect beneficial
owners of interests in such Pass-Through Entity, trust or estate does not
exceed, in the aggregate, the product of (A) the distributive share of the
Company's net taxable income allocable to such Pass-Through Entity, trust or
estate (as shown on its Federal Form 1065), and (B) the highest combined
Federal, state and local marginal income or franchise tax (or capital, gross
receipts, net worth or other tax imposed in lieu of such income or franchise
tax) rate of either (1) such Pass-Through Entity, trust or estate, or (2) any of
the direct or indirect beneficial owners of any interests in such Pass-Through
Entity, trust or estate, whichever is greater; provided, however, that for
purposes of choosing such highest combined marginal tax rate the Executive
Committee shall in good faith exclude the rate applicable to any direct or
indirect beneficial owner(s) who are Relevant Taxpayers and whose direct or
indirect interest(s) in the Pass-Through Entity, trust or estate are not
significant.
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Any payments made pursuant to clauses (b), (c) and (d) of the immediately
preceding paragraph (other than any payments of any Excess Tax Amount) shall be
excluded from the calculation of the aggregate amount of Restricted Payments
made after the Issue Date; provided, however, that the proceeds from the
issuance of Equity Interests pursuant to clause (c) of the immediately preceding
paragraph shall not constitute Equity Interest Sale Proceeds to the extent such
proceeds are used in the manner set forth in such clause (c) for purposes of
clause (c)(ii) of the first paragraph of this covenant.
Limitation on Liens. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist, any
Lien (other than Permitted Liens) upon any of its Property, whether now owned or
hereafter acquired, or any interest therein or any income or profits therefrom,
unless it has made or will make effective provision whereby the Notes will be
secured by such Lien equally and ratably with all other Indebtedness of the
Company or any Restricted Subsidiary secured by such Lien for so long as any
such other Indebtedness of the Company or any Restricted Subsidiary shall be so
secured; provided, however, that no Lien may be granted with respect to
Indebtedness of the Company that is subordinated to the Notes.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective, or enter into any agreement with any Person that
would cause to become effective, any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Equity
Interests, or pay any Indebtedness or other obligation owed, to the Company or
any other Restricted Subsidiary, (b) make any loans or advances to the Company
or any other Restricted Subsidiary or (c) transfer any of its Property to the
Company or any other Restricted Subsidiary. Such limitation will not apply (1)
with respect to clauses (a), (b) and (c), to encumbrances and restrictions (i)
in existence under or by reason of any agreements in effect on the Issue Date,
(ii) relating to Indebtedness of a Restricted Subsidiary and existing at such
Restricted Subsidiary at the time it became a Restricted Subsidiary if either
(A) such encumbrance or restriction was not created in connection with or in
anticipation of the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or was acquired
by the Company or a Restricted Subsidiary or (B) such encumbrance or restriction
was created in connection with the refinancing of preexisting Indebtedness in
connection with or in anticipation of the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company or a Restricted Subsidiary, the new
Indebtedness satisfies the requirements of "-- Certain Definitions -- Permitted
Refinancing Indebtedness", the replacement Indebtedness has an effective
interest cost no higher than that of the previous Indebtedness, and such
encumbrance or restriction relates only to the Property previously subject to an
encumbrance or restriction under the preexisting Indebtedness and such
encumbrance or restriction is no more restrictive than was its predecessor,
(iii) which result from the renewal, refinancing, extension or amendment of an
agreement referred to in clauses (1)(i) and (ii) above and in clauses (2)(i) and
(ii) below, provided such encumbrance or restriction is no more restrictive to
such Restricted Subsidiary and is not materially less favorable to the holders
of Notes than those under or pursuant to the agreement so renewed, refinanced,
extended or amended, and (2) with respect to clause (c) only, to (i) any
encumbrance or restriction relating to Indebtedness that is permitted to be
Incurred and secured pursuant to the provisions under "-- Limitation on
Indebtedness" and "-- Limitation on Liens" that limits the right of the debtor
to dispose of the Property securing such Indebtedness, (ii) any encumbrance or
restriction in connection with an acquisition of Property, so long as such
encumbrance or restriction relates solely to the Property so acquired (and any
improvements thereto) and was not created in connection with or in anticipation
of such acquisition, (iii) customary provisions restricting subletting or
assignment of leases and customary provisions in other agreements that restrict
assignment of such agreements or rights thereunder, (iv) customary restrictions
contained in asset sale agreements limiting the transfer of such assets pending
the closing of such sale or (v) customary restrictions contained in cable
television franchise agreements limiting the transfer of the franchises granted
thereby.
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Limitation on Transactions with Affiliates. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, conduct
any business or enter into or suffer to exist any transaction or series of
transactions (including the purchase, sale, transfer, lease or exchange of any
Property, the rendering of any service or the modification, renewal or extension
of any existing agreement with Affiliates of the Company) with, or for the
benefit of, any Affiliate of the Company (an "Affiliate Transaction") unless the
terms of such Affiliate Transaction are (a) (i) with respect to an Affiliate
Transaction involving, or reasonably expected to involve, aggregate payments or
value in excess of $250,000, set forth in writing, (ii) in the best interest of
the Company or such Restricted Subsidiary, as the case may be, and (iii) no less
favorable to the Company or such Restricted Subsidiary, as the case may be, than
those that could be obtained at the time of such Affiliate Transaction for a
similar transaction in arms-length dealings with a Person who is not such an
Affiliate of the Company, (b) with respect to an Affiliate Transaction
involving, or reasonably expected to involve, aggregate payments or value in
excess of $1.0 million, the Executive Committee approves such Affiliate
Transaction and, in its good faith judgment, believes that such Affiliate
Transaction complies with clauses (a)(ii) and (iii) of this paragraph as
evidenced by a Committee Resolution and (c) with respect to an Affiliate
Transaction involving, or reasonably expected to involve, aggregate payments in
excess of $10.0 million, the Company obtains an opinion letter from an
Independent Appraiser to the effect that such Affiliate Transaction is fair,
from a financial point of view.
Notwithstanding the foregoing limitation, the Company or any of its
Restricted Subsidiaries may enter into or suffer to exist the following: (i) any
transaction pursuant to any contract in existence on the Issue Date or any
renewal, extension or replacement of such contract on terms no less favorable to
the Company and its Restricted Subsidiaries, including contracts for the
acquisition of cable television programming and equipment; (ii) the
reimbursement of BCI or BMSI for costs (including the payment of reasonable
compensation to their respective employees) incurred by BCI or BMSI in providing
management or administrative services to the Company pursuant to the Management
Agreement or the Administration Agreement, as the case may be; (iii) any
Restricted Payment made in accordance with "-- Limitation on Restricted
Payments"; (iv) any transaction or series of transactions between the Company
and one or more of its Restricted Subsidiaries or between two or more of its
Restricted Subsidiaries; (v) the payment of reasonable compensation (including
amounts or Equity Interests (other than Disqualified Equity Interests) paid
pursuant to employee benefit plans) for the personal services of officers,
directors and employees of the Company or any of its Restricted Subsidiaries;
(vi) loans and advances to employees of the Company or any Restricted Subsidiary
or employees of BCC Holding, BCI or BMSI who render substantial services to the
Company or any of its Restricted Subsidiaries (such loans to be made either
directly to such employees or through BCC Holding, BCI or BMSI) or loans to BCI
Management, L.P. to allow BCI Management, L.P. to acquire, redeem or retire
Equity Interests in BCI Management, L.P. held by an employee of the Company, any
Restricted Subsidiary, BCC Holding, BCI or BMSI (or such employee's estate, as
the case may be) upon such employee's death, disability, retirement or
termination of employment with the Company, any Restricted Subsidiary, BCC
Holding, BCI and BMSI, provided that such loans and advances do not exceed $5.0
million at any one time outstanding; (vii) customary indemnification payments to
members of the Executive Committee and/or officers of the Company, any
Restricted Subsidiary, BCI or BMSI for liabilities incurred in connection with
the rendering of services to the Company; and (viii) issuances of Equity
Interests in connection with capital contributions.
Designation of Restricted and Unrestricted Subsidiaries. The Executive
Committee may designate an Unrestricted Subsidiary as a Restricted Subsidiary or
designate a Restricted Subsidiary as an Unrestricted Subsidiary at any time;
provided, however, that immediately after giving effect to such designation on a
pro forma basis, (i) the Company's Leverage Ratio would not exceed 8.0, (ii)
there exist no Liens (other than Permitted Liens) on the Property of the Company
or its Restricted Subsidiaries, (iii) the Company and its Restricted
Subsidiaries are in compliance with the covenant described under "-- Limitation
on Restrictions on Distributions from Restricted Subsidiaries," (iv) in the case
of the designation of a Restricted Subsidiary as an Unrestricted Subsidiary, the
Fair Market Value of such Restricted Subsidiary at the time of such designation
would be permitted as, and shall be deemed
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to constitute, an Investment pursuant to the covenant described under
"-- Limitation on Restricted Payments" and (v) an Officers' Certificate with
respect to such designation is delivered to the Trustee within 75 days after the
end of the fiscal quarter of the Company in which such designation is made (or,
in the case of a designation made during the last fiscal quarter of the
Company's fiscal year, within 120 days after the end of such fiscal year), which
Officers' Certificate shall state the effective date of such designation.
Notwithstanding the foregoing, the Company shall at all times cause BCC to
be a direct Wholly Owned Subsidiary.
Limitation on Conduct of Business of BCC. BCC shall not own any operating
assets or other Property or conduct any business other than to serve as an
Issuer and obligor with respect to the Notes.
Merger, Consolidation and Sale of Assets. Neither of the Issuers may
consolidate with or merge with or into any other Person (other than a merger of
a Restricted Subsidiary (other than BCC) into the Company), or convey, sell,
transfer, lease or otherwise dispose of all or substantially all of its Property
(in one transaction or a series of related transactions), unless: (i) such
Issuer shall be the surviving Person (the "Surviving Person"), or the Surviving
Person (if other than such Issuer) formed by such consolidation or into which
such Issuer is merged or to which the Property of such Issuer is transferred
shall be, in the case of BCC, a corporation, or in any other case, a
corporation, partnership or trust, organized and existing under the laws of the
United States or any State thereof or the District of Columbia; (ii) the
Surviving Person (if other than such Issuer) shall expressly assume, by
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of such Issuer under the
Notes and the Indenture, and the obligations under the Indenture shall remain in
full force and effect; (iii) in the case of a sale, transfer, assignment, lease,
conveyance or other disposition of all or substantially all of an Issuer's
Property, such Property shall have been transferred as an entirety or virtually
as an entirety to one or more Persons, provided that all such transferees shall
have jointly and severally assumed, as the Surviving Person, the obligations of
such Issuer pursuant to clause (ii); (iv) immediately before and immediately
after giving effect to such transaction, no Default or Event of Default shall
have occurred and be continuing; and (v) immediately after giving effect to such
transaction on a pro forma basis (including, any Indebtedness Incurred or
anticipated to be Incurred in connection with such transaction or series of
transactions), the Surviving Person would be able to Incur at least $1.00 of
additional Indebtedness pursuant to clause (a) of the first paragraph of
"-- Limitation on Indebtedness."
In connection with any consolidation, merger or transfer contemplated by
this provision, the Issuers shall deliver, or cause to be delivered, to the
Trustee, in form and substance reasonably satisfactory to the Trustee, an
Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with. After any such consolidation, merger or transfer (other than a lease of
all or substantially all of an Issuer's Property) effected in compliance with
the terms of the Indenture, references to such Issuer shall mean the Surviving
Person and shall not mean the Person who was previously the Issuer.
SEC REPORTS
Notwithstanding that the Issuers may not be required to remain subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act, the
Company shall file with the Commission and provide the Trustee and holders of
the Notes with such annual reports and such information, documents and other
reports as are specified in Sections 13 and 15(d) of the Exchange Act and
applicable to a U.S. corporation subject to such sections, such information,
documents and other reports to be so filed and provided at the times specified
for the filing of such information, documents and reports under such sections.
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EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the Issuers fail to make the payment of any principal of, or premium, if
any, on the Notes when the same becomes due and payable at maturity, upon
acceleration, redemption, mandatory repurchase or declaration, or otherwise;
(ii) the Issuers fail to make the payment of any interest on the Notes when the
same becomes due and payable, and such failure continues for a period of 30
days; (iii) either Issuer fails to comply with any other covenant applicable to
it in the Notes or Indenture and such failure continues for 30 days after
written notice from the Trustee or the registered holders of not less than 25%
in aggregate principal amount of the Notes then outstanding; (iv) a default
under any Indebtedness for borrowed money by the Company or any Restricted
Subsidiary which results in acceleration of the maturity of such Indebtedness,
or the failure to pay any such Indebtedness at final maturity, in an amount
aggregating $5.0 million or more (the "cross acceleration provisions"); (v) any
judgment or judgments for the payment of money (other than judgments which are
covered by enforceable insurance policies issued by solvent carriers) in excess
of $5.0 million shall be rendered against the Company or any Restricted
Subsidiary and shall not be waived, satisfied or discharged for any period of 60
consecutive days during which a stay of enforcement shall not be in effect (the
"judgment default provisions") and (vi) certain events involving bankruptcy,
insolvency or reorganization of either of the Issuers or any Significant
Subsidiary of the Company (the "bankruptcy provisions"). The Indenture provides
that the Trustee may withhold notice to the holders of the Notes of any default
(except in payment of principal or premium, if any, or interest on such Notes)
if the Trustee considers it to be in the best interest of the holders of the
Notes to do so.
The Indenture provides that if an Event of Default with respect to the
Notes (other than an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization with respect to either Issuer) shall
have occurred and be continuing, the Trustee or the registered holders of not
less than 25% in aggregate principal amount of the Notes then outstanding may
declare to be immediately due and payable the principal amount of all the Notes
then outstanding, plus accrued but unpaid interest to the date of acceleration;
provided, however, that after such acceleration but before a judgment or decree
based on acceleration is obtained by the Trustee, the registered holders of a
majority in aggregate principal amount of the Notes then outstanding, may, under
certain circumstances, rescind and annul such acceleration if all Events of
Default, other than the nonpayment of accelerated principal, premium or
interest, have been cured or waived as provided in the Indenture. In case an
Event of Default resulting from certain events of bankruptcy, insolvency or
reorganization with respect to the Company shall occur, such amount with respect
to all of the Notes shall be due and payable immediately without any declaration
or other act on the part of the Trustee or the holders of the Notes.
The registered holders of a majority in principal amount of the Notes then
outstanding shall have the right to waive any existing Default with respect to
the Notes or compliance with any provision of the Indenture or the Notes and to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, subject to certain limitations specified in the
Indenture.
No holder of the Notes will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the registered holders of at least 25% in aggregate
principal amount of the Notes then outstanding shall have made written request
and offered reasonable indemnity to the Trustee to institute such proceeding as
a trustee, and unless the Trustee shall not have received from the registered
holders of a majority in aggregate principal amount of the Notes then
outstanding a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, such limitations do not apply
to a suit instituted by a holder of a Note for enforcement of payment of the
principal of and premium, if any, or interest on such Note on or after the
respective due dates expressed in such Note.
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AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the registered holders of a majority in principal amount of the
Debentures then outstanding (including consents obtained in connection with a
tender offer or exchange for the Debentures) and any past default or compliance
with any provisions may also be waived with the consent of the registered
holders of a majority in principal amount of the Debentures then outstanding.
However, without the consent of each holder of an outstanding Note, no amendment
may, among other things, (i) reduce the amount of Debentures whose holders must
consent to an amendment, (ii) reduce the rate of or extend the time for payment
of interest on any Note, (iii) reduce the principal of or extend the Stated
Maturity of any Note, (iv) make any Note payable in money other than that stated
in the Note, (v) impair the right of any holder of the Debentures to receive
payment of principal of and interest on such holder's Debentures on or after the
due dates therefor or to institute suit for the enforcement of any payment on or
with respect to such holder's Notes, (vi) subordinate in right of payment, or
otherwise subordinate, the Notes to any other obligation of either Issuer, (vii)
make any change in the amendment provisions which require each holder's consent
or in the waiver provisions, (viii) reduce the premium payable upon the
redemption of any Note or change the time at which any Note may or shall be
redeemed as described under "-- Optional Redemption" or (ix) release either of
the Issuers from its respective obligations under the Indenture (other than
pursuant to "-- Certain Covenants -- Merger, Consolidation and Sale of Assets").
Without the consent of any holder of the Notes, the Issuers and the Trustee
may amend the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor of the respective
obligations of the Issuers under the Indenture, to provide for uncertificated
Notes in addition to or in place of certificated Notes (provided that the
uncertificated Notes are issued in registered form for purposes of Section
163(f) of the Internal Revenue Code, or in a manner such that the uncertificated
Notes are described in Section 163(f)(2)(B) of the Internal Revenue Code), to
add Guarantees with respect to the Notes, to secure the Notes, to add to the
covenants of the Issuers for the benefit of the holders of the Notes or to
surrender any right or power conferred upon the Issuers, to make any change that
does not adversely affect the rights of any holder of the Notes or to comply
with any requirement of the Commission in connection with the qualification of
the Indenture under the Trust Indenture Act.
The consent of the holders of the Notes is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Issuers are
required to mail to registered holders of the Notes a notice briefly describing
such amendment. However, the failure to give such notice to all holders of the
Notes, or any defect therein, will not impair or affect the validity of the
amendment.
DEFEASANCE
The Issuers at any time may terminate all of their obligations under the
Notes and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Issuers at any time may terminate their obligations under the
covenants described under "-- Certain Covenants" (other than the covenant
described under "-- Certain Covenants -- Merger, Consolidation and Sale of
Assets"), the operation of the cross acceleration provisions, the bankruptcy
provisions with respect to Significant Subsidiaries, the judgment default
provision described under "-- Events of Default" and the limitations contained
in clause (iv) under "-- Certain Covenants -- Merger, Consolidation and Sale of
Assets" ("covenant defeasance").
The Issuers may exercise their legal defeasance option notwithstanding
their prior exercise of their covenant defeasance option. If the Issuers
exercise their legal defeasance option, payment of the Notes
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may not be accelerated because of an Event of Default with respect thereto. If
the Issuers exercise their covenant defeasance option, payment of the Notes may
not be accelerated because of an Event of Default specified in clause (iii)
(other than the covenant described under "-- Certain Covenants -- Merger,
Consolidation and Sale of Assets" above), (iv), (v) or (vi) (with respect only
to Significant Subsidiaries) under "-- Events of Default" or because of the
failure of the Company to comply with clause (iv) under "-- Certain
Covenants -- Merger, Consolidation and Sale of Assets".
In order to exercise either defeasance option, the Issuers must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal and interest on the Notes to
maturity or an earlier redemption in accordance with the terms of the Indenture
and must comply with certain other conditions, including delivery to the Trustee
of an Opinion of Counsel to the effect that holders of the Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such deposit and defeasance and will be subject to Federal income tax on the
same amount and in the same manner and at the same times as would have been the
case if such deposit and defeasance had not occurred (and, in the case of legal
defeasance only, such Opinion of Counsel must be based on a ruling of the
Internal Revenue Service or other change in applicable Federal income tax law).
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Administration Agreement" means the Amended and Restated Administration
Agreement dated as of May , 1996, among BCC Holding, the Company and BMSI.
"Affiliate" of any specified Person means (i) any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any other Person who is a director or
officer (a) of such specified Person, (b) of any Subsidiary of such specified
Person or (c) of any Person described in clause (i) above. For the purposes of
this definition, "control" when used with resect to any Person means the power
to direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing. For purposes of the section described under "-- Certain
Covenants -- Limitation on Transactions with Affiliates" only, "Affiliate" shall
also mean any beneficial owner of interests representing 10% or more of the
total voting power attached to the then outstanding Voting Equity Interests (on
a fully diluted basis) in the Company or of rights or warrants to purchase such
Voting Equity Interests (whether or not currently exercisable) and any Person
who would be an Affiliate of any such beneficial owner pursuant to the first
sentence hereof.
"Annualized Pro Forma EBITDA" means, with respect to any Person, the
product of such Person's Pro Forma EBITDA for the latest fiscal quarter for
which financial statements are available multiplied by four.
"Attributable Indebtedness" means Indebtedness deemed to be Incurred in
respect of a Sale and Leaseback Transaction and shall be, at the date of
determination, the present value (discounted at the actual rate of interest
implicit in such transaction, compounded annually), of the total obligations of
the lessee for rental payments during the remaining term of the lease included
in such Sale and Leaseback Transaction (including any period for which such
lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Equity Interest, the quotient obtained by dividing (i)
the sum of the products of the numbers of years (rounded to the nearest
one-twelfth of one year) from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness or redemption or
similar payment
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with respect to such Preferred Equity Interest multiplied by the amount of such
payment by (ii) the sum of all such payments.
"Bank Credit Facility" means the Fourth Amended and Restated Loan Agreement
dated as of , 1996 by and among the Company, as borrower, and
certain banks, as lenders, and any extensions, revisions, refinancings or
replacements thereof by a bank or syndicate of banks.
"Cable Business" means the ownership, development, operation and/or
acquisition of cable television systems.
"Cable Programming Business" means the provision of cable television
programming.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Committee Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company, BCI or the General Partner
to have been duly adopted by the Executive Committee, to be in full force and
effect on the date of such certification and delivered to the Trustee.
"Consolidated Interest Expense" means, for any Person (or in the case of
the Company, the Company and its Restricted Subsidiaries), for any period, the
amount of interest in respect of Indebtedness (including amortization of
original issue discount, fees payable in connection with financing, including
commitment, availability and similar fees, non-cash interest payments on any
Indebtedness and the interest portion of any deferred payment obligation and
after taking into account the effect of elections made under, and the net costs
associated with, any Interest Rate Agreement, however denominated, with respect
to such Indebtedness), the amount of Redeemable Dividends in respect of Equity
Interests meeting the requirements of "-- Disqualified Equity Interests" in such
Person, the amount of Preferred Equity Interest dividends in respect of all
Preferred Equity Interests in Subsidiaries of such Person held by Persons other
than such Person or a Subsidiary of such Person, commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, and the interest component of rentals in respect of any
Capitalized Lease Obligation or Sale and Leaseback Transaction paid, accrued or
scheduled to be paid or accrued by such Person during such period, determined on
a consolidated basis in accordance with GAAP. For purposes of this definition,
interest on a Capitalized Lease Obligation or a Sale and Leaseback Transaction
shall be deemed to accrue at an interest rate reasonably determined by such
Person to be the rate of interest implicit in such Capitalized Lease Obligation
or Sale and Leaseback Transaction in accordance with GAAP consistently applied.
"Consolidated Net Income" of a Person means for any period, the net income
(loss) of such Person and its Subsidiaries determined in accordance with GAAP;
provided, however, that there shall not be included in such Consolidated Net
Income (i) with respect to the Company, any net income (loss) of any Person if
such Person is not a Restricted Subsidiary, except that (a) subject to the
limitations contained in (iv) below, the Company's equity in the net income of
any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Restricted Subsidiary as a dividend or
other distribution (subject, in the case of a dividend or other distribution to
a Restricted Subsidiary, to the limitations contained in clause (iii) below) and
(b) the Company's equity in a net loss of any such Person (other than an
Unrestricted Subsidiary) for such period shall be included in determining such
Consolidated Net Income, (ii) any net income (loss) of any Person acquired by
such Person or a Subsidiary of such Person in a pooling of interests transaction
for any period prior to the date of such acquisition, (iii) with respect to the
Company, any net income (loss) of any Restricted Subsidiary if such Subsidiary
is subject to restrictions, directly or indirectly, on the payment of dividends
or the making of distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that (a) subject to the limitations contained
in (iv) below, the Company's equity in the net income of any such
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Restricted Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash that could have been distributed by
such Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend (subject, in the case of a dividend to
another Restricted Subsidiary, to the limitation contained in this clause) and
(b) the Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income, (iv)
any gain (or loss) realized upon the sale or other disposition of any property,
plant or equipment of such Person or its consolidated Subsidiaries (including
pursuant to any Sale and Leaseback Transaction) which is not sold or otherwise
disposed of in the ordinary course of business and any gain (or loss) realized
upon the sale or other disposition of any Equity Interests in any Person, (v)
any extraordinary gain or loss and (vi) the cumulative effect of a change in
accounting principles.
"Cumulative EBITDA" means at any date of determination the aggregate amount
of EBITDA of the Company from and after the last day of the fiscal quarter of
the Company immediately preceding the Issue Date to the end of the fiscal
quarter immediately preceding the date of determination or, if such aggregate
EBITDA for such period is negative, the amount (expressed as a negative number)
by which such cumulative EBITDA is less than zero.
"Cumulative Interest Expense" means at any date of determination the
aggregate amount of Consolidated Interest Expense paid, accrued or scheduled to
be paid or accrued by the Company from the last day of the fiscal quarter of the
Company immediately preceding the Issue Date to the end of the fiscal quarter
immediately preceding the date of determination determined on a consolidated
basis in accordance with GAAP.
"Debenture Contribution" means the cash contribution received by the
Company from BCC Holding in exchange for the issuance to BCC Holding of Equity
Interests (other than Disqualified Equity Interests) in the Company, or the
making by BCC Holding of a contribution to the equity capital of the Company
which does not itself constitute a Disqualified Equity Interest, in either case
representing the proceeds of the issuance of the Debentures (reduced only by the
amount of the underwriting discount and any fees or expenses incurred in
connection with such issuance).
"Debenture Distribution" means a cash dividend paid to BCC Holding in an
amount not to exceed the amount necessary to pay interest due in respect of the
Debentures and provided, further, that any such dividend shall within five days
of the date paid be used to pay interest due in respect of the Debentures on or
after the scheduled interest payment date in accordance with their terms as in
effect on the date of the Indenture.
"Debentures" means the % Senior Debentures Due 2008 issued pursuant to an
indenture dated as of , 1996, between BCC Holding and ,
as trustee, or any renewals, extensions, substitutions, refinancings or
replacements of such Senior Debentures on payment terms no less favorable to the
holders of the Notes.
"Default" means any event which is, or after notice or the passage of time
or both would be, an Event of Default.
"Disqualified Equity Interest" means, with respect to any Person, any
Equity Interest that by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or otherwise (a)(i) matures or
is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is redeemable at the option of the holder thereof, in whole or in part, or
(iii) is convertible or exchangeable for Indebtedness and (b) as to which the
maturity, mandatory redemption, conversion or exchange or redemption at the
option of the holder thereof occurs, or may occur, on or prior to the Stated
Maturity of the Notes; provided, however, that Equity Interests in such Person
that would not otherwise be characterized as Disqualified Equity Interests under
this definition shall not constitute Disqualified Equity Interests if such
Equity Interests are convertible or exchangeable into Indebtedness solely at the
option of such Person.
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"Domestic Telecommunications Business" means (i) a Person actively engaged
in, or assets constituting plant, property or equipment used in the operation
of, a Cable Business, (ii) a Person actively engaged in a Cable Programming
Business or (iii) a Person actively engaged in, or assets which comprise, a
Related Business the services of which are offered in connection with the
operation, or utilizing the facilities, of a cable television system; provided
that each such Cable Business, Cable Programming Business or Related Business is
located in the United States.
"EBITDA" means, for any Person, for any period, an amount equal to (A) the
sum of (i) Consolidated Net Income for such period, plus, to the extent deducted
in the calculation of Consolidated Net Income, (ii) the provision for taxes for
such period based on income or profits to the extent such income or profits were
included in computing Consolidated Net Income and any provision for taxes
utilized in computing net loss under clause (i) hereof, plus (iii) Consolidated
Interest Expense for such period, plus (iv) depreciation for such period on a
consolidated basis, plus (v) amortization of intangibles for such period on a
consolidated basis, plus (vi) any other non-cash items reducing Consolidated Net
Income for such period, minus (B) all non-cash items increasing Consolidated Net
Income for such period, all for such Person and its Subsidiaries determined in
accordance with GAAP consistently applied, except that with respect to the
Company, each of the foregoing items shall be determined on a consolidated basis
with respect to the Company and its Restricted Subsidiaries only.
"Equity Interest Sale Proceeds" means (a) the aggregate Net Cash Proceeds
received by the Company from (i) the issue or sale (other than to a Subsidiary
of the Company or an employee ownership plan or trust established by the Company
or any Subsidiary of the Company) by the Company of any class of its Equity
Interests (other than Disqualified Equity Interests) on or after the Issue Date
or (ii) contributions to the equity capital of the Company on or after the Issue
Date which do not themselves constitute Disqualified Equity Interests and (b)
the Fair Market Value, as determined by an Independent Appraiser with experience
underwriting debt and/or equity securities for operators of Domestic
Telecommunications Businesses, of any Domestic Telecommunications Business (i)
contributed to the Company in exchange for Equity Interests (other than
Disqualified Equity Interests) in the Company on or after the Issue Date or (ii)
which comprises a contribution to the equity capital of the Company on or after
the Issue Date which does not itself constitute a Disqualified Equity Interest;
provided, however, that the Net Cash Proceeds received by the Company from the
Debenture Contribution shall not constitute Equity Interest Sale Proceeds.
"Equity Interests" means, with respect to any Person, any and all shares or
other equivalents (however designated) of corporate stock, partnership interests
or any other participation, right, warrants, options or other interest in the
nature of an interest in equity in such Person (including Preferred Equity
Interests, but excluding any debt security convertible or exchangeable into such
equity interest), entitling the holders thereof (together with the holders of
all other interests of the same class) to a pro rata share of any dividend or
distribution, or a pro rata participation in any other allocation, of the
profits of such Person.
"Event of Default" has the meaning set forth under "-- Events of Default."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Committee" means, with respect to the Company, the executive
committee, management committee or similar governing body of the Company, or any
authorized committee thereof, responsible for the management of the business and
affairs of the Company.
"Fair Market Value" means with respect to any Property, the price which
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value will be
determined, except as otherwise provided, (i) if such Property has a Fair Market
Value of less than $5.0 million, by any Officer of the Company or (ii) if such
Property has a Fair Market Value equal to or in excess of $5.0 million, by a
majority of the Executive Committee and evidenced by a Committee
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Resolution, dated within 30 days of the relevant transaction, of the Executive
Committee delivered to the Trustee.
"GAAP" means United States generally accepted accounting principles as in
effect in the United States on the Issue Date.
"General Partner" means the Person acting as the managing general partner
of the Company.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any Person and any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Indebtedness or other obligation of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); provided, however, 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 has a corresponding meaning.
"Hedging Obligation" of any Person means any obligation of such Person
pursuant to any Interest Rate Agreement, foreign exchange contract, currency
swap agreement, currency option or any other similar agreement or arrangement.
"Hypothetical Tax Liability" with respect to any taxable year means the
hypothetical consolidated Federal, state and local income or franchise tax
liability (or capital, gross receipts, net worth or other tax liability imposed
in lieu of such income or franchise tax liability) of the Company and its
Subsidiaries with respect to such taxable year determined as if the Company and
its Subsidiaries constituted, and had from and after the last day of the fiscal
quarter of the Company immediately preceding the Issue Date constituted, an
affiliated group of corporations within the meaning of the Internal Revenue Code
of 1986, as amended, eligible to file consolidated returns for such taxable
year.
"Incremental Tax Liability" with respect to any taxable year means the
excess, if any, of (i) the actual out-of-pocket Federal, state and local income
or franchise tax liability (or capital, gross receipts, net worth or other tax
liability imposed in lieu of such income or franchise tax liability) of any
Relevant Taxpayer with respect to such taxable year, taking into account such
Relevant Taxpayer's allocable share of income, gain, loss, deduction or credit
of the Company over (ii) the hypothetical out-of-pocket Federal, state and local
income or franchise tax liability (or capital, gross receipts, net worth or
other tax liability imposed in lieu of such income or franchise tax liability)
of any Relevant Taxpayer with respect to such taxable year assuming that such
Relevant Taxpayer did not have any interest in the Company and did not include,
in calculating such tax liability, any allocable portion of the Company's
income, gain, loss, deduction or credit with respect to such taxable year. The
phrase "out-of-pocket Federal, state and local income or franchise tax liability
(or capital, gross receipts, net worth or other tax liability imposed in lieu of
such income or franchise tax liability) of any Relevant Taxpayer" shall include,
without limitation, the application by such Relevant Taxpayer of any credit
balance or refund any such Relevant Taxpayer is entitled to receive from any
relevant taxing authority.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by merger, conversion, exchange or otherwise),
extend, assume, Guarantee or become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or obligation on the balance sheet of such Person (and
"Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that a change in GAAP that
results in an obligation of such Person that exists at such time, and is not
theretofore classified as Indebtedness, becoming Indebtedness shall not be
deemed an Incurrence of such Indebtedness; provided further, that solely for
purposes of determining compliance with "-- Certain Covenants -- Limitation on
Indebtedness," amortization of debt discount shall not be deemed to be the
Incurrence of Indebtedness, provided that in the case of Indebtedness sold at a
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discount, the amount of such Indebtedness Incurred shall at all times be the
aggregate principal amount at Stated Maturity.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness, secured or unsecured, contingent or otherwise, which is for
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), or evidenced by bonds,
notes, debentures or similar instruments or representing the balance deferred
and unpaid of the purchase price of any Property (excluding any balances that
constitute subscriber advance payments and deposits, accounts payable or trade
payables, and other accrued liabilities arising in the ordinary course of
business) if and to the extent any of the foregoing indebtedness would appear as
a liability upon a balance sheet of such Person prepared in accordance with
GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations, (ii) Indebtedness of other Persons secured by a
Lien to which the Property owned or held by such first-named Person is subject,
whether or not the obligation or obligations secured thereby shall have been
assumed (the amount of such Indebtedness being deemed to be the lesser of the
value of such Property or the amount of the Indebtedness so secured), (iii)
Guarantees of Indebtedness of other Persons, (iv) any Disqualified Equity
Interests, (v) any Attributable Indebtedness, (vi) all obligations of such
Person in respect of letters of credit, bankers' acceptances or other similar
instruments or credit transactions (including reimbursement obligations with
respect thereto), other than obligations with respect to letters of credit
securing obligations (other than obligations entered into in connection with the
borrowing of money or the obtaining of advances or credit (other than the
extension of credit represented by the issuance for the account of the Company
or any of its Restricted Subsidiaries of such letter of credit itself)) entered
into in the ordinary course of business of such Person to the extent such
letters of credit are not drawn upon or, if and to the extent drawn upon, such
drawing is reimbursed no later than the third Business Day following receipt by
such Person of a demand for reimbursement following payment on the letter of
credit, (vii) in the case of the Company, Preferred Equity Interests in its
Restricted Subsidiaries and (viii) any payment obligations of any such Person at
the time of determination under any Hedging Obligation. For purposes of this
definition, the maximum fixed repurchase price of any Disqualified Equity
Interest that does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Equity Interest as if such
Disqualified Equity Interest were repurchased on any date on which Indebtedness
shall be required to be determined pursuant to the Indenture; provided, however,
that if such Disqualified Equity Interest is not then permitted to be
repurchased, the repurchase price shall be the book value of such Disqualified
Equity Interest. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all unconditional obligations as
described above and the maximum liability of any contingent obligations in
respect thereof at such date. For purposes of this definition, the amount of the
payment obligation with respect to any Hedging Obligation shall be an amount
equal to (i) zero, if such obligation is an Interest Rate Agreement permitted
pursuant to clause (v) of the second paragraph of "-- Certain
Covenants -- Limitation on Indebtedness" or (ii) the notional amount of such
Hedging Obligation, if such Hedging Obligation is not an Interest Rate Agreement
so permitted. Notwithstanding the foregoing, Indebtedness shall not include any
interest or accrued interest until due and payable.
"Independent Appraiser" means, an investment banking firm of national
standing or any third party appraiser of national standing; provided, however,
that such firm or appraiser is not an Affiliate of the Company or
Tele-Communications, Inc.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement.
"Investment" by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of cash
or other Property to others or payments for Property or services for the account
or use of others, or otherwise) to, or Incurrence of a Guarantee of any
obligation of, or purchase or acquisition of Equity Interests, bonds, notes,
debentures or other securities or evidence of Indebtedness issued by, any other
Person. In determining the amount of any Investment
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made by transfer of any Property other than cash, such Property shall be valued
at its Fair Market Value at the time of such Investment.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) and BBB- (or the equivalent) by Moody's Investor Services, Inc.
(or any successor to the rating agency business thereof) and Standard & Poor's
Rating Group (or any successor to the rating agency business thereof),
respectively.
"Issue Date" means the date on which the Notes are initially issued.
"Leverage Ratio" is defined as the ratio of (i) the outstanding
Indebtedness of a Person and its Subsidiaries (or in the case of the Company,
the outstanding Indebtedness of the Company and its Restricted Subsidiaries,
plus the outstanding Indebtedness of BCC Holding under the Debentures) divided
by (ii) the Annualized Pro Forma EBITDA of such Person (or in the case of the
Company, the Annualized Pro Forma EBITDA of the Company and its Restricted
Subsidiaries).
"Lien" means with respect to any Property of any Person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority, or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such Property (including any Capitalized Lease
Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing or any Sale and
Leaseback Transaction).
"Management Agreement" means the Amended and Restated Management Agreement
dated as of May , 1996 among BCC Holding, the Company and BCI.
"Net Cash Proceeds" with respect to any issuance or sale of Equity
Interests, means the aggregate cash or Temporary Cash Investments received as
proceeds of such issuance or sale, net of attorney's fees, accountants' fees,
underwriters' or placement agents' fees, discounts or commissions and brokerage,
consultant and other fees actually incurred in connection with such issuance or
sale and net of taxes paid or payable as a result thereof.
"Officer" means, with respect to the Company, the Chief Executive Officer,
the President, the Chief Financial Officer, the Senior Vice President-Operations
or the Vice President-Finance of BCI or the Company.
"Officers' Certificate" means, with respect to the Company, a certificate
signed by two Officers at least one of whom shall be the principal executive
officer or principal financial officer of BCI or the Company.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be counsel to the Company, the
General Partner or the Trustee.
"Pass-Through Entity" means a partnership, limited liability company, "S
corporation" or any other entity that is not subject to federal income tax and
whose members are taxed on a distributive share of such entity's income.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) a Restricted Subsidiary or a Person which will, upon the
making of such Investment, become a Restricted Subsidiary; provided, however,
that the primary business of such Restricted Subsidiary is a Cable Business, a
Cable Programming Business or a Related Business; (ii) another Person if as a
result of such Investment such other Person is merged or consolidated with or
into, or transfers or conveys all or substantially all its assets to, the
Company or a Restricted Subsidiary; provided, however, that such Person's
primary business is a Cable Business, a Cable Programming Business or a Related
Business; (iii) Temporary Cash Investments; (iv) receivables owing to the
Company or any Restricted Subsidiary, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; (v) payroll, travel and similar advances to cover matters that are
expected at the
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time of such advances ultimately to be treated as expenses for accounting
purposes and that are made in the ordinary course of business; (vi) loans and
advances to employees of the Company or any Restricted Subsidiary or employees
of BCC Holding, BCI or BMSI who render substantial services to the Company (such
loans to be made either directly to such employees or through BCC Holding, BCI
or BMSI) or loans to BCI Management, L.P. to allow BCI Management, L.P. to
acquire, redeem or retire Equity Interests in BCI Management, L.P. held by an
employee of the Company, any Restricted Subsidiary, BCC Holding, BCI or BMSI (or
such employee's estate, as the case may be) upon such employee's death,
disability, retirement or termination of employment with the Company, any
Restricted Subsidiary, BCC Holding, BCI and BMSI, provided that such loans and
advances do not exceed $5.0 million at any one time outstanding; and (vii)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments.
"Permitted Liens" means (i) Liens Incurred by the Company or any of its
Restricted Subsidiaries if, after giving effect to such Incurrence on a pro
forma basis, the amount of the total Indebtedness of the Company and its
Restricted Subsidiaries that is secured by a Lien does not exceed the product of
the Annualized Pro Forma EBITDA of the Company multiplied by 2.5; (ii) Liens on
the Property of the Company or any of its Restricted Subsidiaries existing on
the Issue Date; (iii) Liens on the Property of the Company or any of its
Restricted Subsidiaries to secure any extension, renewal, refinancing,
replacement or refunding (or successive extensions, renewals, refinancings,
replacements or refundings), in whole or in part, of any Indebtedness secured by
Liens referred to in any of clauses (i), (ii), (vii) or (x); provided, however,
that any such Lien will be limited to all or part of the same Property that
secured the original Indebtedness (plus improvements on such Property) and the
aggregate principal amount of Indebtedness that is secured by such Lien will not
be increased to an amount greater than the sum of (A) the outstanding principal
amount, or, if greater, the committed amount, of the Indebtedness described
under clauses (i), (ii), (vii) and (x) at the time the original Lien became a
Permitted Lien under the Indenture and (B) an amount necessary to pay any
premiums, fees and other expenses Incurred by the Company or any of its
Restricted Subsidiaries in connection with such refinancing, refunding,
extension, renewal or replacement; (iv) Liens for taxes, assessments or
governmental charges or levies on the Property of the Company or any of its
Restricted Subsidiaries if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good faith and
by appropriate proceedings; (v) Liens imposed by law, such as landlords and
carriers', warehousemen's, suppliers', materialmen's, repairmen's and mechanics'
Liens and other similar Liens on the Property of the Company or any of its
Restricted Subsidiaries arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or are being contested in
good faith and by appropriate proceedings; (vi) Liens on the Property of the
Company or any of its Restricted Subsidiaries Incurred in the ordinary course of
business to secure performance of obligations with respect to statutory or
regulatory requirements, performance or return-of-money bonds, surety bonds or
other obligations of a like nature and Incurred in a manner consistent with
industry practice; (vii) Liens on Property at the time the Company or any of its
Restricted Subsidiaries acquired such Property, including any acquisition by
means of a merger or consolidation with or into the Company or any of its
Restricted Subsidiaries; provided, however, that such Lien shall not have been
Incurred in anticipation of such transaction or series of related transactions
pursuant to which such Property was acquired by the Company or any of its
Restricted Subsidiaries; (viii) zoning restrictions, licenses, restrictions on
the use of real property, minor irregularities in the title thereto, or other
Liens on the Property of the Company or any of its Restricted Subsidiaries
incidental to the conduct of their respective businesses or the ownership of
their respective Properties which (except for acknowledgments in any credit
agreement of the lenders' right to setoff deposits held by such lenders so long
as such deposits were made in the ordinary course of business and not with the
intent to provide collateral to such lenders) were not created in connection
with the Incurrence of Indebtedness or the obtaining of advances or credit and
which do not in the aggregate materially detract from the value of their
respective Properties or materially impair the use thereof in the operation of
their respective businesses; (ix) pledges or deposits by the Company or any of
its Restricted Subsidiaries under workmen's
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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) or leases to which the Company or any of its Restricted
Subsidiaries is a party, or deposits to secure public or statutory obligations
of the Company or any of its Restricted Subsidiaries, or deposits for the
payment of rent, in each case incurred in the ordinary course of business, (x)
Liens on the Property of a Person at the time such Person becomes a Restricted
Subsidiary of the Company, provided, however, that any such Lien may not extend
to any other Property of the Company or any other Restricted Subsidiary which is
not a direct Subsidiary of such Person; provided further, however, that any such
Lien was not incurred in anticipation of or in connection with the transaction
or series of related transactions pursuant to which such Person became a
Restricted Subsidiary; (xi) utility easements, rights-of-way, building
restrictions and such other encumbrances or charges against real property as are
of a nature generally existing with respect to properties of a similar character
and which do not in the aggregate materially detract from the value or
materially impair the use of such property; (xii) leases or subleases granted to
others not materially interfering with the ordinary course of business of the
Company and its Subsidiaries; (xiii) customary Liens contained in asset sale
agreements limiting the transfer of such assets pending the closing of such sale
or created by the grant of options to purchase such assets; provided, in any
such case, the sale of such assets is not otherwise prohibited under the
Indenture or (xiv) Liens on the Property of a Restricted Subsidiary securing
Indebtedness of such Restricted Subsidiary owed to the Company.
"Permitted Refinancing Indebtedness" means any renewals, extensions,
substitutions, refinancings or replacements of any Indebtedness, including any
successive extensions, renewals, substitutions, refinancings or replacements so
long as (i) such Permitted Refinancing Indebtedness is incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate issue
price) that is equal to or less than the aggregate principal amount (or if
issued with original issue discount, the aggregate accreted value) then
outstanding of the Indebtedness being refinanced plus any premium payable
thereon and any fees and expenses incurred in connection therewith, (ii) the
Average Life of such Indebtedness is equal to or greater than the Average Life
of the Indebtedness being refinanced, (iii) the Stated Maturity of such
Indebtedness is no earlier than the earlier of (a) the Stated Maturity of the
Indebtedness being extended, renewed, substituted, refinanced or replaced and
(b) the first anniversary of the Stated Maturity of the Notes and (iv) the new
Indebtedness shall not be senior in right of payment to the Indebtedness that is
being extended, renewed, substituted, refinanced or replaced; provided that
Permitted Refinancing Indebtedness shall not include (a) Indebtedness of a
Restricted Subsidiary that refinances Indebtedness of the Company except to the
extent that such Restricted Subsidiary was, prior to such refinancing, a
guarantor of such Indebtedness, or (b) Indebtedness of the Company or a
Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Person" means any individual, corporation, company (including limited
liability company), partnership, joint venture, trust, estate, unincorporated
organization or government or any agency or political subdivision thereof.
"Preferred Equity Interest" means any Equity Interest in a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Equity Interests issued by such Person.
"Pro Forma EBITDA" means for any Person, for any period, the EBITDA of such
Person as determined on a consolidated basis in accordance with GAAP
consistently applied after giving effect to the following: (i) if, during or
after such period, such Person or any of its Subsidiaries shall have made any
disposition of assets, Pro Forma EBITDA of such Person and its Subsidiaries for
such period shall be computed so as to give pro forma effect to such disposition
of assets, (ii) if, during or after such period, such Person or any of its
Subsidiaries completes an acquisition of any Person or business which
immediately after such acquisition is a Subsidiary of such Person or whose
assets are held directly by such Person or a Subsidiary of such Person, Pro
Forma EBITDA shall be computed so as to give pro forma effect to the acquisition
of such Person or business and (iii) if during or after such period, such Person
or any of its Subsidiaries Incurs or repays any Indebtedness, Pro Forma EBITDA
shall be computed so as to
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give pro forma effect to such Incurrence or repayment; provided, however, that,
with respect to the Company, all of the foregoing references to "Subsidiary" or
"Subsidiaries" shall be deemed to refer only to the Restricted Subsidiaries of
the Company.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including, without limitation, Equity Interests in any other
Person (but excluding Equity Interests or other securities issued by such
Person).
"Rating Agencies" mean Standard & Poor's Rating Group, a division of McGraw
Hill, Inc., and Moody's Investor Services, Inc. or any successor to the
respective rating agency businesses thereof; provided, however, that if either
such Person shall cease its business of publishing ratings of debt securities
without any other Person succeeding to such business, the Company shall
designate another "nationally recognized statistical rating organization" (as
defined in Rule 436 under the Securities Act) to replace such Person as a
"Rating Agency."
"Redeemable Dividend" means, for any dividend with regard to Disqualified
Equity Interests, the quotient of the dividend divided by the difference between
one and the maximum statutory federal income tax rate (expressed as a decimal
number between 1 and 0) then applicable to the issuer of such Disqualified
Equity Interests.
"Related Business" means the provision of high-speed data services,
Internet access, interactive services, telephony (including personal
communications services) and/or any other telecommunications service.
"Relevant Taxpayer" means (i) in the case of any beneficial owner of an
Equity Interest in the Company that is an individual, such individual; (ii) in
the case of any beneficial owner of an Equity Interest in the Company that is
taxed as a corporation, such corporation; provided, however, that where such
corporation files any income tax return on a combined, consolidated, or
affiliated basis for any tax period, the "Relevant Taxpayer" for such period
with respect to such tax shall refer to the consolidated, combined or unitary
group of which such corporation is a member; (iii) in the case of any beneficial
owner of an Equity Interest in the Company that is a Pass-Through Entity, such
Pass-Through Entity itself, any indirect individual, corporate, trust or estate
beneficial owner of an Equity Interest in the Company through such Pass-Through
Entity; provided that, in the case of an indirect beneficial owner that is a
corporation, clause (ii) above shall apply and; (iv) in the case of any direct
or indirect beneficial owner of an Equity Interest in the Company that is a
trust or an estate, such trust or estate and any individual (or other trust or
estate) which is a beneficiary of such trust or estate to the extent that such
individual (or other trust or estate) is taxable on the income of such trust or
estate. A Person shall be considered an indirect owner of an Equity Interest in
the Company only to the extent that such Person has an indirect interest in the
Company through a Pass-Through Entity or a trust or estate or through multiple
tiers of Pass-Through Entities, trusts or estates (or any combination thereof).
"Restricted Payment" means (i) any dividend or distribution (whether made
in cash, Property or securities) declared or paid on or with respect to any
Equity Interest in the Company except dividends or distributions payable solely
in Equity Interests (other than Disqualified Equity Interests) in the Company or
in warrants, rights, or options to purchase or acquire (other than debt
securities convertible into an Equity Interest), directly or indirectly, any
Equity Interests (other than Disqualified Equity Interests) in the Company; (ii)
a payment made by the Company or any Restricted Subsidiary to purchase, redeem,
acquire or retire any Equity Interests in the Company or Equity Interests in any
Affiliate of the Company (other than a Restricted Subsidiary) or any warrants,
rights or options to directly or indirectly purchase or acquire any such Equity
Interests or any securities exchangeable for or convertible into any such Equity
Interests, except for payments made to the Company or a Restricted Subsidiary;
(iii) a payment made by the Company or any Restricted Subsidiary to redeem,
repurchase, defease or otherwise acquire or retire for value, prior to any
scheduled maturity, scheduled sinking fund or mandatory redemption payment
(other than the purchase, repurchase, or other acquisition of any Indebtedness
subordinate in right of payment to the Notes purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition), Indebtedness of
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the Company which is subordinate (whether pursuant to its terms or by operation
of law) in right of payment to the Notes; (iv) an Investment (other than
Permitted Investments), including a deemed Investment pursuant to clause (iv) of
"-- Certain Covenants -- Designation of Restricted and Unrestricted
Subsidiaries," in any Person.
"Restricted Subsidiary" means (a) BCC; (b) any Subsidiary of the Company
after the Issue Date unless such Subsidiary shall have been designated as an
Unrestricted Subsidiary as permitted pursuant to "-- Certain
Covenants -- Designation of Restricted and Unrestricted Subsidiaries" and (c) an
Unrestricted Subsidiary which is redesignated as a Restricted Subsidiary as
permitted pursuant to "-- Certain Covenants -- Designation of Restricted and
Unrestricted Subsidiaries."
"Sale and Leaseback Transaction" means, with respect to any Person, any
direct or indirect arrangement pursuant to which Property is sold or transferred
by such Person or a Subsidiary of such Person and is thereafter leased back from
the purchaser or transferee thereof by such Person or one of its Subsidiaries.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Rule 1-02 of Regulation S-X under the
Securities Act as such Regulation is in effect on the Issue Date.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the Equity Interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"Tele-Communications, Inc." means Tele-Communications, Inc., a Delaware
corporation, and any successor thereto by way of merger or consolidation or by
transfer of all or substantially all the assets of such first-named Person.
"Temporary Cash Investments" means any of the following: (i) Investments in
U.S. Government Obligations or in securities guaranteed by the United States of
America, in each case maturing within 90 days of the date of acquisition
thereof, (ii) Investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 90 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the
United States of America or any State thereof having capital, surplus and
undivided profits aggregating in excess of $500.0 million and whose long-term
debt is rated "A-3" or "A-" or higher according to Moody's Investors Service,
Inc. (or any successor to the rating agency business thereof) or Standard &
Poor's Rating Group (or any successor to the rating agency business thereof) (or
such similar equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under the Securities
Act)), (iii) repurchase obligations with a term of not more than 7 days for
underlying securities of the types described in clause (i) entered into with a
bank meeting the qualifications described in clause (ii) above, (iv) Investments
in commercial paper, maturing not more than 90 days after the date of
acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America with a
rating at the time as of which any Investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. (or any successor to the
rating agency business thereof) or
92
<PAGE> 95
"A-1" (or higher) according to Standard & Poor's Rating Group (or any successor
to the rating agency business thereof) (or such similar equivalent rating by at
least one "nationally recognized statistical rating organization" (as defined in
Rule 436 under the Securities Act)) and (v) investments in money market funds
that are registered under the Investment Company Act of 1940, which have net
assets of at least $500.0 million and at least 85% of whose assets are
investments or other obligations of the type described in clauses (i) through
(iv) of this definition.
"Unrestricted Subsidiary" means (a) any Subsidiary of the Company in
existence on the Issue Date that is not a Restricted Subsidiary; (b) any
Subsidiary of an Unrestricted Subsidiary and (c) any Subsidiary of the Company
which is designated after the Issue Date as an Unrestricted Subsidiary as
permitted pursuant to "-- Certain Covenants -- Designation of Restricted and
Unrestricted Subsidiaries" and not thereafter redesignated as a Restricted
Subsidiary as permitted pursuant thereto.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Equity Interests" means the Equity Interests in a corporation or
other Person with voting power under ordinary circumstances entitling the
holders thereof to elect or appoint the board of directors, executive committee
or other governing body of such corporation or Person.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company,
greater than 95% of the then outstanding Equity Interests in which (other than
directors' qualifying shares) are owned by the Company and/or one or more other
Wholly Owned Subsidiaries.
TRANSFER AND EXCHANGE
Holders may transfer or exchange their Notes in accordance with the
Indenture. The Registrar under the Indenture may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture.
The registered holder of a Note may be treated as the owner of it for all
purposes.
NOTICES
Notices to holders of Notes will be given by mail to the addresses of such
holders as they may appear in the security register.
GOVERNING LAW
The Indenture and the Notes are governed by and construed in accordance
with the internal laws of the State of New York without reference to principles
of conflicts of law.
THE TRUSTEE
is to be the Trustee under the Indenture and has been
appointed by the Issuers as Registrar and Paying Agent with regard to the Notes.
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.
93
<PAGE> 96
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement"), the Company has agreed to issue and sell to the
Underwriters listed below, and each of the Underwriters has agreed to purchase,
the principal amount of Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINICPAL
AMOUNT
UNDERWRITER OF NOTES
------------------------------------------------------------- ---------------
<S> <C>
Salomon Brothers Inc......................................... $
Toronto Dominion Securities (USA) Inc........................
Donaldson, Lufkin & Jenrette Securities Corporation..........
------------
Total.............................................. $ 100,000,000
============
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions set forth therein. The
Underwriters will be obligated to purchase all the Notes offered hereby if any
Notes are purchased.
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering prices set forth on the
cover page of this Prospectus and to certain dealers at such prices less a
concession not in excess of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of % of such principal amount to certain other dealers. After the initial
public offering, the public offering price and such concessions may be changed.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities and expenses, including liabilities
under the Securities Act, or contribute to payments the Underwriters may be
required to make in respect thereof.
The Company has been advised by the Underwriters that they presently intend
to make a market in the Notes, as permitted by applicable laws and regulations,
although they are under no obligation to do so. There is no existing market for
the Notes and there can be no assurance that a market will develop. See "Risk
Factors -- Absence of Prior Trading Market."
Each of the Underwriters has from time to time rendered investment banking
and financial advisory services to TCI and its affiliates. In addition, the
Company expects that approximately $27.8 million of the net proceeds of the
Offerings will be applied to repay amounts owed to The Toronto-Dominion Bank, an
affiliate of Toronto Dominion Securities (USA) Inc., pursuant to the Bank Credit
Facility. The Toronto-Dominion Bank serves as the agent under the Bank Credit
Facility. As a result of such use of proceeds, the Underwriters are offering the
Notes in compliance with paragraph (8) of The Corporate Financing Rule of the
National Association of Securities Dealers, Inc. (the "NASD"). Subject to NASD
review, Salomon Brothers Inc (the "Independent Underwriter") proposes to act as
"qualified independent underwriter" for the purpose of determining the public
offering price of the Notes offered hereby. The Independent Underwriter has
performed due diligence investigations and participated in the preparation of
this Prospectus and the Registration Statement of which this Prospectus forms a
part. The public offering price of the Notes will be no lower than that
recommended by the Independent Underwriter.
LEGAL MATTERS
The legality of the Notes offered hereby and certain other matters will be
passed upon for the Issuers by Paul, Hastings, Janofsky & Walker, New York, New
York. Certain legal matters with respect to the Offerings will be passed upon
for the Underwriters by Cravath, Swaine & Moore, New York, New York.
94
<PAGE> 97
EXPERTS
The financial statements of the Company as of December 31, 1994 and 1995,
and for each of the three years in the period ended December 31, 1995, and the
balance sheet of BCC as of April 30, 1996 appearing in the Registration
Statement and in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
95
<PAGE> 98
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP
Report of Independent Auditors........................................................ F-2
Balance Sheets as of December 31, 1994 and 1995 and as of March 31, 1996
(unaudited)......................................................................... F-3
Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and for
the three months ended March 31, 1995 and 1996 (unaudited).......................... F-4
Statements of Changes in Partners' Deficit for the years ended December 31, 1993, 1994
and 1995 and for the three months ended March 31, 1996 (unaudited).................. F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and for
the three months ended March 31, 1995 and 1996 (unaudited).......................... F-6
Notes to Financial Statements......................................................... F-7
BRESNAN CAPITAL CORPORATION
Report of Independent Auditors........................................................ F-15
Balance Sheet as of April 30, 1996.................................................... F-16
Notes to Balance Sheet................................................................ F-17
</TABLE>
F-1
<PAGE> 99
REPORT OF INDEPENDENT AUDITORS
The Partners
Bresnan Communications Company Limited Partnership
We have audited the accompanying balance sheets of Bresnan Communications
Company Limited Partnership as of December 31, 1994 and 1995, and the related
statements of operations, changes in partners' deficit, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Bresnan Communications
Company Limited Partnership at December 31, 1994 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
New York, New York
March 8, 1996
F-2
<PAGE> 100
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
1994 1995 1996
-------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................... $ 1,078 $ 1,172 $ 794
Accounts receivable, less allowance for doubtful
accounts of $300 for 1994 and $311 for 1995 and $294
(unaudited) at March 31, 1996......................... 3,731 3,692
Receivable from affiliated companies.................... 2,045 -- --
Prepaid expenses........................................ 506 558 660
Property, plant and equipment, net...................... 75,311 81,656 82,252
Intangible assets, net.................................. 64,907 55,078 51,826
Deferred financing costs, net........................... 1,982 1,770 1,718
Other assets, net....................................... 1,482 27 302
-------- -------- --------
$150,619 $143,992 $141,244
======== ======== ========
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable and accrued expenses................... $ 5,701 $ 7,391 $ 6,196
Due to affiliated companies............................. 2,024 3,148 2,272
Accrued interest payable................................ 15,099 16,551 16,917
Deferred revenue........................................ 2,010 2,758 2,982
Debt.................................................... 187,798 185,480 186,345
Partners' deficit....................................... (62,013) (71,336) (73,468)
-------- -------- --------
$150,619 $143,992 $141,244
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 101
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------- -------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue.............................. $51,902 $61,380 $70,389 $16,692 $18,302
Operating costs and expenses:
Cost of service.................... 6,681 8,126 9,219 2,121 2,251
Programming expense................ 1,745 2,067 2,604 581 833
Programming purchased from
affiliated companies............ 8,440 10,945 13,298 3,268 3,490
Selling, general and
administrative.................. 12,111 14,459 16,713 3,838 4,343
Depreciation and amortization...... 14,844 16,843 21,930 5,293 5,575
Loss on disposal of obsolete
plant........................... 5,493 43 275 -- 156
------- ------- ------- ------- -------
Total operating costs and
expenses................. 49,314 52,483 64,039 15,101 16,648
------- ------- ------- ------- -------
Operating income..................... 2,588 8,897 6,350 1,591 1,654
Other (income) expense:
Interest........................... 7,571 12,557 16,063 4,091 3,786
Gain on investment................. -- -- (390) (390) --
------- ------- ------- ------- -------
Net loss............................. $(4,983) $(3,660) $(9,323) $(2,110) $(2,132)
======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 102
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<S> <C>
Partners' deficit at December 31, 1992........................................... $(53,370)
Net loss for the year ended December 31, 1993.................................... (4,983)
--------
Partners' deficit at December 31, 1993........................................... (58,353)
Net loss for the year ended December 31, 1994.................................... (3,660)
--------
Partners' deficit at December 31, 1994........................................... (62,013)
Net loss for the year ended December 31, 1995.................................... (9,323)
--------
Partners' deficit at December 31, 1995........................................... (71,336)
--------
Net loss for the three months ended March 31, 1996 (unaudited)................... (2,132)
--------
Partners' deficit at March 31, 1996 (unaudited).................................. $(73,468)
========
</TABLE>
See accompanying notes.
F-5
<PAGE> 103
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -----------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................ $ (4,983) $ (3,660) $ (9,323) $(2,110) $(2,132)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on disposal of obsolete plant................ 5,493 144 355 -- 264
Depreciation and amortization..................... 14,982 17,040 22,166 5,352 5,604
Noncash loss on write-off of deferred financing
costs........................................... -- 778 -- -- --
Changes in assets and liabilities:
(Increase) decrease in accounts receivable...... (359) (514) 397 643 158
(Increase) in prepaid expenses.................. (63) (150) (52) (104) (102)
(Increase) decrease in other assets............. (61) 7 1,455 1,337 (275)
(Decrease) increase in accounts payable and
accrued expenses.............................. (559) 1,540 1,922 266 (1,185)
Increase (decrease) in accrued interest......... 1,433 3,310 1,452 (577) 366
Increase (decrease) in subscribers' advance
payments...................................... 4 179 (61) 88 88
-------- -------- -------- ------- -------
Net cash provided by operating activities........... 15,887 18,674 18,311 4,895 2,786
-------- -------- -------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital asset additions............................. (11,982) (6,323) (14,640) (2,106) (3,133)
(Increase) decrease in intangibles.................. (413) 92 (205) (469) (3)
Advances (to) from affiliated companies............. -- (2,045) 2,937 (529) (886)
Acquisitions:
Property, plant and equipment..................... (8,519) (4,263) (913) (343) --
Intangible assets................................. (17,017) (34,463) (3,053) (923) --
-------- -------- -------- ------- -------
Net cash used in investing activities............... (37,931) (47,002) (15,874) (4,370) (4,022)
-------- -------- -------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings (repayments) under senior loan
agreement......................................... 22,400 31,200 (4,600) 200 1,000
Deferred financing costs............................ (94) (2,097) (25) (5) (7)
Net (repayments) borrowings under real estate
mortgage and construction loan agreements......... (30) -- 2,282 -- (135)
-------- -------- -------- ------- -------
Net cash provided by (used in) financing
activities........................................ 22,276 29,103 (2,343) 195 858
-------- -------- -------- ------- -------
Net increase (decrease) in cash and cash
equivalents....................................... 232 775 94 720 (378)
Cash and cash equivalents at beginning of year...... 71 303 1,078 1,078 1,172
-------- -------- -------- ------- -------
Cash and cash equivalents at end of year............ $ 303 $ 1,078 $ 1,172 $ 1,798 $ 794
======== ======== ======== ======= =======
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid during the period for interest............ $ 6,271 $ 8,296 $ 14,615 $ 4,664 $ 3,357
======== ======== ======== ======= =======
</TABLE>
See accompanying notes.
F-6
<PAGE> 104
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PARTNERSHIP
Bresnan Communications Company Limited Partnership (the "Partnership"),
organized under the provisions of the Michigan Revised Uniform Limited
Partnership Act, is carried on under an agreement dated October 31, 1984 (as
amended). The general policies of the Partnership are formulated and
administered by the Executive Committee. BCI (USA), L.P. and TCID of Michigan,
Inc., a wholly owned subsidiary of Tele-Communications, Inc. ("TCI"), are the
managing general partner and general partner, respectively, of the Partnership.
The Partnership owns and operates cable television systems which are
franchised or otherwise authorized to provide cable television services to
various communities within the states of Michigan, Wisconsin, Minnesota, Georgia
and Mississippi.
B. GENERAL
Information with respect to the three months ended March 31, 1995 and 1996
is unaudited. The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with Rule 10-01 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments which are necessary for a fair statement of the
results for the interim period have been made. All such adjustments are of a
normal, recurring nature.
The results for the three months ended March 31, 1996 are not necessarily
indicative of the results of operations for the full year.
C. CASH EQUIVALENTS
The Partnership considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
D. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost which includes acquisition
costs allocated to tangible assets of cable television systems acquired.
Construction costs of cable television systems are capitalized.
Depreciation is computed on the straight-line basis using estimated useful
lives ranging from 5 to 15 years for distribution systems and 5 to 40 years for
buildings and support equipment.
E. INTANGIBLE ASSETS
Intangible assets are comprised of goodwill, franchise costs, subscriber
lists and covenants not to compete.
Goodwill represents the excess of the purchase price of acquired cable
television assets over the fair value of the net assets acquired. Goodwill is
being amortized on the straight-line basis over 40 years.
Capitalized franchise costs related to obtaining or acquiring cable
television franchises are amortized on the straight-line basis over the same
period as goodwill, or where applicable, over the unexpired terms
F-7
<PAGE> 105
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
of the related franchises, which range from 1 to 17 years. The amounts of
franchise value ascribed to acquired subscriber bases are amortized on the
straight-line basis over their estimated lives ranging from 8 to 20 years.
Covenants not to compete are being amortized over the life of the related
agreements ranging from 3 to 5 years. Amortization of the covenants amounted to
approximately $515, $209 and $796 for the years ended December 31, 1993, 1994
and 1995, respectively, and approximately $199 and $202 (unaudited) for the
three months ended March 31, 1995 and 1996, respectively.
In March 1995, the FASB issued Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("FAS 121") effective for fiscal years beginning after
December 15, 1995. The new rules establish standards for the recognition and
measurement of impairment losses on long-lived assets and certain intangible
assets. The Partnership expects that the adoption of FAS 121 will not have a
material effect on its financial statements.
F. DEFERRED FINANCING COSTS
Deferred financing costs are being amortized over the term of the related
amended revolving credit term loan agreement (see Note 6 and Note 8).
G. INCOME TAXES
For income tax purposes, the Partnership's net income or loss is reported
by its partners in accordance with the respective partnership interests. Thus,
the Partnership does not have an income tax liability, and there is no income
tax provision in the accompanying financial statements.
As a result of differences in accounting for depreciable and amortizable
assets for financial statement and income tax purposes, the financial statement
basis of the Partnership's assets exceeds the corresponding tax basis by $32,800
and $30,800 at December 31, 1994 and 1995, respectively.
H. CONCENTRATION OF CREDIT RISK
The Partnership places its temporary cash investments with high credit
quality financial institutions and, by policy, limits the amount of credit
exposure to any one financial institution. Concentration of credit risk with
respect to trade receivables is limited due to the large number of customers
comprising the Partnership's customer base.
Interest rate swap agreements (see Note 7) have been entered into with the
same lending institutions as the revolving credit term loan agreement, as
amended (see Note 6).
I. 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 amounts reported in the financial statements and
related notes. Management believes they have made reasonable and prudent
estimates and assumptions. However, actual results could differ.
J. BASIS OF PRESENTATION
Certain reclassifications have been made to the prior years' financial
statements to conform to 1995 presentation.
F-8
<PAGE> 106
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
K. REVENUE RECOGNITION
Revenue is recognized when services are delivered.
2. ACQUISITIONS/NEW OPERATIONS
The Partnership added new operations during the years ended December 31,
1993, 1994 and 1995, as summarized below. The purchase prices were allocated to
the net assets acquired in relation to their fair values at the time of closing.
a) Hinesville, Georgia:
<TABLE>
<S> <C>
Property, plant and equipment........................... $ 8,519
Intangible assets....................................... 17,017
-------
Total purchase price............................ $25,536
=======
</TABLE>
Date acquired: December 1, 1993
b) Mankato, Minnesota:
<TABLE>
<S> <C>
Property, plant and equipment........................... $ 2,092
Intangible assets....................................... 23,780
-------
Total purchase price............................... $25,872
=======
</TABLE>
Date acquired: July 25, 1994
c) Marshall and Montevideo, Minnesota:
<TABLE>
<S> <C>
Property, plant and equipment........................... $ 2,171
Intangible assets....................................... 10,683
-------
Total purchase price............................ $12,854
=======
</TABLE>
Date acquired: July 25, 1994
On July 25, 1994 the Partnership purchased substantially all of the cable
television system assets serving the communities of Kings Mountain and Gaston
County, North Carolina and Clover, South Carolina for $36,500. These assets were
then exchanged for the cable television system assets serving Mankato, Marshall
and Montevideo, Minnesota along with a $2,000 cash payment. No gain or loss was
recognized as a result of this nonmonetary exchange.
d) Bruce, Mississippi:
<TABLE>
<S> <C>
Property, plant and equipment........................... $ 343
Intangible assets....................................... 923
-------
Total purchase price............................ $ 1,266
=======
</TABLE>
Date acquired: January 31, 1995
e) Crosby, Minnesota:
<TABLE>
<S> <C>
Property, plant and equipment........................... $ 570
Intangible assets....................................... 2,130
-------
Total purchase price............................ $ 2,700
=======
</TABLE>
Date acquired: August 1, 1995
F-9
<PAGE> 107
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The results of operations of these cable television systems since the dates
of their acquisition have been included in the accompanying statements of
operations.
The following unaudited pro forma income statement information is presented
as though the acquisitions of Mankato, Marshall and Montevideo, Minnesota and
Hinesville, Georgia had occurred January 1, 1993. Pro forma information on the
Crosby, Minnesota and Bruce, Mississippi acquisitions have not been presented
because the effects were not significant:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1993 1994
-------- -------
<S> <C> <C>
Revenue............................................. $ 64,526 $65,713
Operating (loss) income............................. (61) 7,002
Net loss............................................ (11,286) (7,141)
</TABLE>
This unaudited pro forma financial information is presented for
informational purposes only and may not be indicative of the results of
operations had these acquisitions been completed as of January 1, 1993 or of
future results of operations.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is comprised of the following at December 31,
1994 and 1995 and at March 31, 1996:
<TABLE>
<CAPTION>
MARCH 31,
1996
1994 1995 -----------
-------- -------- (UNAUDITED)
<S> <C> <C> <C>
Land and buildings...................... $ 3,434 $ 3,892 $ 3,558
Distribution systems.................... 107,917 116,317 117,863
Support equipment....................... 11,448 13,394 13,835
Construction in progress................ 117 3,368 4,363
-------- -------- --------
122,916 136,971 139,619
Accumulated depreciation................ (47,605) (55,315) (57,367)
-------- -------- --------
$ 75,311 $ 81,656 $ 82,252
======== ======== ========
</TABLE>
Depreciation expense of approximately $7,450, $7,960 and $8,842 is included
in the statements of operations for the years ended December 31, 1993, 1994 and
1995, respectively. Depreciation expense of approximately $2,123 and $2,290
(unaudited) is included in the statements of operations for the three-month
periods ended March 31, 1995 and 1996, respectively.
Capitalized interest on construction in progress was approximately $210,
$10 and $181 in 1993, 1994 and 1995, respectively, and approximately $45 and $0
(unaudited) in the three-month periods ended March 31, 1995 and 1996,
respectively.
F-10
<PAGE> 108
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INTANGIBLE ASSETS
Intangible assets is comprised of the following at December 31, 1994 and
1995 and at March 31, 1996:
<TABLE>
<CAPTION>
MARCH 31,
1996
1994 1995 -----------
-------- -------- (UNAUDITED)
<S> <C> <C> <C>
Goodwill................................ $ 5,579 $ 5,579 $ 5,579
Franchise costs......................... 80,764 83,923 83,923
Subscriber lists........................ 37,727 37,727 37,727
Covenants not to compete................ 5,128 5,228 5,228
-------- -------- --------
129,198 132,457 132,457
Accumulated amortization................ (64,291) (77,379) (80,631)
-------- -------- --------
$ 64,907 $ 55,078 $ 51,826
======== ======== ========
</TABLE>
5. OTHER ASSETS
Other assets consisted primarily of an investment in common stock of QVC,
Inc. which was sold in February 1995 pursuant to a cash tender offer. A gain of
$390 was recognized.
6. DEBT
Debt consists of the following at December 31, 1994 and 1995 and at March
31, 1996:
<TABLE>
<CAPTION>
MARCH 31,
1996
1994 1995 -----------
-------- -------- (UNAUDITED)
<S> <C> <C> <C>
Notes payable to banks.................. $165,600 $161,000 $ 162,000
Note payable to partner................. 22,100 22,100 22,100
Other debt.............................. 98 2,380 2,245
-------- -------- --------
$187,798 $185,480 $ 186,345
======== ======== ========
</TABLE>
a. The notes payable to banks represent borrowings under a $225,000
revolving credit term loan agreement as amended August 25, 1995. The
agreement calls for a current Available Commitment of $225,000 of which
$161,000 and $162,000 (unaudited) is outstanding at December 31, 1995 and
March 31, 1996, respectively. The agreement provides for a revolving credit
facility through January 25, 1997 and a term loan feature thereafter
requiring quarterly payments ranging from .75% to 8.25% of the principal
through June 30, 2003.
The agreement provides for interest at varying rates based upon two
optional measures available to the Partnership: the prime rate plus .75%
and the London Interbank Offered Rate ("LIBOR") plus 1.75%, with provision
for certain performance-based rate reductions during the term of the
agreement. In addition, the agreement allows for interest rate swap
agreements (see Note 7).
The rates applicable to balances outstanding at December 31, 1995
ranged from 7.2% to 8.875% and at March 31, 1996 ranged from 6.7% to 8.7%
(unaudited) (see Note 7). Covenants of the agreement require, among other
things, the maintenance of certain earnings, cash flow and financial ratios
and include certain limitations on additional investments, indebtedness,
capital expenditures, asset sales, management fees and affiliate
transactions. The Partnership pays commitment fees of .375% per annum on
the unused principal amounts of the Available Commitment
F-11
<PAGE> 109
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
under the agreement, as well as an annual agency fee to a bank of $60. A
guarantee in the amount of $3,000 has been made on these loans by one of
the partners. Balances outstanding at December 31, 1995 are due as follows
(assuming the revolving credit facility is converted to a term loan on
March 31, 1997):
<TABLE>
<S> <C>
1997.......................................................... $ 4,830
1998.......................................................... 16,100
1999.......................................................... 20,930
2000.......................................................... 25,760
2001 and thereafter........................................... 93,380
--------
$161,000
========
</TABLE>
b. The note payable to a partner is comprised of a $25,000
subordinated note of which $22,100 is outstanding at December 31, 1995 and
$22,100 (unaudited) is outstanding at March 31, 1996. The note, dated May
12, 1988, is junior and subordinate to the senior debt represented by the
notes payable to banks. Interest is to be provided for at the prime rate
(as defined) and is payable quarterly, to the extent allowed under the bank
subordination agreement, or at the maturity date of the note, which is the
earlier of April 30, 2001 or the first business day following the full
repayment of the entire amount due under the notes payable to banks. The
interest rates at December 31, 1995 and March 31, 1996 were 8.5% and 8.25%
(unaudited), respectively, and accrued interest totalled $14,302 and
$14,768 (unaudited), respectively. The note also provides for repayment at
any time without penalty, subject to subordination restrictions. The
Partnership executed another note payable to a partner on July 22, 1994 for
a maximum principal amount of $2,900 with interest thereon to be computed
at a rate of 12.0% per year, compounded quarterly, based on a 365-day year.
The note was cancelled in May 1996 (unaudited). No amounts were ever drawn
under the note.
7. INTEREST RATE SWAP AGREEMENTS
The Partnership has entered into several interest rate swap agreements to
effectively fix or set maximum interest rates on a portion of its floating rate
long-term debt. The Partnership is exposed to credit loss in the event of
nonperformance by the counterparties to the interest rate swap agreements.
At December 31, 1995, such interest rate swap agreements effectively fix or
set maximum interest rates on an aggregate notional principal amount of $122,000
with rates ranging from 6.07% to 9.26%, excluding the applicable margin required
pursuant to the revolving credit term loan agreement, as amended, which was
1.625% for the three months ended March 31, 1996. The expiration dates of the
swap agreements range from June 5, 1996 to October 14, 1997. The difference
between the fair market value and book value of the Partnership's long-term debt
at December 31, 1995 is not material.
F-12
<PAGE> 110
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. DEFERRED FINANCING COSTS
Deferred financing costs consists of the following at December 31, 1994 and
1995 and at March 31, 1996:
<TABLE>
<CAPTION>
MARCH 31,
1996
1994 1995 ------------
------- ------- (UNAUDITED)
<S> <C> <C> <C>
Deferred financing costs................. $ 3,666 $ 3,691 $ 3,698
Accumulated amortization................. (1,684) (1,921) (1,980)
------- ------- -------
Deferred financing costs, net............ $ 1,982 $ 1,770 $ 1,718
======= ======= =======
</TABLE>
9. TRANSACTIONS WITH AFFILIATES
The Partnership purchases various programming services through Satellite
Services, Inc. and Tele-Communications, Inc., which are affiliates of a general
partner. These purchases, which are made in the normal course of business and,
in management's opinion, at rates which do not exceed those the Partnership
could obtain from third parties, aggregated approximately $8,440, $10,945 and
$13,298 during the years ended December 31, 1993, 1994 and 1995, respectively,
and approximately $3,268 and $3,490 (unaudited) during the three months ended
March 31, 1995 and 1996, respectively.
Amounts due to affiliated companies for programming services at December
31, 1994 and 1995 amounted to approximately $2,024, and $2,256, respectively,
and approximately $2,118 and $2,266 (unaudited) at March 31, 1995 and 1996,
respectively, and are included in due to affiliated companies in the
accompanying balance sheets.
The Partnership, in accordance with the Partnership Management Agreement,
paid an annual fee to an affiliate of certain of its partners for management
services and reimbursed certain fringe benefit costs. Payments under the
agreement amounted to approximately $213, $214 and $214 in 1993, 1994 and 1995,
respectively.
The Partnership, in accordance with the Management Agreement and the
Administration Agreement, each dated December 31, 1995, pays fees to affiliates
of certain of its partners for management and administrative services beginning
January 1, 1996. Payments under these agreements are for management and
administrative expenses previously paid for directly by the Partnership and
amounted to approximately $926 (unaudited) for the three months ended March 31,
1996.
During the normal course of business, the Partnership incurs management
costs and makes and receives advances on behalf of two domestic affiliates who
have invested in new cable television operations in Chile and Poland. These
costs totalled approximately $242 and $995 for the years ended December 31, 1994
and 1995, respectively, and approximately $249 and $0 (unaudited) for the three
months ended March 31, 1995 and 1996, respectively, and are reflected as a
reduction of selling, general and administrative expenses. There were no such
costs for the year ended December 31, 1993. At December 31, 1995 and March 31,
1996, respectively, the net amount included in due to affiliated companies in
the accompanying balance sheets is approximately $892 and $6 (unaudited),
respectively.
10. COMMITMENTS
The Partnership leases business space and has entered into various pole and
tower rental agreements. Rent expense under such agreements amounted to
approximately $848, $998 and $1,057 during the years ended December 31, 1993,
1994 and 1995, respectively, and approximately $256 and
F-13
<PAGE> 111
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
$216 (unaudited) during the three months ended March 31, 1995 and 1996,
respectively. A substantial number of these rental agreements are renewed on a
continuous basis. In management's opinion, future rental costs, while
substantially not in the form of noncancelable lease commitments, will
approximate $1,162 per year over the next five years.
The Partnership's employees' savings plan allows eligible employees to
contribute up to 12% of their pre-tax earnings to the Plan. The Partnership
provides matching contributions equal to one-half of the first 6% of an
employee's pre-tax salary contribution. The Partnership's contributions during
the years ended December 31, 1993, 1994 and 1995 amounted to approximately $165,
$176 and $173, respectively, and approximately $37 and $44 (unaudited) during
the three months ended March 31, 1995 and 1996, respectively.
11. CONTINGENCIES
Various legal actions remain pending against the Partnership which have
arisen in the ordinary course of business. Management believes that the
Partnership is not a party to any litigation which is expected to have a
material adverse effect on the Partnership's financial condition.
12. SUBSEQUENT EVENT (UNAUDITED)
In May 1996, the Partnership will commence plans to offer an aggregate
principal amount of $100,000 of senior notes in a public offering. In connection
with the completion of the public offering, the former partners of the
Partnership will contribute all, or substantially all, of their interests in the
Partnership to Bresnan Communications Company Holding, L.P. ("BCC Holding"). As
a result, BCC Holding will hold a 99% general partner interest in the
Partnership. In May 1996, BCC Holding will also commence plans to offer an
aggregate principal amount of $100,000 of senior debentures in a public
offering. The net proceeds from the offering of such senior debentures will be
contributed by BCC Holding to the Partnership. The net proceeds from the
offerings will be used to repay amounts under the Partnership's $225,000
revolving credit term loan agreement and the note payable to a partner, with the
remaining proceeds being used for general purposes, including to pay fees and
expenses relating to an amendment to the revolving credit term loan agreement.
F-14
<PAGE> 112
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Bresnan Capital Corporation
We have audited the accompanying balance sheet of Bresnan Capital
Corporation as of April 30, 1996. This financial statement is the responsibility
of the Corporation's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of Bresnan Capital Corporation
at April 30, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
May 16, 1996
F-15
<PAGE> 113
BRESNAN CAPITAL CORPORATION
BALANCE SHEET
APRIL 30, 1996
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents............................................................ $ 1
-----
$ 1
=====
LIABILITIES AND STOCKHOLDER'S EQUITY
Commitments and contingencies........................................................ $ --
Stockholder's equity:
Common stock, $.01 par value, 100 shares authorized, issued and outstanding........ 1
-----
$ 1
=====
</TABLE>
See accompanying notes.
F-16
<PAGE> 114
BRESNAN CAPITAL CORPORATION
NOTES TO BALANCE SHEET
APRIL 30, 1996
1. ORGANIZATION
Bresnan Capital Corporation (the "Company") was incorporated in the state
of Delaware on April 25, 1996 for the purpose of serving as an issuer, jointly
and severally with its parent company Bresnan Communications Company Limited
Partnership (the "Partnership"), of an aggregate principal amount of $100,000 of
senior notes. The Company does not expect to have operations other than those
related to its purpose as co-issuer.
The Company is a wholly owned subsidiary of the Partnership and has had no
operations from the date of its incorporation through April 30, 1996.
2. SUBSEQUENT EVENTS (UNAUDITED)
In May 1996, the Company and the Partnership will commence plans to offer
an aggregate principal amount of $100,000 of senior notes in a public offering.
In connection with the completion of the public offering, the former partners of
the Partnership will contribute all, or substantially all, of their interests in
the Partnership to Bresnan Communications Company Holding, L.P. ("BCC Holding").
As a result, BCC Holding will also commence plans to offer an aggregate
principal amount of $100,000 of senior debentures in a public offering. The net
proceeds from the offering of such senior debentures will be contributed by BCC
Holding to the Partnership. The net proceeds from the offerings will be used to
repay amounts under the Partnership's $225,000 revolving credit term loan
agreement and the note payable to a partner, with the remaining proceeds being
used for general purposes, including to pay fees and expenses relating to an
amendment to the revolving credit term loan agreement.
F-17
<PAGE> 115
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS OR BY THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information...................... 2
Prospectus Summary......................... 3
Risk Factors............................... 9
Concurrent BCC Holding Offering............ 13
Use of Proceeds............................ 14
Capitalization............................. 15
Organization............................... 16
Selected Financial and Operating Data...... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................ 19
Business................................... 25
Legislation and Regulation................. 42
Management................................. 52
Certain Relationships and Related
Transactions............................. 56
The Reorganization......................... 60
Principal Partners......................... 61
Description of Partnership Agreement....... 63
Description of Bank Credit Facility........ 69
Description of Notes....................... 70
Underwriting............................... 94
Legal Matters.............................. 94
Experts.................................... 95
Index to Financial Statements.............. F-1
</TABLE>
------------------------
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$100,000,000
BRESNAN COMMUNICATIONS
COMPANY LIMITED
PARTNERSHIP
BRESNAN CAPITAL
CORPORATION
% SENIOR NOTES DUE 2006
[LOGO]
SALOMON BROTHERS INC
TORONTO DOMINION SECURITIES
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PROSPECTUS
DATED , 1996
<PAGE> 116
The Bresnan Systems Map has two colored maps, each of which shows three
states, certain areas of which have colored shading. The top map shows the
states of Minnesota, Wisconsin and Michigan. The bottom map shows the states of
Mississippi, Alabama and Georgia. Underneath both maps is a legend which lists
the regions in which Bresnan operates and the approximate amount of homes
passed and basic subscribers for each of the regions. The legend also assigns a
color to each region listed, and explains that the colored areas appearing in
the maps indicate the counties in which Bresnan operates.
<PAGE> 117
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the issuance and distribution of the securities
being registered hereby are set forth below, all of which will be paid by
Bresnan Communications Company Limited Partnership (the "Company"). Except for
the SEC registration fee and the NASD filing fee, all of the following expenses
are estimated.
<TABLE>
<S> <C>
SEC registration fee..................................... $34,483
NASD filing fee.......................................... 10,500
Printing and engraving expenses.......................... 100,000
Accounting fees and expenses............................. 35,000
Registrants' legal fees and expenses..................... 150,000
Blue sky filing fees and expenses........................ 12,000
Trustee fees and expenses................................ 10,000
Rating agency fees and expenses.......................... 35,000
Miscellaneous expenses................................... 238,017
-------
Total.......................................... $625,000
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Amended and Restated Agreement of Limited Partnership
The Company's Amended and Restated Agreement of Limited Partnership
provides that the Company (but not any partner therein or affiliate of any such
partner) shall indemnify and hold harmless the Company's general partner, and
its respective affiliates, partners, officers, directors, employees and agents,
from and against any and all claims, demands, liabilities, costs, damages and
causes of action of any nature whatsoever arising out of or incidental to the
management by the general partner of the Company's affairs, except where such
general partner has committed fraud, gross negligence or willful misconduct.
The Company's indemnification obligations with respect to its general
partner include payment of reasonable attorneys' fees or other expenses incurred
in connection with any settlement or in any legal proceeding, and the removal of
any liens affecting any property of the indemnitee.
Management Agreement
Pursuant to the Amended and Restated Management Agreement dated as of May
[ ], 1996 between the Company and Bresnan Communications, Inc. ("BCI"), the
Company is required to indemnify and hold harmless BCI, in its capacity as
management company under such agreement, as well as BCI's officers, directors,
employees and control persons, from and against any and all claims, damages,
liabilities, costs and expenses (including reasonable attorneys' fees and court
costs) which may be incurred by reason of BCI's duties or obligations
thereunder, except with respect to acts constituting gross negligence or willful
misconduct.
Administration Agreement
Pursuant to the Amended and Restated Administration Agreement dated as of
May [ ], 1996 between the Company and Bresnan Management Services, Inc.
("BMSI"), the Company is required to indemnify and hold harmless BMSI, as well
as BMSI's officers, directors, employees and control persons, from and against
any and all claims, damages, liabilities, costs and expenses (including
reasonable attorneys' fees and court costs) which may be incurred by reason of
BMSI's duties or obligations thereunder, except with respect to acts
constituting gross negligence or willful misconduct.
II-1
<PAGE> 118
Delaware General Corporation Law; Bresnan Capital Corporation's
Organizational Documents
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law (the "DGCL"), which enables a corporation in its original certificate of
incorporation or an amendment thereto to eliminate or limit the personal
liability of a director to the corporation for monetary damages for breaches of
the director's fiduciary duty, except with respect to the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the DGCL (providing for liability of directors for the unlawful
payment of dividends or unlawful stock purchases or redemptions, whether willful
or negligent) or (iv) for any transaction from which a director derived an
improper personal benefit.
Reference is also made to Section 145 of the DGCL which provides that a
corporation may indemnify any persons, including officers and directors, who
are, or are threatened to be made, parties to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person was an officer, director, employee or agent
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation, partnership or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding, provided such
officer, director, employee or agent (i) acted in good faith and in a manner he
reasonably believed to be in and not opposed to the corporation's best interests
and (ii) with respect to any criminal action or proceeding, had no reasonable
cause to believe that his conduct was unlawful. A Delaware corporation may also
indemnify an officer, director, employee and agent in an action or suit by or in
the right of the corporation under the conditions described in clause (i) of the
preceding sentence, except that no indemnification is permitted without judicial
approval if the officer, director, employee and agent is adjudged to be liable
to the corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify such person against the expenses (including attorneys' fees) actually
and reasonably incurred by such person in connection therewith.
The Certificate of Incorporation and Bylaws of Bresnan Capital Corporation
provide for indemnification of officers and directors to the fullest extent
permitted by applicable law.
Underwriting Agreement
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification of the Registrants and their respective
officers, directors and Executive Committee members, as the case may be, by the
Underwriters, and of the Underwriters by the Registrants, for certain
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"), or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On April 25, 1996, Bresnan Capital Corporation sold 100 shares of common
stock, par value $.01 per share to the Company for an aggregate price of $1.00.
These shares were sold pursuant to the exemption from registration afforded by
Section 4(2) of the Securities Act.
II-2
<PAGE> 119
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <C> <S>
1.1 -- Form of Underwriting Agreement*
3.1 -- Amended and Restated Agreement of Limited Partnership of Bresnan Communications
Company Limited Partnership*
3.2 -- Certificate of Incorporation of Bresnan Capital Corporation
3.3 -- By-Laws of Bresnan Capital Corporation
4.1 -- Form of Indenture*
4.2 -- Form of the Senior Notes*
4.3 -- Fourth Amended and Restated Loan Agreement dated [ ], 1996 by and among
Bresnan Communications Company Limited Partnership, as borrower, and certain
banks, as lenders*
5.1 -- Opinion of Paul, Hastings, Janofsky & Walker*
10.1 -- Amended and Restated Management Agreement dated as of [ ], 1996 between
Bresnan Communications Company Limited Partnership and Bresnan Communications,
Inc.*
10.2 -- Amended and Restated Administration Agreement dated as of [ ], 1996
between Bresnan Communications Company Limited Partnership and Bresnan Management
Services, Inc.*
10.3 -- Equipment Purchase Agreement dated as of October 31, 1984 between Bresnan
Communications Company Limited Partnership and Community Tele-Communications, Inc.
10.4 -- Supply Agreement dated as of October 31, 1984 between Bresnan Communications
Company Limited Partnership and Satellite Services, Inc.**
10.5 -- Reference is made to Exhibit 4.3, Exhibit 4.4, Exhibit 4.5 and Exhibit 4.6
12.1 -- Statement regarding computation of ratio of earnings to fixed charges
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Paul, Hastings, Janofsky & Walker (contained in Exhibit 5.1 of this
Registration Statement)*
24.1 -- Power of Attorney (contained on signature page of this Registration Statement)
25.1 -- Statement of Eligibility of Trustee on Form T-1*
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
** The Company is applying for confidential treatment of portions of this
Exhibit.
(b) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
Other prescribed financial statement schedules are not furnished because
the required information is either included elsewhere in this Registration
Statement, or such schedules are not required or are inapplicable.
ITEM 17. UNDERTAKINGS.
(h) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of
II-3
<PAGE> 120
the Registrants in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
(i) The Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 121
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrants
have duly caused this Registration Statement to be signed on their behalf by the
undersigned, thereunto duly authorized, in the City of White Plains, State of
New York, on May 21, 1996.
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
By: BCI (USA), L.P.
Its Managing General Partner
By: BRESNAN COMMUNICATIONS, INC.
Its General Partner
By: /s/ WILLIAM J. BRESNAN
------------------------------------
William J. Bresnan
President and Chief Executive
Officer
BRESNAN CAPITAL CORPORATION
By: /s/ WILLIAM J. BRESNAN
------------------------------------
William J. Bresnan
President
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jeffrey S. DeMond and Andrew C. Kober,
and each of them, as such person's true and lawful attorney-in-fact and agent
with full power of substitution and revocation for such person and in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments to this Registration Statement (including post effective amendments),
any Registration Statement permitted to be filed pursuant to Rule 462(b) of the
Securities Act of 1933, as amended, and any amendments thereto, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-fact
and agent full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as such person might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or his or her substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
II-5
<PAGE> 122
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------- -------------
<C> <S> <C>
/s/ WILLIAM J. BRESNAN President and Chief Executive May 21, 1996
- ------------------------------------------ Officer of Bresnan Communications,
William J. Bresnan Inc.
/s/ JEFFREY S. DEMOND Senior Vice President and Chief May 21, 1996
- ------------------------------------------ Financial Officer of Bresnan
Jeffrey S. DeMond Communications, Inc.; Member of the
Executive Committee
/s/ ANDREW C. KOBER Vice President and Controller of May 21, 1996
- ------------------------------------------ Bresnan Communications, Inc.
Andrew C. Kober
/s/ MICHAEL W. BRESNAN Member of the Executive Committee May 21, 1996
- ------------------------------------------
Michael W. Bresnan
/s/ MARVIN L. JONES Member of the Executive Committee May 21, 1996
- ------------------------------------------
Marvin L. Jones
/s/ WILLIAM R. FITZGERALD Member of the Executive Committee May 21, 1996
- ------------------------------------------
William R. Fitzgerald
</TABLE>
II-6
<PAGE> 123
REPORT OF INDEPENDENT AUDITORS
The Partners
Bresnan Communications Company Limited Partnership
We have audited the financial statements of Bresnan Communications Company
Limited Partnership as of December 31, 1994 and 1995, and for each of the three
years in the period ended December 31, 1995, and have issued our reports thereon
dated March 8, 1996 (included elsewhere in this Registration Statement). Our
audits included the financial statement schedule listed in Item 16(b) of this
Registration Statement. This schedule is the responsibility of the Partnership's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
New York, New York
March 8, 1996
II-7
<PAGE> 124
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCES AT ADDITIONS CHARGED
BEGINNING OF TO COSTS AND BALANCE AT END
PERIOD EXPENSES DEDUCTIONS(1) OF PERIOD
------------ ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
For the three months ended March 31,
1996 (unaudited)
Allowance for receivables........... $311,000 $ 313,000 $ (330,000) $ 294,000
======== ========== =========== ========
For the year ended December 31, 1995
Allowance for receivables........... $300,000 $ 1,077,000 $(1,066,000) $ 311,000
======== ========== =========== ========
For the year ended December 31, 1994
Allowance for receivables........... $237,000 $ 991,000 $ (928,000) $ 300,000
======== ========== =========== ========
For the year ended December 31, 1993
Allowance for receivables........... $119,000 $ 741,000 $ (623,000) $ 237,000
======== ========== =========== ========
</TABLE>
- ---------------
(1) Represents the write-off of uncollectible accounts, net of recoveries and
the sale of receivables to acquiring companies.
<PAGE> 125
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. PAGE NO.
- ------- --------
<C> <S> <C> <C>
1.1 -- Form of Underwriting Agreement*
3.1 -- Amended and Restated Agreement of Limited Partnership of Bresnan
Communications Company Limited Partnership*
3.2 -- Certificate of Incorporation of Bresnan Capital Corporation
3.3 -- By-Laws of Bresnan Capital Corporation
4.1 -- Form of Indenture*
4.2 -- Form of the Senior Notes*
4.3 -- Fourth Amended and Restated Loan Agreement dated [ ], 1996
by and among Bresnan Communications Company Limited Partnership, as
borrower, and certain banks, as lenders*
5.1 -- Opinion of Paul, Hastings, Janofsky & Walker*
10.1 -- Amended and Restated Management Agreement dated as of [ ],
1996 between Bresnan Communications Company Limited Partnership and
Bresnan Communications, Inc.*
10.2 -- Amended and Restated Administration Agreement dated as of [
], 1996 between Bresnan Communications Company Limited
Partnership and Bresnan Management Services, Inc.*
10.3 -- Equipment Purchase Agreement dated as of October 31, 1984 between
Bresnan Communications Company Limited Partnership and Community Tele-
Communications, Inc.
10.4 -- Supply Agreement dated as of October 31, 1984 between Bresnan
Communications Company Limited Partnership and Satellite Services,
Inc.**
10.5 -- Reference is made to Exhibit 4.3, Exhibit 4.4, Exhibit 4.5 and Exhibit
4.6
12.1 -- Statement regarding computation of ratio of earnings to fixed charges
23.1 -- Consent of Ernst & Young LLP
23.2 -- Consent of Paul, Hastings, Janofsky & Walker (contained in Exhibit 5.1
of this Registration Statement)*
24.1 -- Power of Attorney (contained on signature page of this Registration
Statement)
25.1 -- Statement of Eligibility of Trustee on Form T-1*
27.1 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
** The Company is applying for confidential treatment of portions of this
Exhibit.
<PAGE> 1
Exhibit 3.2
CERTIFICATE OF INCORPORATION
OF
BRESNAN CAPITAL CORPORATION
ARTICLE ONE
The name of this Corporation (hereinafter called the
"Corporation") is Bresnan Capital Corporation.
ARTICLE TWO
The address, including street, number, city and county, of
the registered office of the Corporation in the State of Delaware is 1209 Orange
Street, in the City of Wilmington, County of New Castle, 19801. The name of the
registered agent of the Corporation in the State of Delaware at such address is
The Corporation Trust Company.
ARTICLE THREE
The nature of the business and the purposes to be
conducted and promoted by the Corporation is to conduct any lawful business, to
promote any lawful purpose and to engage in any lawful act or activity for which
a corporation may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE FOUR
The Corporation shall have authority, to be exercised by
its Board of Directors, to issue 100 shares of common stock of the par value of
$.01 per share.
ARTICLE FIVE
The number of directors which shall constitute the whole
Board of Directors of the Corporation shall be determined pursuant to the
By-Laws of the Corporation as provided therein. Elections of directors need not
be by written ballot.
ARTICLE SIX
In furtherance and not in limitation of the powers
conferred by statute and in accordance with any relevant provisions of the
By-Laws, the Board of Directorsis expressly authorized to adopt, amend or repeal
the By-Laws of the Corporation.
ARTICLE SEVEN
The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation.
<PAGE> 2
ARTICLE EIGHT
The Corporation shall indemnify all directors and officers
of the Corporation, to the fullest extent permitted by the General Corporation
Law of the State of Delaware and as provided in the By-Laws of the Corporation,
from and against any and all expenses, liabilities or other matters. The
Corporation may indemnify, to the fullest extent permitted by the General
Corporation Law of the State of Delaware and as provided in the By-laws of the
Corporation, any and all persons whom it shall have the power to indemnify from
and against any and all expenses, liabilities or other matters.
ARTICLE NINE
No director of the Corporation shall be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty by such director as a director; provided, however, that this
Article Nine shall not eliminate or limit the liability of a director (i) for
any breach of such director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
Title 8 of the General Corporation Law of the State of Delaware or (iv) for any
transaction from which such director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware, as so amended. No amendment to or repeal of this
Article Nine shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring at the time of or prior to such amendment
or repeal. Any repeal or modification of this Article Nine shall not adversely
affect any right or protection of a director of the Corporation existing under
this Certificate of Incorporation.
ARTICLE TEN
Whenever a compromise or arrangement is proposed between
the Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of
-2-
<PAGE> 3
creditors, and/or on all the stockholders or class of stockholders, of the
Corporation, as the case may be, and also on the Corporation.
ARTICLE ELEVEN
The name and mailing address of the incorporator are
Robert V. Bresnan, c/o Bresnan Communications, Inc., 709 Westchester Avenue,
White Plains, New York 10604- 3023.
I, THE UNDERSIGNED, being the sole incorporator
hereinbefore named, for the purpose of forming a corporation pursuant to the
General Corporation Law of the State of Delaware, do hereby make this
certificate, hereby declaring and certifying that this is my act and deed and
the facts herein stated are true and, accordingly, have hereunto set my hand
this 25th day of April, 1996.
/s/ Robert V. Bresnan
-----------------------------
Robert V. Bresnan
-3-
<PAGE> 1
Exhibit 3.3
BY-LAWS
OF
BRESNAN CAPITAL CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock
in the Corporation shall be entitled to have a certificate signed by, or in the
name of, the Corporation by the Chairman or Vice Chairman of the Board of
Directors, if any, or by the President or a Vice President and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation representing the number of shares owned by him or her in the
Corporation. Any and all signatures on any such certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he or she were such
officer, transfer agent, or registrar at the date of issue.
Whenever the Corporation shall be authorized to issue more
than one class of stock or more than one series of any class of stock and
whenever the Corporation shall issue any shares of its stock as partly paid
stock, the certificate representing shares of any such class or series or of any
such partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The Corporation may issue a new certificate of stock in
place of any certificate theretofore issued by it, alleged to have been lost,
stolen, or destroyed, and the Board of Directors may require the owner of any
lost, stolen, or destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify the Corporation against any claim
that may be made against it on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The Corporation may, but
shall not be required to, issue fractions of a share. If the Corporation does
not issue fractions of a share, it shall (1) arrange for the disposition of
fractional interests by those entitled thereto, (2) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in registered or bearer
form which shall entitle the holder to receive a certificate for a full share
upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share shall, but scrip or warrants shall not unless
otherwise provided therein, entitle the holder to exercise voting rights, to
receive dividends thereon, and to participate in any of the assets of the
Corporation
<PAGE> 2
in the event of liquidation, in each case to the extent of such fraction. The
Board of Directors may cause scrip or warrants to be issued subject to the
conditions that they shall become void if not exchanged for certificates
representing full shares before a specified date, or subject to the conditions
that the shares for which scrip or warrants are exchangeable may be sold by the
Corporation and the proceeds thereof distributed to the holders of scrip or
warrants, or subject to any other conditions which the Board of Directors may
impose.
3. STOCK TRANSFERS. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if any,
transfers or registration of transfers of shares of stock of the Corporation
shall be made only on the stock ledger of the Corporation and on surrender of
the certificate or certificates for such shares of stock properly endorsed and
the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of
determining the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix, in
advance, a record date, which shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty days nor less than ten days
before the date of such meeting. If no record date is fixed, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting of stockholders, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall not be
more than ten days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. If no record date has been fixed by
the Board of Directors, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting of stockholders, when
no prior action by the Board of Directors is required by the General Corporation
Law, shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Corporation by delivery
to its registered office in the State of Delaware, its principal place of
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to
the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
the General Corporation Law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
-2-
<PAGE> 3
In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
5. MEANING OF CERTAIN TERMS. As used herein in respect of
the right to notice of a meeting of stockholders or a waiver thereof or to
participate or vote thereat or to consent or dissent in writing in lieu of a
meeting, as the case may be, the term "share" or "shares" or "share of stock" or
"shares of stock" or "stockholder" or "stockholders" refers to an outstanding
share or shares of stock and to a holder or holders of record of outstanding
shares of stock when the Corporation has only one class of shares of stock
outstanding; and said reference is also intended to include any outstanding
share or shares of stock and any holder or holders of record of outstanding
shares of stock of any class upon which or upon whom the Certificate of
Incorporation confers such rights where there are two or more classes or series
of shares of stock or upon which or upon whom the General Corporation Law
confers such rights notwithstanding that the Certificate of Incorporation may
provide for more than one class or series of shares of stock, one or more of
which are limited or denied such rights thereunder.
6. STOCKHOLDER MEETINGS.
6.1 TIME. The annual meeting shall be held on the date
and at them time fixed, from time to time, by the Board of Directors, provided,
that thefirst annual meeting shall be held on a date within thirteen months
after the organization of the corporation, and each successive annual meeting
shall be held on a date within thirteen months after the date of the preceding
annual meeting. A special meeting shall be held on the date and at the time
fixed by the Board of Directors.
6.2 PLACE. Annual meetings and special meetings shall
be held within or without the State of Delaware, as the Board of Directors may,
from time to time, fix. Whenever the Board of Directors shall fail to fix such
place, the meeting shall be held at the registered office of the Corporation in
the State of Delaware.
6.3 CALL. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by the General Corporation
Law or by the Certificate of Incorporation, may be called by action of the Board
of Directors, the Chairman of the Board or the President and shall be called by
the Chairman of the Board, the President or the Secretary at the written request
of a majority of the Board of Directors then in office or the holders of a
majority of the outstanding shares of stock entitled to vote.
6.4 NOTICE OR WAIVER OF NOTICE. Written notice of all
meetings of stockholders shall be given, stating the place, date, and hour of
the meeting and stating the
-3-
<PAGE> 4
place within the city or other municipality or community at which the list of
stockholders of the Corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state any other purpose or purposes. The notice of
a special meeting shall in all instances state the purpose or purposes for which
the meeting is to be called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice of any meeting shall be given, not less
than ten days nor more than sixty days before the date of the meeting. Notice by
mail shall be deemed to be given when deposited, with postage thereon prepaid,
in the United States Mail directed to the stockholder at his or her address as
it appears on the records of the Corporation. If a meeting is adjourned to
another time, not more than thirty days hence, and/or to another place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the Board
of Directors, after adjournment, fix a new record date for the adjourned
meeting. Notice need not be given to any stockholder who submits a written
waiver of notice signed by him or her before or after the time stated therein.
Attendance of a stockholder at a meeting of stockholders shall constitute a
waiver of notice of such meeting, except when the stockholder attends the
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice.
6.5 STOCKHOLDER LIST. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least ten days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city or other municipality or community where the meeting is to be held, which
place shall be specified in the notice of the meeting, or if not so specified,
at the place where the meeting is to be held. The list shall also be produced
and kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present. The stock ledger shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by this section or the books of the Corporation, or to
vote at any meeting of stockholders.
6.6 CONDUCT OF MEETING. Meetings of the stockholders
shall be presided over by one of the following officers in the order of
seniority and if present and acting, the Chairman of the Board, if any, the Vice
Chairman of the Board, if any, the President, a Vice President, if any, or, if
none of the foregoing is in office and present and acting, by a chairman to be
chosen by the stockholders. The Secretary of the Corporation, or in his absence,
an Assistant Secretary, shall act as secretary of every meeting, but if neither
-4-
<PAGE> 5
the Secretary nor an Assistant Secretary is present the chairman of the meeting
shall appoint a secretary of the meeting.
6.7 PROXY REPRESENTATION. Every stockholder entitled
to vote at a meeting of stockholders or to express consent or dissent to
corporate action in writing without a meeting may authorize another person or
persons to act for him or her by proxy. A stockholder may execute a writing
authorizing another person or persons to act for him or her as proxy. Execution
may be accomplished by the stockholder or his or her authorized officer,
director, employee or agent signing such writing or causing his or her signature
to be affixed to such writing by any reasonable means including, but not limited
to, by facsimile signature. A stockholder may authorize another person or
persons to act for him or her as proxy by transmitting or authorizing the
transmission of a telegram, cablegram, or other means of electronic transmission
to the person who will be the holder of the proxy or to a proxy solicitation
firm, proxy support service organization or like agent duly authorized by the
person who will be the holder of the proxy to receive such transmission,
provided that any such telegram, cablegram or other means of electronic
transmission must either set forth or be submitted with information from which
it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder. If it is determined that such
telegrams, cablegrams or other electronic transmissions are valid, the
inspectors or, if there are no inspectors, such other persons making that
determination shall specify the information upon which they relied. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission created pursuant to the above may be substituted or used in lieu of
the original writing or transmission for any and all purposes for which the
original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission. No proxy shall be
voted or acted upon after three years from its date unless such proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and, if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.
6.8 INSPECTORS. The Board of Directors, in advance of
any meeting of stockholders, may, but need not unless prescribed by the General
Corporation Law, appoint one or more inspectors of election to act at the
meeting or any adjournment thereof and make a written report thereof. If an
inspector or inspectors are not appointed, the person presiding at the meeting
may, but need not, appoint one or more inspectors. In case any person who may be
appointed as an inspector fails to appear or act, the vacancy may be filled by
appointment made by the directors in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, if any, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his ability. The inspectors, if any, shall determine the number of
shares of stock outstanding and the voting power of each, the shares of stock
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall count all votes and ballots, determine and retain for a
reasonable period a record of the disposition of any challenges made to any
determination by inspectors and
-5-
<PAGE> 6
certify their determination of the number of shares represented at the meeting,
and their count of all votes and ballots.
6.9 QUORUM. The holders of a majority of the
outstanding shares of stock shall constitute a quorum at a meeting of
stockholders for the transaction of any business. The stockholders present may
adjourn the meeting despite the absence of a quorum.
6.10 VOTING. Each share of stock shall entitle the
holder thereof to one vote. In the election of directors, a plurality of the
votes cast shall elect. Any other action shall be authorized by a majority of
the votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the Certificate of
Incorporation or these By-Laws. In the election of directors, and for any other
action, voting need not be by written ballot.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action
required by the General Corporation Law to be taken at any annual or special
meeting of stockholders, or any action which may be taken at any annual or
special meeting of stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted and shall be delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors of the Corporation except as otherwise provided in the General
Corporation Law or in the Certificate of Incorporation. The Board of Directors
shall have the authority to fix the compensation of the members thereof. The use
of the phrase "whole Board of Directors" herein refers to the total number of
directors which the Corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a
stockholder, or a citizen or resident of the United States or the State of
Delaware. The initial Board of Directors shall consist of one person. Except for
the initial Board of Directors, the number of directors may be fixed from time
to time by action of the stockholders or of the Board of
-6-
<PAGE> 7
Directors. The number of directors may be increased or decreased by action of
the stockholders or of the Board of Directors.
3. ELECTION AND TERM. The first Board of Directors, unless
the members thereof shall have been named in the Certificate of Incorporation,
shall be elected by the incorporator or incorporators and shall hold office
until the first annual meeting of stockholders and until their successors are
elected and qualified or until their earlier resignation or removal. Any
director may resign at any time upon written notice to the Corporation.
Directors who are elected at an annual meeting of stockholders, and directors
who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
or until their successors are elected and qualified or until their earlier
resignation or removal. Newly created directorships and any vacancies in the
Board of Directors, including unfilled vacancies resulting from the removal of
directors for cause or without cause, may be filled by the vote of a majority of
the remaining directors then in office although less than a quorum, or by the
sole remaining director.
4. MEETINGS.
4.1 TIME. Meetings shall be held at such time as the
Board of Directors shall fix, except that the first meeting of a newly elected
Board of Directors shall be held as soon after its election as the directors may
conveniently assemble.
4.2 PLACE. Meetings shall be held at such place within
or without the State of Delaware as shall be fixed by the Board of Directors.
4.3 CALL. No call shall be required for regular
meetings for which the time and place have been fixed. Special meetings may be
called by or at the direction of the Chairman of the Board, if any, the Vice
Chairman of the Board, if any, or the President, or of a majority of the
directors in office.
4.4 NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice
shall be required for regular meetings for which the time and place have been
fixed. Written, oral, or any other mode of notice of the time and place shall be
given for special meetings in sufficient time for the convenient assembly of the
directors thereat. Notice need not be given to any director or to any member of
a committee of directors who submits a written waiver of notice signed by him or
her before or after the time for the meeting stated therein. Attendance of any
such person at a meeting shall constitute a waiver of notice of such meeting,
except when he or she attends a meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in any written waiver of notice.
4.5 QUORUM AND ACTION. A majority of the whole Board
of Directors shall constitute a quorum for the transaction of business except
when a vacancy or vacancies prevents such majority, whereupon a majority of the
directors in office shall constitute a quorum, provided, that such majority
shall constitute at least one third of the
-7-
<PAGE> 8
whole Board of Directors. A majority of the directors present, whether or not a
quorum is present, may adjourn a meeting to another time and place. Except as
otherwise provided by the General Corporation Law, the vote of the majority of
the directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors. The quorum and voting provisions herein stated shall
not be construed as conflicting with any provisions of the General Corporation
Law and these By-Laws which govern a meeting of directors held to fill vacancies
and newly created directorships in the Board of Directors or action of
disinterested directors.
4.6 CHAIRMAN OF THE MEETING. The Chairman of the Board
of Directors, if any, and if present and acting, shall preside at all meetings.
Otherwise, the Vice Chairman of the Board of Directors, if any and if present
and acting, or the President, if present and acting, or any other director
chosen by the Board of Directors, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be
provided by the General Corporation Law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of
any member of any such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation with the exception of any authority the delegation of
which is prohibited by Section 141 of the General Corporation Law or by these
By-Laws, and may authorize the seal of the Corporation to be affixed to all
papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be
taken at any meeting of the Board of Directors or any committee thereof may be
taken without a meeting if all members of the Board of Directors or committee,
as the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors, or committee.
8. ELECTRONIC COMMUNICATION. Any member or members of the
Board of Directors or of any committee designated by the Board of Directors, may
participate in a meeting of such Board of Directors, or any such committee, as
the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.
-8-
<PAGE> 9
ARTICLE III
OFFICERS
The officers of the Corporation shall consist of a
President and a Secretary, and, if deemed necessary, expedient, or desirable by
the Board of Directors, a Chief Executive Officer, a Chairman of the Board, a
Vice Chairman of the Board, one or more Vice Presidents, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers, and such other
officers with such titles as the resolution of the Board of Directors choosing
them shall designate. Except as may otherwise be provided in the resolution of
the Board of Directors choosing him or her, no officer other than the Chairman
or Vice Chairman of the Board, if any, need be a director. Any number of offices
may be held by the same person.
Unless otherwise provided in the resolution choosing him
or her, each officer shall be chosen for a term which shall continue until the
meeting of the Board of Directors following the next annual meeting of
stockholders and until his successor shall have been chosen and qualified or
until his earlier resignation or removal. Any officer may be removed, with or
without cause, by the Board of Directors. Any vacancy in any office may be
filled by the Board of Directors.
All officers of the Corporation shall have such authority
and perform such duties in the management and operation of the Corporation as
may be prescribed in the resolutions of the Board of Directors designating and
choosing such officers or prescribing the authority and duties of the various
officers of the Corporation, and as are customarily incident to their office,
except to the extent that such resolutions may be inconsistent therewith. The
Secretary or Assistant Secretary of the Corporation shall record all of the
proceedings of all meetings and the actions in writing of stockholders,
directors and committees of directors, and shall exercise such additional
authority and perform such additional duties as the Board of Directors shall
assign to him or her.
The President of the Corporation shall, subject to the
control of the Board of Directors, manage the business of the Corporation.
ARTICLE IV
INDEMNIFICATION
The Corporation, to the full extent permitted by law,
shall indemnify any officer or director of the Corporation who was or is a party
or is threatened to be made a party to, any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative in nature, by reason of the fact that such person is or was a
director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or
-9-
<PAGE> 10
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding and/or the defense or
settlement of such action or suit, and the Corporation may enter into agreements
with any such person for the purpose of providing for such indemnification.
To the extent that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in the preceding paragraph, or in defense
of any claim, issue or matter therein, and the Corporation shall not previously
have reimbursed or paid for all such expenses, such person shall be indemnified
against expenses (including attorneys' fees and disbursements) actually and
reasonably incurred by such person in connection therewith.
Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such director or officer is not
entitled to be indemnified by the Corporation against such expenses as
authorized by this Article.
The indemnification and advancement of expenses permitted
by this Article shall not be deemed exclusive of any other rights to which any
person may be entitled under any agreement, or by virtue of vote of stockholders
or disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding an office,
and shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such
person.
ARTICLE V
CORPORATE SEAL
The corporate seal shall be in such form as the Board of
Directors shall prescribe.
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall be fixed, and
shall be subject to change, by the Board of Directors.
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<PAGE> 11
ARTICLE VII
CONTROL OVER BY-LAWS
Subject to the provisions of the Certificate of
Incorporation and the provisions of the General Corporation Law, the power to
amend, alter or repeal these By-Laws and to adopt new By-Laws may be exercised
by the Board of Directors or by the stockholders entitled to vote.
ARTICLE VIII
BOOKS AND RECORDS
1. BOOKS AND RECORDS. The books and records of the
Corporation may be kept at such places within or without the State of Delaware
as the proper officers of the Corporation may from time to time determine.
2. STOCK RECORD. The person in whose name shares of stock
stand on the stock record of the Corporation shall be deemed the owner thereof
for all purposes as regards the Corporation.
-11-
<PAGE> 1
Exhibit 10.3
EQUIPMENT PURCHASE AGREEMENT
AGREEMENT, dated as of October 31, 1984 between BRESNAN COMMUNICATIONS
COMPANY LIMITED PARTNERSHIP, a Michigan limited partnership (the "Partnership")
and COMMUNITY TELE-COMMUNICATIONS, INC., a Nevada corporation ("CTCI").
RECITALS
The Partnership and CTCI desire to enter into an agreement pursuant to
which CTCI will make available to the Partnership CTCI's bulk purchase discounts
for any Equipment (as hereinafter defined) necessary to construct and maintain
the cable television systems now owned or hereafter acquired by the Partnership.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and for other good and valuable consideration
receipt of which is hereby acknowledged, the parties agree as follows:
1. Definitions.
(a) Equipment: All converters, cable and other equipment and materials
necessary for the construction and maintenance of cable television systems.
<PAGE> 2
2
Partnership Agreement: The Limited Partnership Agreement of Bresnan
Communications Company Limited Partnership, dated as of the date hereof, among
Bresnan Communications, Inc., a New York corporation, TCID of Michigan, Inc., a
Nevada corporation, and William Bresnan.
(b) Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Partnership Agreement.
2. Representations of CTCI.
CTCI hereby represents and warrants that it has available to it, by
reason of its making bulk purchases, the right to purchase Equipment at a
discount.
3. Procedures.
3.1 The Partnership shall give CTCI notice from time to time, as much
in advance as is practicable, of its intention to purchase Equipment. CTCI shall
promptly, and in any event in not less than 10 days after receipt of the notice
from the Partnership, advise the Partnership of the price at and the terms on
which CTCI can make such Equipment available to the Partnership.
3.2 If the Partnership decides to utilize CTCI's discount for
purchasing such Equipment, it will deliver an executed purchase order for such
Equipment to CTCI. Upon receipt of such purchase order CTCI shall (a) if
possible,
<PAGE> 3
3
cause its supplier to sell such Equipment, at the discount price specified in
the notice required pursuant to Section 3.1, directly to the Partnership or (b)
if the alternative provided by subsection (a) is not possible, CTCI shall
purchase such Equipment and resell it to the Partnership at the same price and
subject to the same terms specified in the notice required pursuant to Section
3.1.
3.3 In the event that the purchase of any Equipment is pursuant to
Section 3.2(b), CTCI will, from time to time, take all action necessary and
appropriate to assure that all warranties and other rights available to the
original purchaser of such Equipment are assigned and extend to, or otherwise
enforce such warranties and rights on behalf of, the Partnership.
4. Term and Termination.
4.1 The term of this Agreement shall commence on the date hereof and,
unless sooner terminated by agreement of the parties or pursuant to Section 4.2,
shall terminate upon completion of the distribution of the assets and properties
of the Partnership pursuant to Section 7.2 of the Partnership Agreement.
4.2 This Agreement may be terminated by CTCI as provided below:
<PAGE> 4
4
(a) upon the giving of at least fifteen (15) days' prior written
notice, in the event that the Partnership delivers an executed purchase order
for Equipment to CTCI pursuant to Section 3.2 and fails to purchase the same in
accordance with the terms and conditions specified in the notice given pursuant
to Section 3.1;
(b) immediately and without any requirement of notice, if TCID ceases
for any reason to be a Partner of the Partnership and no Affiliate of TCID is
admitted as a Substitute Partner, or if CTCI ceases for any reason to be an
Affiliate of TCID (or such Substitute Partner);
(c) immediately and without any requirement of notice, if any of the
Events of Default specified in Section 7.3(a) of the Partnership Agreement
occurs with respect to BCI or the Limited Partner or if the Event of Default
described in Section 7.3(a)(ii) thereof (as if the reference to "any Partner"
therein referred to the Partnership) shall have occurred with respect to the
Partnership.
4.3 Termination of this Agreement in accordance with Section 4.2 shall
not affect the right of CTCI to receive, and the obligation of the Partnership
to make, payment for any Equipment theretofor delivered pursuant to this
Agreement.
<PAGE> 5
5
5. Miscellaneous.
The provisions of this Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
assigns, provided, however, that the Partnership shall not assign this
Agreement, or assign its rights or delegate its obligations hereunder, without
the prior written consent of CTCI and such a purported assignment or delegation
without such consent shall be void. The provisions of this Agreement are for the
exclusive benefit of the parties hereto and their permitted assigns, and no
other person is intended to be a third party beneficiary or to have any rights
by virtue of this Agreement. Neither this Agreement nor any of the terms hereof
may be amended, waived, modified or cancelled orally, but only by a written
instrument signed by the parties hereto, or in the case of a waiver, by the
party waiving noncompliance. This Agreement shall in all respects be governed
by, and construed in accordance with, the internal laws of the State of New York
without regard to principles of conflict of laws.
6. Notices.
Any notice or communication given pursuant to this Agreement shall be
in writing and delivered or mailed by certified mail, return receipt requested,
postage prepaid
<PAGE> 6
6
(mailed notices shall be deemed given three days after the date when duly
mailed) as follows:
If to CTCI to it at:
Call Box 22595
Wellshire Station
Denver, Colorado 80222
Attention: Legal Department
If to the Partnership, to it at:
709 Westchester Avenue
White Plains, New York 10604
Attention: William Bresnan
or to such other address or addresses as either party may designate by notice
given pursuant hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above. COMMUNITY TELE-COMMUNICATIONS, INC.
By:/s/ Donne F. Fisher
---------------------------------
Pres.
BRESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
By TCID OF MICHIGAN, INC.,
General Partner
By:/s/ Donne F. Fisher
---------------------------------
Pres.
By BRESNAN COMMUNICATIONS, INC.,
General Partner
By:/s/ William J. Bresnan
---------------------------------
Pres.
<PAGE> 1
Exhibit 10.4
Confidential Treatment
================================================================================
SUPPLY AGREEMENT
between
SATELLITE SERVICES, INC.
and
BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP
Dated as of October 31, 1984
================================================================================
<PAGE> 2
THIS AGREEMENT is made this 31st day of October, 1984, by and between
Satellite Services, Inc., a Delaware corporation ("Distributor"), and Bresnan
Communications Company Limited Partnership, a Michigan limited partnership
("Operator").
RECITALS
Operator, of which an affiliate of Distributor is one of the General
Partners, owns cable television systems which are franchised or otherwise
authorized to provide cable television services to the various communities in
the State of Michigan listed on Exhibit A. Operator desires to appoint
Distributor as the agent of Operator for obtaining pay cable television and
satellite programming for delivery to the subscribers of the cable television
systems presently owned or hereafter acquired by Operator, and Distributor
desires to accept such appointment, on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, Operator and Distributor agree as follows:
1. Definitions.
(a) 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):
<PAGE> 3
2
Available Terms. As to any Pay CATV Programming, the terms and
conditions upon which such programming would be available to Operator (for each
class of customer of Operator) if it did not purchase it from Distributor
hereunder.
CATV Subscriber: Any person, whether an individual, business entity or
institution, who pays a monthly service charge to lawfully receive basic or pay
cable television programming.
Distributor's Pay Programming Agreements: The agreements between
Distributor and the suppliers of pay cable television or satellite programming,
through which Distributor supplies such programming to cable television systems
owned or operated by TCI, or by an entity in which TCI directly or indirectly
owns an equity interest of the size specified in such agreements.
FCC: Federal Communications Commission.
Partnership Agreement: The Limited Partnership Agreement of Bresnan
Communications Company Limited Partnership, dated as of the date hereof, among
Bresnan Communications, Inc., a New York corporation, TCID of Michigan, Inc., a
Nevada corporation, and William Bresnan, as said agreement may be amended from
time to time.
Pay CATV Subscriptions: As to each Pay CATV Programming service
supplied hereunder, the number of CATV
<PAGE> 4
3
Subscribers in the Systems who on any day receive from Operator such Pay CATV
Programming service on such date.
Pay CATV Programming: Any cable television programming (x) for which
Operator charges its CATV Subscribers an additional fee above the applicable
monthly charge for the basic cable television programming purchased by such
Subscriber or (y) which is received by the Systems via satellite.
Systems: All cable television systems presently owned or hereafter
acquired by Operator as set forth in Exhibit A, as said Exhibit may be amended
or supplemented from time to time.
(b) Capitalized terms which are used but not otherwise defined herein
shall have the meanings ascribed to them in the Partnership Agreement.
2. Purchase; Programming Responsibility.
2.1 Except as otherwise provided herein, Distributor agrees to provide
to Operator, and Operator agrees to buy and procure exclusively from
Distributor, all of the requirements of the Systems for Pay CATV Programming,
subject to the terms and conditions hereinafter specified.
2.2 Except as otherwise provided herein, Operator hereby retains
Distributor, for so long as Distributor is supplying Pay CATV Programming to
Operator hereunder, to make and execute decisions on Operator's behalf with
respect to
<PAGE> 5
4
marketing, selection of programming, channel allocation and similar matters
relating to the requirements of the Systems for Pay CATV Programming.
3. Programming and Benefits to be Supplied.
3.1 Prior to the date hereof, Distributor submitted to Operator a plan,
a copy of which is annexed hereto as Exhibit B (the "Plan"), setting forth its
selection of Pay CATV Programming for the Systems, the channel allocation and
marketing plan for such programming and similar matters relating thereto.
Promptly following the execution hereof and the acquisition of any Systems
hereafter, as necessary, Distributor will cause an order to be filed with the
appropriate pay or satellite programming suppliers and otherwise take the steps
required to assure the earliest possible availability of such programming in the
Systems. From time to time hereafter and upon request of the Management
Committee, Distributor will consult with the Management Committee with respect
to the terms of the Plan and will submit to the Management Committee a revised
Plan, reflecting all changes to the Plan which is then in effect that
Distributor and the Management Committee have agreed upon, within 30 days after
such agreement has been reached. In the event that any revised Plan provides for
Operator to furnish to its CATV Subscribers any Pay CATV Programming not
theretofore provided
<PAGE> 6
5
in the Systems, Distributor shall, on submission of such revisions to the
Management Committee, confirm whether it can supply such programming to Operator
at, or on terms better than, the Available Terms and, if it can, specify the
terms at which such programming is offered to Operator. If Distributor cannot
provide such programming to Operator at, or on terms better than, the Available
Terms, then Operator may purchase such programming elsewhere.
3.2 If, during the term of this Agreement, any of Distributor's Pay
Programming Agreements pursuant to which any Pay CATV Programming is provided
hereunder are terminated, or expire and are not renewed, or Distributor ceases
generally to distribute any such Pay CATV Programming pursuant to any of such
agreements, then Distributor shall as soon as practicable so notify Operator in
writing and the Pay CATV Programming affected thereby shall be deleted from that
supplied to Operator hereunder; provided, however, that Distributor agrees to
use its best efforts to give Operator at least 60 days prior written notice of
the deletion of any such programming. Operator shall have the right thereafter
to obtain such programming from other sources and, if requested by Operator,
Distributor will use reasonable efforts to assist Operator in doing so.
Distributor shall have no further
<PAGE> 7
6
obligation to supply the deleted Pay CATV Programming to Operator and shall
incur no cost or liability to Operator relating directly or indirectly to such
deletion.
3.3 If, as a result of any rate adjustment pursuant to Section 7.2(b)
or otherwise, the rate paid by Operator for any of the Pay CATV Programming
supplied pursuant hereto would be higher than the then Available Terms for such
Pay CATV Programming, Operator may elect to purchase its requirements for the
Pay CATV Programming affected by such adjustment elsewhere by giving written
notice of such election to Distributor. Distributor will delete the Pay CATV
Programming specified in such notice from the programming supplied hereunder as
soon as practicable under the terms of Distributor's Pay Programming Agreements;
provided, however, that Operator shall pay the adjusted rate for such Pay CATV
Programming until the deletion thereof is effected.
3.4 Distributor shall make available to Operator its pro rata share of
all promotional material, program guides, time spots for local advertising,
promotional fees and other benefits available or extended to Distributor under
Distributor's Pay Programming Agreements for the Pay CATV Programming furnished
to Operator hereunder. Operator's pro rata share of such benefits shall be based
upon the ratio of the number of CATV Subscribers in the Systems who receive the
<PAGE> 8
7
applicable Pay CATV Programming to the number of CATV Subscribers receiving the
applicable Pay CATV Programming in all cable television systems, including the
Systems, to which Distributor supplies such Pay CATV Programming. Distributor
hereby grants, or will cause to be granted, to Operator all licenses or
sublicenses of the proprietary rights which its suppliers have in any Pay CATV
Programming sold to Operator hereunder (including the names and marks relating
to the Pay CATV Programming) as may be necessary for Operator to send or promote
the Pay CATV Programming during the term of this Agreement without infringing
any such proprietary rights. Distributor will execute, acknowledge and deliver
to Operator any further documents necessary to effectuate the agreements set
forth in this Section 3.4.
4. Service Marks and Trade Names.
Operator acknowledges that the names and marks relating to the Pay CATV
Programming supplied pursuant to this Agreement and relating to the suppliers
thereof are and will at all times remain the exclusive property of Distributor's
suppliers of such programming and Operator shall acquire no proprietary or other
rights therein by reason of this Agreement.
5. Disclaimer of Title.
Distributor does not claim title or copyright in itself to the Pay CATV
Programming being sold hereunder.
<PAGE> 9
8
Operator acknowledges that Distributor is merely an agent for the distribution
of the Pay CATV Programming and Distributor is selling only such right or title
to the Pay CATV Programming as it may hold.
6. Availability of Indemnities.
Subject to the next sentence, Distributor makes no representation as to
whether the Pay CATV Programming being sold is free of the rightful claim of any
third person by way of copyright infringement or the like, and disclaims any
warranty against infringement with respect to such programming. Distributor
represents and warrants that all of the indemnities set forth in any of
Distributor's Pay Programming Agreements pursuant to which Distributor from time
to time provides any Pay CATV Programming hereunder and made by the supplier of
such programming extend to Operator as a result of Operator's purchase of such
Pay CATV Programming hereunder and Distributor agrees to take all action
necessary to enforce any such indemnity on behalf of Operator upon the request
of Operator.
7. Price and Payment.
7.1 For all Pay CATV Programming supplied to Operator under the terms
of this Agreement, Operator shall pay to Distributor within 30 days after
billing therefor by Distributor, in arrears, the rates established in this
<PAGE> 10
9
Section 7 in respect of the number of Pay CATV Subscriptions to such Pay CATV
Programming in effect during the preceding month. Operator's payments made
pursuant to this Section 7 shall be made to Distributor at the address for
Distributor set forth in Section 16 of this Agreement.
7.2 (a) Except as otherwise provided in Section 7.2(b), the rates for
the Pay CATV Programming supplied pursuant to this Agreement shall be 100% of
the rates paid by Distributor to the suppliers of such programming pursuant to
the Distributor's Pay Programming Agreements, and shall be adjusted as and when
such rates paid by Distributor are adjusted. Promptly after receipt by
Distributor of notice from its suppliers of any rate adjustment relating to the
Pay CATV Programming supplied hereunder, Distributor shall notify Operator of
the amount and effective date of such adjustment.
(b) The rates for Pay CATV Programming supplied pursuant to this
Agreement in Systems acquired by Operator subsequent to the date hereof shall,
if required by the terms of Distributor's Pay Programming Agreements, be the
rates established in accordance with the agreements between the previous
owners of such Systems and the applicable suppliers of such Pay CATV
Programming until such time as Distributor is permitted in compliance with
the terms of Distributor's
<PAGE> 11
10
Pay Programming agreements to supply such programming at the rates
specified in Section 7.2(a).
7.3 In addition to the amounts payable pursuant to Section 7.2,
Operator shall pay to Distributor at the same time as payments are made pursuant
to Section 7.1 an administrative fee equal to * percent of the amount then due
pursuant to Section 7.2.
7.4 Amounts not paid pursuant to this Section 7 when due shall be
subject to a delinquency charge at the rate of eighteen (18%) percent per annum
from the due date thereof until paid.
8. Subscriber Data.
8.1 Operator shall deliver to Distributor not more than 15 days after
the end of each calendar month a subscriber data report in form satisfactory to
Distributor, setting forth such information as to the CATV Subscribers in the
Systems, the Pay CATV Subscriptions and the Pay CATV Programming supplied
pursuant hereto as Distributor is required from time to time to include in its
reports to the suppliers of such programming, and certified as complete and
correct by the General Manager or an appropriate officer of Operator. Specimens
of the forms for the subscriber data reports currently required by Distributor's
Pay Programming Agreements are annexed as Exhibit C and shall be used by
Operator in
- --------
* Filed under an application for confidential treatment.
<PAGE> 12
11
rendering the reports to Distributor required by this Section 8.1 until
Distributor notifies Operator of any other or different forms on which such
reports shall be rendered consistent with the reporting requirements of
Distributor's suppliers.
8.2 Upon written request of Distributor, Operator shall furnish
Distributor copies of such portions of all regular and periodic reports which
Operator shall or may be required to file with any federal, state or local
regulatory agency including, but not limited to, the FCC, as pertain to the CATV
Subscribers in the Systems, the Pay CATV Subscriptions or the Pay CATV
Programming.
8.3 For purposes of this Agreement, Distributor and its agents,
representatives, and employees will be permitted, upon reasonable prior notice,
to visit Operator's offices during normal, business hours and in a way which
does not unreasonably interfere with normal business practices, in order to
inspect, at Distributor's cost and expense, Operator's books and documents as
such pertain to the Systems' CATV Subscribers, the Pay CATV Subscriptions and
the billing practices of Operator for the purpose of determining the amounts due
to Distributor and verifying the reports rendered to Distributor pursuant to
this Agreement.
<PAGE> 13
12
9. Term.
9.1 The term of this Agreement shall commence on the date hereof and,
unless sooner terminated by agreement of the parties or pursuant to Section 9.2
of this Agreement, shall terminate upon the completion of the distribution of
the assets and properties of Operator pursuant to Section 7.2 of the Partnership
Agreement.
9.2 This Agreement may be terminated as provided below upon the
happening of any of the following events:
(a) At either party's option, by giving the other at least 30 days'
prior written notice, in the event that the other has made any material
misrepresentation herein or fails to keep, observe or perform any material
covenant, agreement, term or provision of this Agreement to be kept, observed or
performed by it (including the obligation to make all payments when due and
payable), and such misrepresentation or failure is continuing and not cured or
satisfied within 30 days after such notice is given.
(b) At Operator's option, immediately and without any requirement of
notice, if any of the Events of Default specified in Section 7.3(a) of the
Partnership Agreement occurs with respect to TCID or if the Event of Default
described in Section 7.3(a)(ii) thereof (as if the reference to "any Partner"
therein referred to Distributor) shall have occurred with respect to
Distributor;
<PAGE> 14
13
(c) At Distributor's option, immediately and without any requirement of
notice, if any of the Events of Default specified in Section 7.3(a) of the
Partnership Agreement occurs with respect to BCI or the Limited Partner or if
the Event of Default described in Section 7.3(a)(ii) thereof (as if the
reference to "any Partner" therein referred to Operator) shall have occurred
with respect to Operator;
(d) By either party upon 60 days' prior written notice to the other, if
TCID ceases for any reason to be a Partner of Operator and no Affiliate of TCID
is admitted as a Substitute Partner, or if Distributor ceases for any reason to
be an Affiliate of TCID (or such Substitute Partner).
For purposes of this Agreement, BCI, as a Partner of Operator, shall
have the right and authority to act on behalf of Operator in exercising
Operator's right to terminate this Agreement pursuant to this Section 9.2,
including in determining whether the conditions permitting such termination
exist.
9.3 Termination of this Agreement in accordance with this Section 9
shall not affect the rights of Operator or Distributor with respect to any
damages it has suffered as a result of any breach of this Agreement, nor shall
it affect the rights of Operator or Distributor with respect to any liabilities
or claims accruing, or based upon events occurring, prior to the date of
termination.
<PAGE> 15
14
10. Representations and Warranties of Operator.
Operator hereby represents and warrants to Distributor as follows:
10.1 Operator is a limited partnership duly organized, validly existing
and in good standing, with full partnership power to conduct its business and
operations under the laws of the State of Michigan and where otherwise required
in the opinion of its counsel; and has full power and authority to execute,
deliver and perform this Agreement and any other documents or instruments
contemplated herein or required hereby.
10.2 The execution, delivery and performance of this Agreement and the
compliance with and fulfillment of the terms and conditions hereof, will not as
of the date hereof (i) violate any provisions of any federal, state or local
laws, statutes or ordinances, rules or regulations, judicial or administrative
orders, awards, judgments or decrees applicable to Operator; (ii) conflict with,
result in a breach of, or constitute a default under, any material agreement,
license, franchise or instrument to which Operator is a party or by which it is
bound; or (iii) conflict with, result in a breach of the terms, conditions or
provisions of, or constitute a default under, the Partnership Agreement.
<PAGE> 16
15
10.3 Operator is duly licensed and in substantial compliance with all
existing laws and regulations, whether federal, state or local, as may pertain
to the conduct of its cable television business, and in sending, receiving and
distributing the Pay CATV Programming, including but not limited to, the rules
and regulations of the FCC, and the requirements of all franchises, permits, and
approvals issued by regulatory authorities.
11. Representations and Warranties of Distributor.
Distributor hereby represents and warrants to Operator as follows:
11.1 Distributor is a corporation duly organized, validly existing, and
in good standing with full corporate power to conduct its business and
operations under the laws of the State of Delaware and where otherwise required
in the opinion of its counsel; and has full power and authority to execute,
deliver, and perform this Agreement, and any other documents or instruments
contemplated herein or required hereby.
11.2 The execution, delivery and performance of this Agreement and the
compliance with and fulfillment of the terms and conditions hereof, will not as
of the date hereof (i) violate any provisions of any federal, state or local
laws, statutes or ordinances, rules or regulations,
<PAGE> 17
16
judicial or administrative orders, awards, judgments or decrees applicable to
Distributor; (ii) conflict with, result in a breach of, or constitute a default
under, any material agreement, license, franchise or instrument to which
Distributor is a party or by which it is bound; or (iii) conflict with, result
in a breach of the terms, conditions or provisions of, or constitute a default
under, its Articles or Certificate of Incorporation or Bylaws.
11.3 Distributor is a party to, and in substantial compliance with, all
necessary contracts and agreements with program suppliers to enable it to
perform satisfactorily all obligations on its part to be performed under this
Agreement and has all rights and privileges necessary to empower it to sell (or
redistribute) the Pay CATV Programming to Operator in the manner contemplated by
this Agreement, to make available to Operator the items specified in Section 3.4
and to grant the licenses and sublicenses specified in Section 3.4.
12. Covenant of Operator.
Operator agrees that its carriage of the Pay CATV Programming supplied
pursuant to this Agreement shall be subject to reasonable rules, regulations,
and restrictions imposed by Distributor in order to ensure compliance with
Distributor's Pay Programming Agreements.
<PAGE> 18
17
13. Indemnity.
13.1 Operator agrees and obligates itself to indemnify and hold
harmless Distributor and its officers, directors, shareholders and employees and
the respective successors and assigns of any thereof from and against any and
all claims, judgments, liabilities, losses or expenses (including reasonable
attorney's fees) that Distributor or any such indemnitee may suffer arising from
or related to any breach of Operator's covenants, representations or warranties
under this Agreement. Distributor agrees to indemnify and hold harmless
Operator, its officers, partners and employees and the officers, directors and
employee's of its corporate partners and the respective successors and assigns
of any thereof from and against any and all claims, judgments, liabilities,
losses or expenses (including reasonable attorney's fees) that Operator or any
such indemnitee may suffer as a result of (a) any breach by Distributor of its
covenants, representations or warranties under this Agreement or (b) a breach by
Distributor of the terms of Distributor's Pay Programming Agreements in
connection with the provision of Pay CATV Programming to the Systems if by
virtue of such breach the suppliers of such Pay CATV Programming assert a claim
directly against Operator or any such indemnitee, provided that such breach by
Distributor is not a result of a breach
<PAGE> 19
18
by Operator of its covenants hereunder. No claim for indemnity hereunder shall
be based upon, or include as a measure of damages, lost profits or other
consequential damages.
13.2 Whenever it shall come to the attention of a party that it has
suffered or incurred, or may suffer or incur, any loss with respect to a single
item or an aggregate of items covered by Section 13.1, such party shall promptly
so notify the other party in writing. The other party shall have the right to
defend against any claims or actions by third parties giving rise to any such
loss, damage, cost or expense to the fullest extent permitted by law. Such other
party agrees that it will not settle or permit the settlement of any matter
giving rise to any loss without the prior written consent of the aggrieved
party, which shall not be unreasonably withheld.
13.3 Each party agrees that its sole and exclusive remedy for a breach
of this Agreement by the other party hereto shall be as provided in this Section
13.
14. Limitation of Liability.
Distributor shall not be liable for nonperformance or delay in
performance of its obligations hereunder due wholly or partly to any cause not
within its control nor avoidable by reasonable diligence.
<PAGE> 20
19
15.Assignment and Delegation.
Neither party may assign this Agreement or any right accruing hereunder
or delegate its performance in whole or in part, unless approved prior thereto
in writing by the other party in its sole and absolute discretion; provided,
however, that Distributor may assign its rights and delegate its obligation of
performance hereunder without the prior consent of Operator if, and only if,
such delegation is had at substantially the same terms and at the same cost as
contemplated by this Agreement, and provided that such assignment and delegation
shall not relieve Distributor of its obligations under this Agreement. Any such
assignment or delegation without such prior approval except as provided in the
previous sentence shall be null and void.
16. Notification.
Any notice or communication given pursuant to this Agreement shall be
in writing and delivered or mailed by certified mail, return receipt requested,
postage prepaid mailed notices shall be deemed given three days after the date
when duly mailed) as follows:
If to Distributor to:
President
Satellite Services, Inc.
Call Box 22595
Wellshire Station
Denver, Colorado 80222
<PAGE> 21
20
With a copy to the same address, marked:
Attention: Legal Department
If to Operator or the Management Committee to:
Bresnan Communications Company
Limited Partnership
709 Westchester Avenue
White Plains, New York 10604
Attention: William Bresnan, President
With a copy to:
Shea & Gould
330 Madison Avenue
New York, New York 10017
Attention: Samuel Bergman, Esq.
or to such other address or addresses as either party may designate by notice
given pursuant hereto.
17. Amendments and Waivers.
This Agreement may be amended, modified or cancelled, and any terms,
covenants or conditions hereof may be waived, only by a written instrument
executed by the parties hereto or, in the case of a waiver, by the party waiving
noncompliance. No delay on the part of any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
waiver on the part of any party hereto of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege hereunder;
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude any other
<PAGE> 22
21
or further exercise thereof or the exercise of any other
right, power or privilege hereunder.
18. Entire Agreement.
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, superseding all prior agreements or
understandings, written or oral.
19. Captions.
Captions contained in this Agreement are inserted only as a matter of
convenience and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any of its provisions.
20. Severability.
If any provision of this Agreement or the application thereof to any
person or circumstance shall to any extent be held in any proceeding to be
invalid or unenforceable, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those to which it was held
to be invalid or unenforceable, shall not be affected thereby, provided that the
parties shall negotiate in good faith with respect to an equitable modification
of the provision or application thereof held to be invalid.
<PAGE> 23
22
21. Governing Law.
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York without regard to principles of
conflict of laws.
22. Counterparts.
This Agreement may be executed in multiple counterparts, each of which
shall be considered an original and all of which shall constitute one and the
same instrument.
23. Binding Effect.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and, subject to Section 15, their respective successors and
assigns. The provisions of this Agreement are for the exclusive benefit of the
parties hereto and their permitted assigns, and no other person is intended to
be a third party beneficiary or to have any rights by virtue of this Agreement.
24. Confidentiality.
All information obtained by Distributor or Operator pursuant to this
Agreement and in connection with the negotiation thereof, except as required by
performance of this Agreement and except as otherwise required by law, shall
<PAGE> 24
23
be maintained, and will be maintained, in confidence, by Distributor and
Operator and their respective employees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SATELLITE SERVICES, INC.
By: /s/ Donne F. Fisher
-----------------------------------
Pres.
RESNAN COMMUNICATIONS COMPANY
LIMITED PARTNERSHIP
By: TCID OF MICHIGAN, INC.,
General Partner
By: /s/ Donne F. Fisher
-----------------------------------
Pres.
By: BRESNAN COMMUNICATIONS, INC.,
General Partner
By: /s/ William J. Bresnan
-----------------------------------
Pres.
<PAGE> 25
EXHIBIT A
COMMUNITIES SERVED
Calumet, Michigan
Escanaba, Michigan
Ironwood, Michigan
Iron Mountain, Michigan
Sault Ste. Marie, Michigan
Marquette, Michigan
<PAGE> 26
EXHIBIT B
PLAN
<PAGE> 27
EXHIBIT C
SAMPLE REPORT FORMS
<PAGE> 28
SUBSCRIBER COUNTS FOR SSI
CATV and Pay Programming license fees are based on subscriber counts and rates,
therefore, figures submitted must be as accurate as possible. Our records are
audited on a regular basis by suppliers.
Before you start you should have your previous month's subscriber counts handy
to check for reasonableness when pulling present month's counts.
If more than one system shares a computer report, you must break out each
franchise area according to GL number. If all franchise areas are under one GL
number but only one franchise area carries a certain CATV program, such as
Nickelodeon, WGN, etc., we must have you pull this count from the total and
supply us with a list of programs carried by the franchise area. Also, we must
be informed of all services carried on a "tier" along with the monthly tier
count. A "tier" is defined as CATV programming viewed only by those subscribers
who pay an additional fee.
If a system includes tax in with basic or Pay subscriber rates, you must record
the subscriber rate without tax.
Systems on "Cable Data" will need the following reports:
1. Detail of Income Charged, Month-to-Date, Area ALL (in most systems
it is Report W).
a. Detail of Income Charged: Refer to columns - Service
Description and Counts Item
b. Service Description - This will describe the type of service
and its rate. i.e., HBO Service, 11.95, 3468.
c. Count Item - This is the second column of numbers and is the
number across from the rate. i.e., HBO Service, 11.95,
3468.
d. Basic Commercial Accounts:
When you pick up your Commercial Accounts generally called
"Comm Non Stand," you must divide your basic sub rate into
your non-standard revenue in order to arrive at equivalent
billing units.
e. HBO and Showtime Commercial Accounts:
Hotels and motels must be reported separately-- do not
include in with regular HBO, Showtime, or another pay
subscribers. We receive a discount rate for Commercial
Accounts from most suppliers.
2. Management Analysis - System Status - Report J:
This report is used when free service is not listed on the Detail
of Income Charged. On the last page of this report you will find a
section labeled ALL, at the far right a column, headed Free
Outlets will be found. Refer to the Co. listed below ALL and this
will describe the number of subscribers and what service is given
free each month. i.e., Co. 1 (Basic Service) Count is 1.
Page 1 of 2
<PAGE> 29
SUBSCRIBER COUNTS FOR SSI
Systems on Cablefacts will need as follows:
1. Accounting Analysis - This is used to determine the bulk count.
Use the franchise "ALL" report. Divide
your Basic Commercial Non-standard Bulk
revenue by your Basic Subscriber rate and
this will give you Equivalent Billing
Units. You need to list your HBO and
Showtime Bulk Accounts separately i.e.,
HBO bulk - . . . . . rooms
Showtime bulk - . . . . .rooms
Do not include Pay Bulk Accounts in with
Residential Subscribers.
2. Management Summary - Refer to the "Service Count
Reconciliation and Activity" section.
Only the basic, tier and free counts
should be taken from this report as all
of the pay services generally include
combos. The count recorded is the number
below the month in which the monthly
reports were processed, i.e., date
processed is 10/20/83, use the count
below 10/83. Use only the count across
the basic rate. i.e., 1st 7.95 4,504
record 4,504 2nd 2.50 753 do not record
The only time the total count for a code
is recorded is when the rates for the
additional outlets equal the first
outlet.
3. Customer profile - This describes the codes and the rates
for basic, Pay TV and combos.
4. Billing Dunning - This gives the count for straight Pay TV
and their combos. Please be very careful
picking up counts.
Pay TV Combination
Summary - This report also lists the subscriber
count for straight Pay TV and their
combinations. Use as for the Management
Summary the count below for the month in
which the report was processed.
The Cablefacts report does not supply us with combination, and, in some
instances, full pay rates to subscribers; but this should be available at the
system level. Please include these rates with the counts.
If you have any questions concerning the above, please call Joan Kraeft at (303)
694-3405.
Page 2 of 2
<PAGE> 30
SATELLITE SERVICES, INC.
Call Box 22595, Wellshire Station
Denver, Colorado 80222
SUBSCRIBER DATA REPORT
<TABLE>
<CAPTION>
SYSTEM: ____________________ For the Month of __________________
REVENUE DIVIDED BY
SUBSCRIBER SUBSCRIBER RESIDENTIAL RATE # OF ROOMS
RATE COUNT EQUALS BULK EBU'S HOTEL/MOTEL
-------------- --------------- ------------------- -------------------
as per attached
list
<S> <C> <C> <C> <C>
BASIC
Residential
-------------- ---------------
Rooms-Hotel/Motels
-------------- -------------------
EBU Bulk
-------------------
Tier*
-------------- ---------------
Free Subs
---------------
* We need to have a list of services carried on the tier
HBO
Primary Residential
-------------- ---------------
Combos
-------------- ---------------
Bulk-Hotel/Motel Rooms
-------------- -------------------
Free subs
-------------- ---------------
Total
============== =============== ===================
SHOWTIME
Primary Residential
-------------- ---------------
Dual
-------------- ---------------
Triple
-------------- ---------------
Quad
-------------- ---------------
Etc.
-------------- ---------------
Bulk-Hotel/Motel Rooms
-------------- -------------------
Free subs
-------------- ---------------
Total
============== =============== ===================
</TABLE>
Page 1 of 4
<PAGE> 31
SATELLITE SERVICES, INC.
Call Box 22595, Wellshire Station
Denver, Colorado 80222
SUBSCRIBER DATA REPORT
<TABLE>
<CAPTION>
SYSTEM: ____________________ For the Month of __________________
REVENUE DIVIDED BY
SUBSCRIBER SUBSCRIBER RESIDENTIAL RATE # OF ROOMS
RATE COUNT EQUALS BULK EBU'S HOTEL/MOTEL
-------------- --------------- ------------------- -------------------
as per attached
list
<S> <C> <C> <C> <C>
CINEMAX
Primary Residential
-------------- ---------------
Dual
-------------- ---------------
Triple
-------------- ---------------
Quad
-------------- ---------------
Etc.
-------------- ---------------
Bulk-Hotel/Motel
-------------- -------------------
Free Subs
-------------- ---------------
Total
============== =============== ===================
THE DISNEY CHANNEL
Primary Residential
-------------- ---------------
Combos
-------------- ---------------
Bulk-Hotel/Motel
-------------- -------------------
Free Subs
-------------- ---------------
Total
============== =============== ===================
THE MOVIE CHANNEL
Primary Residential
-------------- ---------------
Combos
-------------- ---------------
Bulk-Hotel/Motel
-------------- ======================
Free Subs
-------------- ---------------
Total
============== ===============
</TABLE>
Page 2 of 4
<PAGE> 32
SATELLITE SERVICES, INC.
Call Box 22595, Wellshire Station
Denver, Colorado 80222
SUBSCRIBER DATA REPORT
<TABLE>
<CAPTION>
SYSTEM: ____________________ For the Month of __________________
REVENUE DIVIDED BY
SUBSCRIBER SUBSCRIBER RESIDENTIAL RATE # OF ROOMS
RATE COUNT EQUALS BULK EBU'S HOTEL/MOTEL
-------------- --------------- ------------------- -------------------
as per attached
list
<S> <C> <C> <C> <C>
GALAVISION
Primary Residential
-------------- ---------------
Combos
-------------- ---------------
Bulk-Hotel/Motel
-------------- -------------------
Free Subs
-------------- ---------------
Total
============== =============== ===================
PRISM
Primary Residential
-------------- ---------------
Combos
-------------- ---------------
Bulk-Hotel/Motel
-------------- -------------------
Free Subs
-------------- ---------------
Total
============== =============== ===================
HOME THEATRE NETWORK
Primary Residential
-------------- ---------------
Combos
-------------- ---------------
Bulk-Hotel/Motel
-------------- -------------------
Free Subs
-------------- ---------------
Total
============== =============== ===================
Z-CHANNEL
Primary Residential
-------------- ---------------
Combos
-------------- ---------------
Bulk-Hotel/Motel
-------------- -------------------
Free Subs
-------------- ---------------
Total
============== =============== ===================
</TABLE>
Page 3 of 4
<PAGE> 33
SATELLITE SERVICES, INC.
Call Box 22595, Wellshire Station
Denver, Colorado 80222
SUBSCRIBER DATA REPORT
<TABLE>
<CAPTION>
SYSTEM: ____________________ For the Month of __________________
REVENUE DIVIDED BY
SUBSCRIBER SUBSCRIBER RESIDENTIAL RATE # OF ROOMS
RATE COUNT EQUALS BULK EBU'S HOTEL/MOTEL
-------------- --------------- ------------------- -------------------
as per attached
list
<S> <C> <C> <C> <C>
SPORTSTIME
Primary Residential
-------------- ---------------
Combos
-------------- ---------------
Bulk-Hotel/Motel
-------------- -------------------
Free Subs
-------------- ---------------
Total
============== =============== ===================
</TABLE>
Page 4 of 4
<PAGE> 34
TO: SATELLITE SERVICES, INC.
C E R T I F I C A T E
I, _________________________, am the duly elected and acting Controller* of
_________________________ and hereby certify that the Subscriber Data Report
attached hereto is complete and correct as of the month ended _______________.
-----------------------------
(company name)
By: _____________________________
* If system does not have a Controller, the System Manager must certify above.
<PAGE> 1
EXHIBIT 12.1
BRESNAN COMMUNICATIONS COMPANY LIMITED PARTNERSHIP
RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------------- ---------------------------
1995 1996
PRO 1995 1996 PRO
1991 1992 1993 1994 1995 FORMA ACTUAL ACTUAL FORMA
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIXED CHARGE COVERAGE:
EARNINGS:
Net loss before tax.......... $(9,412) $(1,290) $(4,983) $(3,660) $(9,323) $(3,822) $(2,110) $(2,132) $(1,058)
Plus:
Fixed charge interest........ 11,691 8,578 7,571 12,557 16,063 10,562 4,091 3,786 2,712
Portion of rent = interest... 92 97 100 120 135 135 34 34 34
------- ------- ------- ------- ------- ------- ------- ------- ------
Earnings as defined.......... 2,371 7,385 2,688 9,017 6,875 6,875 2,015 1,688 1,688
FIXED CHARGES:
Interest expense............. 11,691 8,578 7,571 12,557 16,063 10,562 4,091 3,786 2,712
Capitalized interest......... 59 86 210 10 181 181 45 -- --
Portion of rent = interest... 92 97 100 120 135 135 34 34 34
------- ------- ------- ------- ------- ------- ------- ------- ------
TOTAL FIXED CHARGES.......... 11,842 8,761 7,881 12,687 16,379 10,878 4,170 3,820 2,746
------- ------- ------- ------- ------- ------- ------- ------- ------
Deficiency $................. $ 9,471 $ 1,376 $ 5,193 $ 3,670 $ 9,504 $ 4,003 $ 2,155 $ 2,132 $ 1,058
======= ======= ======= ======= ======= ======= ======= ======= ======
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT
We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated March 8, 1996 with respect to the financial
statements and financial statement schedule of Bresnan Communications Company
Limited Partnership and to our report dated May 16, 1996 with respect to the
balance sheet of Bresnan Capital Corporation, included in the Registration
Statement on Form S-1 and related Prospectus of Bresnan Communications Company
Limited Partnership and Bresnan Capital Corporation, for the registration of
$100,000,000 Senior Notes Due 2006.
ERNST & YOUNG LLP
New York, New York
May 21, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 00001013693
<NAME> BRESNAN COMMUNICATIONS CO. LP
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1995 AND THE THREE MONTHS ENDED MARCH
31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
[/LEGEND]
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996
<CASH> 1,172 794
<SECURITIES> 0 0
<RECEIVABLES> 4,042 3,986
<ALLOWANCES> 311 294
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,461 5,146
<PP&E> 136,971 139,619
<DEPRECIATION> 55,315 57,367
<TOTAL-ASSETS> 143,992 141,244
<CURRENT-LIABILITIES> 29,848 28,367
<BONDS> 185,480 186,345
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 7,000 7,000
<TOTAL-LIABILITY-AND-EQUITY> 143,992 141,244
<SALES> 70,389 18,302
<TOTAL-REVENUES> 70,389 18,302
<CGS> 0 0
<TOTAL-COSTS> 25,121 6,574
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 664 188
<INTEREST-EXPENSE> 16,063 3,786
<INCOME-PRETAX> (9,323) (2,132)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (9,323) (2,132)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (9,323) (2,132)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
